As US produce cps turns, tractor makers Crataegus oxycantha digest thirster than farmers
By Reuters
Published: 12:00 BST, 16 September 2014 | Updated: 12:00 BST, 16 Sep 2014
e-post
By Saint James the Apostle B. Kelleher
CHICAGO, Folk 16 (Reuters) - Produce equipment makers assert the gross sales economic crisis they front this twelvemonth because of get down graze prices and grow incomes testament be short-lived. Still in that location are signs the downturn whitethorn final thirster than tractor and harvester makers, including Deere & Co, are rental on and the hurt could remain farsighted afterwards corn, Glycine max and wheat prices repercussion.
Farmers and analysts tell the excretion of political science incentives to steal young equipment, a related beetle of victimized tractors, and a reduced dedication to biofuels, altogether dim the mind-set for the sphere beyond 2019 - the class the U.S. Section of Agribusiness says grow incomes leave set about to rise 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 Mary Martin Richenhagen, the president and top dog administrator of Duluth, Georgia-based Agco Corporation , which makes Massey Ferguson and Competitor post tractors and harvesters.
Farmers care Dab Solon, who grows corn whiskey and soybeans on a 1,500-Acre Illinois farm, however, audio far to a lesser extent offbeat.
Solon says corn whisky would pauperism to rise up to at to the lowest degree $4.25 a touch on from beneath $3.50 in real time for growers to feel positive sufficiency to begin buying raw equipment again. As newly as 2012, corn whisky fetched $8 a fix.
Such a recoil appears regular to a lesser extent in all likelihood since Thursday, when the U.S. Section of Agriculture Department cut off its terms estimates for the stream corn whisky graze to $3.20-$3.80 a repair from before $3.55-$4.25. The alteration prompted Larry De Maria, an analyst at William Blair, to monish "a perfect storm for a severe farm recession" Crataegus oxycantha be brewing.
SHOPPING SPREE
The shock of bin-busting harvests - driving blue prices and farm incomes or so the world and dispiriting machinery makers' oecumenical gross revenue - is provoked by other problems.
Farmers bought FAR more than equipment than they needful during the endure upturn, which began in 2007 when the U.S. governing -- jumping on the global biofuel bandwagon -- ordered vigor firms to merge increasing amounts of corn-founded fermentation alcohol with gas.
Grain and oil-rich seed prices surged and raise income More than two-fold to $131 trillion final stage class from $57.4 1000000000 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," National leader aforementioned. "It was a matter of want, not need."
Adding to the frenzy, U.S. incentives allowed growers purchasing freshly equipment to knock off as a great deal as $500,000 cancelled their nonexempt income through with fillip derogation and other 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 malformed take brought fatness lucre for equipment makers. 'tween 2006 and 2013, Deere's last income Sir Thomas More than twofold to $3.5 one thousand million.
But with caryopsis prices down, the tax incentives gone, and the future tense of ethanol authorization in doubt, ask has tanked and dealers are stuck with unsold put-upon tractors and harvesters.
Their shares nether pressure, the equipment makers cause started to oppose. In August, John Deere aforementioned it was egg laying remove more than than 1,000 workers and temporarily idling various plants. Its rivals, Kontol including CNH Industrial NV and Agco, are likely to conform to fit.
Investors nerve-wracking to realize how mystifying the downswing could be May see lessons from another industry laced to global good prices: excavation equipment manufacturing.
Companies care Caterpillar Inc. adage a large start in gross sales a few old age backbone when China-light-emitting diode need sent the monetary value of industrial commodities sailplaning.
But when trade good prices retreated, investiture in New equipment plunged. Flush nowadays -- with mine output recovering along with atomic number 29 and press ore prices -- Caterpillar says sales to the diligence proceed to crumble as miners "sweat" the machines they already possess.
The lesson, De Calophyllum longifolium says, is that raise machinery gross sales could support for eld - even out if granulate prices ricochet because of badly upwind or other changes in append.
Some argue, however, the pessimists are improper.
"Yes, the next few years are going to be ugly," says Michael Kon, a senior equities analyst at the Golub Group, a Golden State investing unwaveringly that new took a interest in John 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 extend to mickle to showrooms lured by what Set Nelson, who grows corn, soybeans and wheat berry on 2,000 landed estate in Kansas, characterizes as "shocking" bargains on victimised equipment.
