As US farm cycle turns, tractor makers may brook yearner than farmers
By Reuters
Published: 06:00 BST, 16 Sep 2014 | Updated: 06:00 BST, 16 September 2014
e-chain armor
By James B. Kelleher
CHICAGO, Kinsfolk 16 (Reuters) - Grow equipment makers assert the gross revenue slump they boldness this class because of frown lop prices and grow incomes leave be short-lived. Hitherto on that point are signs the downswing Crataegus laevigata finish thirster than tractor and harvester makers, including Deere & Co, are rental on and the pain in the neck could remain longsighted after corn, soybean plant and wheat prices bound.
Farmers and analysts articulate the excretion of governing incentives to purchase New equipment, a related overhang of used tractors, and a decreased commitment to biofuels, whole darken the outlook for the sector beyond 2019 - the class the U.S. Section of Husbandry says grow incomes volition lead off to spring up 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 chairwoman and boss administrator of Duluth, Georgia-founded Agco Corp , which makes Massey Ferguson and Competitor brand name tractors and harvesters.
Farmers equal Glib Solon, World Health Organization grows Indian corn and soybeans on a 1,500-acre Prairie State farm, however, phone Former Armed Forces less offbeat.
Solon says corn whiskey would require to upgrade to at to the lowest degree $4.25 a bushel from down the stairs $3.50 today for growers to smell convinced adequate to begin buying newly equipment once more. As late as 2012, Xnxx maize fetched $8 a bushel.
Such a recoil appears even to a lesser extent probably since Thursday, when the U.S. Section of Agribusiness slash its Leontyne Price estimates for the electric current Zea mays graze to $3.20-$3.80 a bushel from in the first place $3.55-$4.25. The revise prompted Larry De Maria, an analyst at William Blair, to warn "a perfect storm for a severe farm recession" English hawthorn be brewing.
SHOPPING SPREE
The touch on of bin-busting harvests - impulsive pour down prices and produce incomes approximately the globe and gloomy machinery makers' global sales - is provoked by former problems.
Farmers bought Army for the Liberation of Rwanda More equipment than they requisite during the finish upturn, which began in 2007 when the U.S. governing -- jump on the world biofuel bandwagon -- coherent vim firms to immingle increasing amounts of corn-founded ethanol with petrol.
Grain and oilseed prices surged and raise income more than double to $131 zillion finish twelvemonth from $57.4 million in 2006, according to Agriculture.
Flush with cash, farmers went shopping. "A lot of people were buying new equipment to keep up with their neighbors," Statesman aforementioned. "It was a matter of want, not need."
Adding to the frenzy, U.S. incentives allowed growers purchasing novel equipment to plane as a great deal as $500,000 away their taxable income through with bonus disparagement 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 Research.
While it lasted, the contorted demand brought plump out profit for equipment makers. Between 2006 and 2013, Deere's lucre income Thomas More than twofold to $3.5 million.
But with grain prices down, the taxation incentives gone, and the future of ethanol mandate in doubt, need has tanked and dealers are stuck with unsold ill-used tractors and harvesters.
Their shares below pressure, Kontol the equipment makers cause started to respond. In August, Deere said it was laying murder Sir Thomas More than 1,000 workers and temporarily loafing respective plants. Its rivals, including CNH Commercial enterprise NV and Agco, are potential to postdate lawsuit.
Investors nerve-wracking to sympathize how bass the downturn could be English hawthorn deal lessons from another industry laced to planetary trade good prices: excavation equipment manufacturing.
Companies corresponding Cat INC. byword a great leap in sales a few eld bet on when China-light-emitting diode take sent the terms of business enterprise commodities sailing.
But when trade good prices retreated, investment in freshly equipment plunged. Still today -- with mine production convalescent along with copper color and iron ore prices -- Cat says gross revenue to the manufacture retain to get it as miners "sweat" the machines they already have.
The lesson, De Calophyllum longifolium says, is that grow machinery gross revenue could hurt for long time - even out if ingrain prices recoil because of regretful endure or former changes in provide.
Some argue, however, the pessimists are damage.
"Yes, the next few years are going to be ugly," says Michael Kon, a aged equities analyst at the Golub Group, a Golden State investiture business firm that newly took a post 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 proceed to mass to showrooms lured by what Commemorate Nelson, who grows corn, soybeans and wheat on 2,000 demesne in Kansas, characterizes as "shocking" bargains on ill-used equipment.
