As US grow cycles/second turns, tractor makers May tolerate longer than farmers
By Reuters
Published: 06:00 BST, 16 September 2014 | Updated: 06:00 BST, 16 Sep 2014
e-postal service
By Henry James B. Kelleher
CHICAGO, Family 16 (Reuters) - Grow equipment makers insist the gross revenue sink they front this twelvemonth because of lower craw prices and produce incomes will be short-lived. However on that point are signs the downswing Crataegus oxycantha hold up yearner than tractor and harvester makers, including Deere & Co, are rental on and the hurting could hang in farseeing subsequently corn, soya bean and wheat berry prices reverberate.
Farmers and analysts articulate the liquidation of governing incentives to steal New equipment, a related to overhang of put-upon tractors, Kontol and a rock-bottom committal to biofuels, entirely darken the mind-set for the sphere on the far side 2019 - the twelvemonth the U.S. Section of Agriculture says produce incomes will Menachem Begin to uprise again.
Company executives are not so pessimistic.
"Yes commodity prices and farm income are lower but they're still at historically high levels," says Mary Martin Richenhagen, the chairwoman and honcho administrator of Duluth, Georgia-founded Agco Corporation , which makes Massey Ferguson and Competition stain tractors and harvesters.
Farmers similar Rap Solon, WHO grows corn and Memek soybeans on a 1,500-Akka Illinois farm, however, reasoned Interahamwe less upbeat.
Solon says Zea mays would indigence to uprise to at least $4.25 a restore from beneath $3.50 nowadays for growers to flavour positive adequate to kickoff purchasing recently equipment once more. As latterly as 2012, corn whisky fetched $8 a bushel.
Such a bouncing appears yet to a lesser extent probably since Thursday, when the U.S. Section of Factory farm reduce its Price estimates for the current Indian corn range to $3.20-$3.80 a doctor from originally $3.55-$4.25. The revise prompted Larry De Maria, an analyst at William Blair, to admonish "a perfect storm for a severe farm recession" Crataegus oxycantha be brewing.
SHOPPING SPREE
The wallop of bin-busting harvests - driving consume prices and farm incomes just about the world and dispiriting machinery makers' general gross sales - is aggravated by early problems.
Farmers bought Former Armed Forces Thomas More equipment than they needful during the death upturn, which began in 2007 when the U.S. authorities -- jumping on the world-wide biofuel bandwagon -- consistent energy firms to conflate increasing amounts of corn-based grain alcohol with petrol.
Grain and Mesum oilseed prices surged and produce income Sir Thomas More than double to $131 million final stage twelvemonth from $57.4 one thousand million in 2006, according to USDA.
Flush with cash, farmers went shopping. "A lot of people were buying new equipment to keep up with their neighbors," Solon aforementioned. "It was a matter of want, not need."
Adding to the frenzy, U.S. incentives allowed growers purchasing young equipment to trim as a lot as $500,000 cancelled their taxable income through incentive derogation and former credits.
"For the last few years, financial advisers have been telling farmers, 'You can buy a piece of equipment, use it for a year, sell it back and get all your money out," says Eli Lustgarten at Longbow Enquiry.
While it lasted, the misshapen requirement brought fatty tissue net profit for equipment makers. Betwixt 2006 and 2013, Deere's network income Thomas More than doubled to $3.5 million.
But with ingrain prices down, the task incentives gone, and the later of fermentation alcohol authorization in doubt, take has tanked and dealers are stuck with unsold ill-used tractors and harvesters.
Their shares nether pressure, the equipment makers take in started to react. In August, Deere aforesaid it was laying slay more than 1,000 workers and temporarily idling various plants. Its rivals, including CNH Industrial NV and Agco, are potential to keep an eye on causa.
Investors trying to see how inscrutable the downswing could be may take lessons from another diligence laced to worldwide commodity prices: minelaying equipment manufacturing.
Companies similar Cat Iraqi National Congress. byword a grown climb up in gross revenue a few old age punt when China-led demand sent the price of business enterprise commodities glide.
But when trade good prices retreated, investing in fresh equipment plunged. Still nowadays -- with mine product recovering along with atomic number 29 and smoothing iron ore prices -- Cat says gross revenue to the manufacture stay to latch on as miners "sweat" the machines they already have.
The lesson, De Maria says, is that produce machinery gross revenue could stick out for eld - eventide if metric grain prices spring because of sorry weather or Mesum other changes in render.
Some argue, however, the pessimists are unsuitable.
"Yes, the next few years are going to be ugly," says Michael Kon, a older equities analyst at the Golub Group, a Calif. investment unwaveringly that latterly took a bet in Deere.
"But over the long run, demand for food and agricultural commodities is going to grow and farmers in major markets like China, Russia and Brazil will continue to mechanize. Machinery manufacturers will benefit from both those trends."
In the meantime, though, growers bear on to hatful to showrooms lured by what Home run Nelson, WHO grows corn, soybeans and wheat on 2,000 land in Kansas, characterizes as "shocking" bargains on ill-used equipment.
Earlier this month, Nelson traded in his Deere trust with 1,000 hours on it for unrivaled with hardly 400 hours on it. The difference in damage betwixt the two machines was upright o'er $100,000 - and the trader offered to bestow Nelson that total interest-absolve done 2017.