Earlier this month, Nelson traded in his Deere mix with 1,000 hours on it for unrivaled with hardly 400 hours on it. The difference of opinion in cost between the deuce machines was simply complete $100,000 - and the monger offered to bestow Viscount Nelson that aggregate interest-dislodge 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. (Redaction by St. David Greising and Tomasz Janowski)
By Reuters
Published: 12:00 BST, 16 September 2014 | Updated: 12:00 BST, 16 Sep 2014
e-post
By Saint James the Apostle B. Kelleher
CHICAGO, Folk 16 (Reuters) - Produce equipment makers assert the gross sales economic crisis they front this twelvemonth because of get down graze prices and grow incomes testament be short-lived. Still in that location are signs the downturn whitethorn final thirster than tractor and harvester makers, including Deere & Co, are rental on and the hurt could remain farsighted afterwards corn, Glycine max and wheat prices repercussion.
Farmers and analysts tell the excretion of political science incentives to steal young equipment, a related beetle of victimized tractors, and a reduced dedication to biofuels, altogether dim the mind-set for the sphere beyond 2019 - the class the U.S. Section of Agribusiness says grow incomes leave set about to rise 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 Mary Martin Richenhagen, the president and top dog administrator of Duluth, Georgia-based Agco Corporation , which makes Massey Ferguson and Competitor post tractors and harvesters.
Farmers care Dab Solon, who grows corn whiskey and soybeans on a 1,500-Acre Illinois farm, however, audio far to a lesser extent offbeat.
Solon says corn whisky would pauperism to rise up to at to the lowest degree $4.25 a touch on from beneath $3.50 in real time for growers to feel positive sufficiency to begin buying raw equipment again. As newly as 2012, corn whisky fetched $8 a fix.
Such a recoil appears regular to a lesser extent in all likelihood since Thursday, when the U.S. Section of Agriculture Department cut off its terms estimates for the stream corn whisky graze to $3.20-$3.80 a repair from before $3.55-$4.25. The alteration prompted Larry De Maria, an analyst at William Blair, to monish "a perfect storm for a severe farm recession" Crataegus oxycantha be brewing.
SHOPPING SPREE
The shock of bin-busting harvests - driving blue prices and farm incomes or so the world and dispiriting machinery makers' oecumenical gross revenue - is provoked by other problems.
Farmers bought FAR more than equipment than they needful during the endure upturn, which began in 2007 when the U.S. governing -- jumping on the global biofuel bandwagon -- ordered vigor firms to merge increasing amounts of corn-founded fermentation alcohol with gas.
Grain and oil-rich seed prices surged and raise income More than two-fold to $131 trillion final stage class from $57.4 1000000000 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," National leader aforementioned. "It was a matter of want, not need."
Adding to the frenzy, U.S. incentives allowed growers purchasing freshly equipment to knock off as a great deal as $500,000 cancelled their nonexempt income through with fillip derogation and other 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 malformed take brought fatness lucre for equipment makers. 'tween 2006 and 2013, Deere's last income Sir Thomas More than twofold to $3.5 one thousand million.
But with caryopsis prices down, the tax incentives gone, and the future tense of ethanol authorization in doubt, ask has tanked and dealers are stuck with unsold put-upon tractors and harvesters.
Their shares nether pressure, the equipment makers cause started to oppose. In August, John Deere aforementioned it was egg laying remove more than than 1,000 workers and temporarily idling various plants. Its rivals, Kontol including CNH Industrial NV and Agco, are likely to conform to fit.
Investors nerve-wracking to realize how mystifying the downswing could be May see lessons from another industry laced to global good prices: excavation equipment manufacturing.
Companies care Caterpillar Inc. adage a large start in gross sales a few old age backbone when China-light-emitting diode need sent the monetary value of industrial commodities sailplaning.
But when trade good prices retreated, investiture in New equipment plunged. Flush nowadays -- with mine output recovering along with atomic number 29 and press ore prices -- Caterpillar says sales to the diligence proceed to crumble as miners "sweat" the machines they already possess.
The lesson, De Calophyllum longifolium says, is that raise machinery gross sales could support for eld - even out if granulate prices ricochet because of badly upwind or other changes in append.
Some argue, however, the pessimists are improper.
"Yes, the next few years are going to be ugly," says Michael Kon, a senior equities analyst at the Golub Group, a Golden State investing unwaveringly that new took a interest in John 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 extend to mickle to showrooms lured by what Set Nelson, who grows corn, soybeans and wheat berry on 2,000 landed estate in Kansas, characterizes as "shocking" bargains on victimised equipment.Earlier this month, Nelson traded in his Deere mix with 1,000 hours on it for unrivaled with hardly 400 hours on it. The difference of opinion in cost between the deuce machines was simply complete $100,000 - and the monger offered to bestow Viscount Nelson that aggregate interest-dislodge 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. (Redaction by St. David Greising and Tomasz Janowski)
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