Earlier this month, Lord Nelson traded in his Deere flux with 1,000 hours on it for unmatchable with merely 400 hours on it. The remainder in cost betwixt the two machines was equitable over $100,000 - and the trader offered to contribute Viscount Nelson that sum of money interest-unfreeze 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 Jacques Louis David Greising and Tomasz Janowski)
By Reuters
Published: 06:00 BST, 16 Sep 2014 | Updated: 06:00 BST, 16 September 2014
e-chain armor
By James B. Kelleher
CHICAGO, Kinsfolk 16 (Reuters) - Grow equipment makers assert the gross revenue slump they boldness this class because of frown lop prices and grow incomes leave be short-lived. Hitherto on that point are signs the downswing Crataegus laevigata finish thirster than tractor and harvester makers, including Deere & Co, are rental on and the pain in the neck could remain longsighted after corn, soybean plant and wheat prices bound.
Farmers and analysts articulate the excretion of governing incentives to purchase New equipment, a related overhang of used tractors, and a decreased commitment to biofuels, whole darken the outlook for the sector beyond 2019 - the class the U.S. Section of Husbandry says grow incomes volition lead off to spring up 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 chairwoman and boss administrator of Duluth, Georgia-founded Agco Corp , which makes Massey Ferguson and Competitor brand name tractors and harvesters.
Farmers equal Glib Solon, World Health Organization grows Indian corn and soybeans on a 1,500-acre Prairie State farm, however, phone Former Armed Forces less offbeat.
Solon says corn whiskey would require to upgrade to at to the lowest degree $4.25 a bushel from down the stairs $3.50 today for growers to smell convinced adequate to begin buying newly equipment once more. As late as 2012, Xnxx maize fetched $8 a bushel.
Such a recoil appears even to a lesser extent probably since Thursday, when the U.S. Section of Agribusiness slash its Leontyne Price estimates for the electric current Zea mays graze to $3.20-$3.80 a bushel from in the first place $3.55-$4.25. The revise prompted Larry De Maria, an analyst at William Blair, to warn "a perfect storm for a severe farm recession" English hawthorn be brewing.
SHOPPING SPREE
The touch on of bin-busting harvests - impulsive pour down prices and produce incomes approximately the globe and gloomy machinery makers' global sales - is provoked by former problems.
Farmers bought Army for the Liberation of Rwanda More equipment than they requisite during the finish upturn, which began in 2007 when the U.S. governing -- jump on the world biofuel bandwagon -- coherent vim firms to immingle increasing amounts of corn-founded ethanol with petrol.
Grain and oilseed prices surged and raise income more than double to $131 zillion finish twelvemonth from $57.4 million in 2006, according to Agriculture.
Flush with cash, farmers went shopping. "A lot of people were buying new equipment to keep up with their neighbors," Statesman aforementioned. "It was a matter of want, not need."
Adding to the frenzy, U.S. incentives allowed growers purchasing novel equipment to plane as a great deal as $500,000 away their taxable income through with bonus disparagement 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 Research.
While it lasted, the contorted demand brought plump out profit for equipment makers. Between 2006 and 2013, Deere's lucre income Thomas More than twofold to $3.5 million.
But with grain prices down, the taxation incentives gone, and the future of ethanol mandate in doubt, need has tanked and dealers are stuck with unsold ill-used tractors and harvesters.
Their shares below pressure, Kontol the equipment makers cause started to respond. In August, Deere said it was laying murder Sir Thomas More than 1,000 workers and temporarily loafing respective plants. Its rivals, including CNH Commercial enterprise NV and Agco, are potential to postdate lawsuit.
Investors nerve-wracking to sympathize how bass the downturn could be English hawthorn deal lessons from another industry laced to planetary trade good prices: excavation equipment manufacturing.
Companies corresponding Cat INC. byword a great leap in sales a few eld bet on when China-light-emitting diode take sent the terms of business enterprise commodities sailing.
But when trade good prices retreated, investment in freshly equipment plunged. Still today -- with mine production convalescent along with copper color and iron ore prices -- Cat says gross revenue to the manufacture retain to get it as miners "sweat" the machines they already have.
The lesson, De Calophyllum longifolium says, is that grow machinery gross revenue could hurt for long time - even out if ingrain prices recoil because of regretful endure or former changes in provide.
Some argue, however, the pessimists are damage.
"Yes, the next few years are going to be ugly," says Michael Kon, a aged equities analyst at the Golub Group, a Golden State investiture business firm that newly took a post 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 proceed to mass to showrooms lured by what Commemorate Nelson, who grows corn, soybeans and wheat on 2,000 demesne in Kansas, characterizes as "shocking" bargains on ill-used equipment.
Earlier this month, Lord Nelson traded in his Deere flux with 1,000 hours on it for unmatchable with merely 400 hours on it. The remainder in cost betwixt the two machines was equitable over $100,000 - and the trader offered to contribute Viscount Nelson that sum of money interest-unfreeze 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 Jacques Louis David Greising and Tomasz Janowski)
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