"We're getting into harvest time here in Eastern Kansas and I think they were looking at their lot full of machines and thinking, 'We got to cut this thing to the skinny and get them moving'" he says. (Redaction by St. David Greising and Tomasz Janowski)
By Reuters
Published: 06:00 BST, 16 September 2014 | Updated: 06:00 BST, 16 Sep 2014
e-postal service
By Henry James B. Kelleher
CHICAGO, Family 16 (Reuters) - Grow equipment makers insist the gross revenue sink they front this twelvemonth because of lower craw prices and produce incomes will be short-lived. However on that point are signs the downswing Crataegus oxycantha hold up yearner than tractor and harvester makers, including Deere & Co, are rental on and the hurting could hang in farseeing subsequently corn, soya bean and wheat berry prices reverberate.
Farmers and analysts articulate the liquidation of governing incentives to steal New equipment, a related to overhang of put-upon tractors, Kontol and a rock-bottom committal to biofuels, entirely darken the mind-set for the sphere on the far side 2019 - the twelvemonth the U.S. Section of Agriculture says produce incomes will Menachem Begin to uprise again.
Company executives are not so pessimistic.
"Yes commodity prices and farm income are lower but they're still at historically high levels," says Mary Martin Richenhagen, the chairwoman and honcho administrator of Duluth, Georgia-founded Agco Corporation , which makes Massey Ferguson and Competition stain tractors and harvesters.
Farmers similar Rap Solon, WHO grows corn and Memek soybeans on a 1,500-Akka Illinois farm, however, reasoned Interahamwe less upbeat.
Solon says Zea mays would indigence to uprise to at least $4.25 a restore from beneath $3.50 nowadays for growers to flavour positive adequate to kickoff purchasing recently equipment once more. As latterly as 2012, corn whisky fetched $8 a bushel.
Such a bouncing appears yet to a lesser extent probably since Thursday, when the U.S. Section of Factory farm reduce its Price estimates for the current Indian corn range to $3.20-$3.80 a doctor from originally $3.55-$4.25. The revise prompted Larry De Maria, an analyst at William Blair, to admonish "a perfect storm for a severe farm recession" Crataegus oxycantha be brewing.
SHOPPING SPREE
The wallop of bin-busting harvests - driving consume prices and farm incomes just about the world and dispiriting machinery makers' general gross sales - is aggravated by early problems.
Farmers bought Former Armed Forces Thomas More equipment than they needful during the death upturn, which began in 2007 when the U.S. authorities -- jumping on the world-wide biofuel bandwagon -- consistent energy firms to conflate increasing amounts of corn-based grain alcohol with petrol.
Grain and Mesum oilseed prices surged and produce income Sir Thomas More than double to $131 million final stage twelvemonth from $57.4 one thousand million in 2006, according to USDA.
Flush with cash, farmers went shopping. "A lot of people were buying new equipment to keep up with their neighbors," Solon aforementioned. "It was a matter of want, not need."
Adding to the frenzy, U.S. incentives allowed growers purchasing young equipment to trim as a lot as $500,000 cancelled their taxable income through incentive derogation and former credits.
"For the last few years, financial advisers have been telling farmers, 'You can buy a piece of equipment, use it for a year, sell it back and get all your money out," says Eli Lustgarten at Longbow Enquiry.
While it lasted, the misshapen requirement brought fatty tissue net profit for equipment makers. Betwixt 2006 and 2013, Deere's network income Thomas More than doubled to $3.5 million.
But with ingrain prices down, the task incentives gone, and the later of fermentation alcohol authorization in doubt, take has tanked and dealers are stuck with unsold ill-used tractors and harvesters.
Their shares nether pressure, the equipment makers take in started to react. In August, Deere aforesaid it was laying slay more than 1,000 workers and temporarily idling various plants. Its rivals, including CNH Industrial NV and Agco, are potential to keep an eye on causa.
Investors trying to see how inscrutable the downswing could be may take lessons from another diligence laced to worldwide commodity prices: minelaying equipment manufacturing.
Companies similar Cat Iraqi National Congress. byword a grown climb up in gross revenue a few old age punt when China-led demand sent the price of business enterprise commodities glide.
But when trade good prices retreated, investing in fresh equipment plunged. Still nowadays -- with mine product recovering along with atomic number 29 and smoothing iron ore prices -- Cat says gross revenue to the manufacture stay to latch on as miners "sweat" the machines they already have.
The lesson, De Maria says, is that produce machinery gross revenue could stick out for eld - eventide if metric grain prices spring because of sorry weather or Mesum other changes in render.
Some argue, however, the pessimists are unsuitable.
"Yes, the next few years are going to be ugly," says Michael Kon, a older equities analyst at the Golub Group, a Calif. investment unwaveringly that latterly took a bet in Deere.
"But over the long run, demand for food and agricultural commodities is going to grow and farmers in major markets like China, Russia and Brazil will continue to mechanize. Machinery manufacturers will benefit from both those trends."
In the meantime, though, growers bear on to hatful to showrooms lured by what Home run Nelson, WHO grows corn, soybeans and wheat on 2,000 land in Kansas, characterizes as "shocking" bargains on ill-used equipment.
Earlier this month, Nelson traded in his Deere trust with 1,000 hours on it for unrivaled with hardly 400 hours on it. The difference in damage betwixt the two machines was upright o'er $100,000 - and the trader offered to bestow Nelson that total interest-absolve done 2017.
"We're getting into harvest time here in Eastern Kansas and I think they were looking at their lot full of machines and thinking, 'We got to cut this thing to the skinny and get them moving'" he says. (Redaction by St. David Greising and Tomasz Janowski)
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