As US grow cps turns, tractor makers Crataegus oxycantha bear yearner than farmers
By Reuters
Published: 12:00 BST, 16 Sept 2014 | Updated: 12:00 BST, 16 Sep 2014
e-mail service
By James B. Kelleher
CHICAGO, Kontol September 16 (Reuters) - Farm equipment makers take a firm stand the gross revenue correct they look this class because of lower prune prices and produce incomes wish be short-lived. Eventually at that place are signs the downturn Crataegus oxycantha lastly longer than tractor and harvester makers, including John Deere & Co, are letting on and the botheration could stay long later corn, soya bean and wheat prices recoil.
Farmers and analysts say the excreting of government activity incentives to bribe newfangled equipment, a germane overhang of put-upon tractors, and a rock-bottom consignment to biofuels, whole dim the mentality for the sector beyond 2019 - the year the U.S. Section of Husbandry says raise incomes leave begin to raise over again.
Company executives are not so pessimistic.
"Yes commodity prices and farm income are lower but they're still at historically high levels," says Martin Richenhagen, the president and head executive of Duluth, Georgia-based Agco Corporation , which makes Massey Ferguson and Competitor brand tractors and harvesters.
Farmers ilk Glib Solon, who grows corn and soybeans on a 1,500-acre Prairie State farm, however, good far to a lesser extent pollyannaish.
Solon says maize would need to procession to at least $4.25 a bushel from down the stairs $3.50 immediately for growers to tactile property confident adequate to lead off buying newfangled equipment once again. As recently as 2012, corn fetched $8 a furbish up.
Such a spring appears eve less likely since Thursday, when the U.S. Department of Agriculture foreshorten its damage estimates for the stream edible corn range to $3.20-$3.80 a touch on from sooner $3.55-$4.25. The rewrite prompted Larry De Maria, Porn an psychoanalyst at William Blair, to monish "a perfect storm for a severe farm recession" Crataegus oxycantha be brewing.
SHOPPING SPREE
The bear upon of bin-busting harvests - driving belt down prices and raise incomes more or less the Earth and depressive machinery makers' general gross sales - is aggravated by former problems.
Farmers bought ALIR More equipment than they needful during the end upturn, which began in 2007 when the U.S. authorities -- jump on the spherical biofuel bandwagon -- coherent DOE firms to blend in increasing amounts of corn-founded ethyl alcohol with gasolene.
Grain and oil-rich seed prices surged and produce income more than two-fold to $131 billion 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 said. "It was a matter of want, not need."
Adding to the frenzy, U.S. incentives allowed growers purchasing Modern equipment to shave as often as $500,000 bump off their nonexempt income done bonus depreciation and early 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 Search.
While it lasted, the distorted exact brought fatty lucre for equipment makers. Betwixt 2006 and 2013, Deere's earnings income to a greater extent than double to $3.5 trillion.
But with granulate prices down, the revenue enhancement incentives gone, and the futurity of grain alcohol authorization in doubt, need has tanked and dealers are stuck with unsold victimized tractors and harvesters.
Their shares nether pressure, the equipment makers have started to oppose. In August, Deere aforementioned it was egg laying away More than 1,000 workers and temporarily loafing several plants. Its rivals, including CNH Industrial NV and Agco, are likely to conform to accommodate.
Investors nerve-racking to infer how inscrutable the downswing could be whitethorn look at lessons from some other diligence trussed to spheric commodity prices: minelaying equipment manufacturing.
Companies care Cat Iraqi National Congress. byword a large leap in sales a few age plump for when China-LED demand sent the cost of business enterprise commodities glide.
But when good prices retreated, investment funds in newly equipment plunged. Regular now -- with mine yield convalescent along with fuzz and iron ore prices -- Cat says gross revenue to the industriousness stay on to tip as miners "sweat" the machines they already own.
The lesson, De Maria says, is that produce machinery gross sales could hurt for old age - fifty-fifty if metric grain prices take a hop because of risky upwind or early changes in cater.
Some argue, however, the pessimists are incorrectly.
"Yes, the next few years are going to be ugly," says Michael Kon, a older equities psychoanalyst at the Golub Group, a Golden State investiture firmly that of late took a back 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 keep going to sight to showrooms lured by what Gull Nelson, who grows corn, soybeans and wheat berry on 2,000 land in Kansas, characterizes as "shocking" bargains on exploited equipment.
Earlier this month, Admiral Nelson traded in his Deere trust with 1,000 hours on it for unitary with exactly 400 hours on it. The difference in toll between the deuce machines was just over $100,000 - and the trader offered to add Horatio Nelson that heart interest-loose through and through 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. (Editing by David Greising and Tomasz Janowski)
By Reuters
Published: 12:00 BST, 16 Sept 2014 | Updated: 12:00 BST, 16 Sep 2014
e-mail service
By James B. Kelleher
CHICAGO, Kontol September 16 (Reuters) - Farm equipment makers take a firm stand the gross revenue correct they look this class because of lower prune prices and produce incomes wish be short-lived. Eventually at that place are signs the downturn Crataegus oxycantha lastly longer than tractor and harvester makers, including John Deere & Co, are letting on and the botheration could stay long later corn, soya bean and wheat prices recoil.
Farmers and analysts say the excreting of government activity incentives to bribe newfangled equipment, a germane overhang of put-upon tractors, and a rock-bottom consignment to biofuels, whole dim the mentality for the sector beyond 2019 - the year the U.S. Section of Husbandry says raise incomes leave begin to raise over again.
Company executives are not so pessimistic.
"Yes commodity prices and farm income are lower but they're still at historically high levels," says Martin Richenhagen, the president and head executive of Duluth, Georgia-based Agco Corporation , which makes Massey Ferguson and Competitor brand tractors and harvesters.
Farmers ilk Glib Solon, who grows corn and soybeans on a 1,500-acre Prairie State farm, however, good far to a lesser extent pollyannaish.
Solon says maize would need to procession to at least $4.25 a bushel from down the stairs $3.50 immediately for growers to tactile property confident adequate to lead off buying newfangled equipment once again. As recently as 2012, corn fetched $8 a furbish up.
Such a spring appears eve less likely since Thursday, when the U.S. Department of Agriculture foreshorten its damage estimates for the stream edible corn range to $3.20-$3.80 a touch on from sooner $3.55-$4.25. The rewrite prompted Larry De Maria, Porn an psychoanalyst at William Blair, to monish "a perfect storm for a severe farm recession" Crataegus oxycantha be brewing.
SHOPPING SPREE
The bear upon of bin-busting harvests - driving belt down prices and raise incomes more or less the Earth and depressive machinery makers' general gross sales - is aggravated by former problems.
Farmers bought ALIR More equipment than they needful during the end upturn, which began in 2007 when the U.S. authorities -- jump on the spherical biofuel bandwagon -- coherent DOE firms to blend in increasing amounts of corn-founded ethyl alcohol with gasolene.
Grain and oil-rich seed prices surged and produce income more than two-fold to $131 billion 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 said. "It was a matter of want, not need."
Adding to the frenzy, U.S. incentives allowed growers purchasing Modern equipment to shave as often as $500,000 bump off their nonexempt income done bonus depreciation and early 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 Search.
While it lasted, the distorted exact brought fatty lucre for equipment makers. Betwixt 2006 and 2013, Deere's earnings income to a greater extent than double to $3.5 trillion.
But with granulate prices down, the revenue enhancement incentives gone, and the futurity of grain alcohol authorization in doubt, need has tanked and dealers are stuck with unsold victimized tractors and harvesters.
Their shares nether pressure, the equipment makers have started to oppose. In August, Deere aforementioned it was egg laying away More than 1,000 workers and temporarily loafing several plants. Its rivals, including CNH Industrial NV and Agco, are likely to conform to accommodate.
Investors nerve-racking to infer how inscrutable the downswing could be whitethorn look at lessons from some other diligence trussed to spheric commodity prices: minelaying equipment manufacturing.
Companies care Cat Iraqi National Congress. byword a large leap in sales a few age plump for when China-LED demand sent the cost of business enterprise commodities glide.
But when good prices retreated, investment funds in newly equipment plunged. Regular now -- with mine yield convalescent along with fuzz and iron ore prices -- Cat says gross revenue to the industriousness stay on to tip as miners "sweat" the machines they already own.
The lesson, De Maria says, is that produce machinery gross sales could hurt for old age - fifty-fifty if metric grain prices take a hop because of risky upwind or early changes in cater.
Some argue, however, the pessimists are incorrectly.
"Yes, the next few years are going to be ugly," says Michael Kon, a older equities psychoanalyst at the Golub Group, a Golden State investiture firmly that of late took a back 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 keep going to sight to showrooms lured by what Gull Nelson, who grows corn, soybeans and wheat berry on 2,000 land in Kansas, characterizes as "shocking" bargains on exploited equipment.
Earlier this month, Admiral Nelson traded in his Deere trust with 1,000 hours on it for unitary with exactly 400 hours on it. The difference in toll between the deuce machines was just over $100,000 - and the trader offered to add Horatio Nelson that heart interest-loose through and through 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. (Editing by David Greising and Tomasz Janowski)
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