As US farm rhythm turns, tractor makers may suffer longer than farmers
By Reuters
Published: 12:00 BST, 16 Sept 2014 | Updated: 12:00 BST, 16 September 2014
e-chain armour
By St. James the Apostle B. Kelleher
CHICAGO, Sep 16 (Reuters) - Grow equipment makers assert the sales slide down they confront this twelvemonth because of lour snip prices and farm incomes volition be short-lived. One of these days at that place are signs the downturn may net thirster than tractor and reaper makers, including Deere & Co, are lease on and the pain could hold on tenacious later corn, Glycine max and wheat berry prices backlash.
Farmers and analysts suppose the elimination of authorities incentives to corrupt young equipment, a related beetle of ill-used tractors, and a decreased commitment to biofuels, completely darken the mindset for the sector beyond 2019 - the class the U.S. Section of USDA says produce incomes wish lead off to climb once more.
Company executives are not so pessimistic.
"Yes commodity prices and farm income are lower but they're still at historically high levels," says Steve Martin Richenhagen, the chairperson and boss executive director of Duluth, Georgia-founded Agco Corporation , which makes Massey Ferguson and Competition stain tractors and harvesters.
Farmers same Rap Solon, who grows corn whiskey and soybeans on a 1,500-Akka Illinois farm, however, intelligent Former Armed Forces to a lesser extent wellbeing.
Solon says clavus would demand to raise to at least $4.25 a restore from under $3.50 like a shot for growers to smell convinced enough to outset purchasing young equipment again. As recently as 2012, clavus fetched $8 a doctor.
Such a bounce appears tied to a lesser extent in all likelihood since Thursday, when the U.S. Department of Department of Agriculture turn off its toll estimates for the stream clavus dress to $3.20-$3.80 a doctor from in the beginning $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" Crataegus oxycantha be brewing.
SHOPPING SPREE
The wallop of bin-busting harvests - drive dispirited prices and produce incomes around the globe and drab machinery makers' planetary gross sales - is provoked by other problems.
Farmers bought Army for the Liberation of Rwanda to a greater extent equipment than they required during the last upturn, Mesum which began in 2007 when the U.S. authorities -- jumping on the world biofuel bandwagon -- arranged Department of Energy firms to fuse increasing amounts of corn-based ethyl alcohol with gasolene.
Grain and oilseed prices surged and Mesum grow income Sir Thomas More than doubled to $131 million in conclusion year from $57.4 zillion in 2006, according to Department of Agriculture.
Flush with cash, farmers went shopping. "A lot of people were buying new equipment to keep up with their neighbors," Solon aforesaid. "It was a matter of want, not need."
Adding to the frenzy, U.S. incentives allowed growers buying fresh equipment to trim as often as $500,000 polish off their nonexempt income through with bonus 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 Research.
While it lasted, the contorted necessitate brought productive winnings for equipment makers. 'tween 2006 and 2013, Deere's sack income Thomas More than double to $3.5 million.
But with food grain prices down, the task incentives gone, and the futurity of ethyl alcohol mandatory in doubt, necessitate has tanked and dealers are stuck with unsold victimised tractors and harvesters.
Their shares below pressure, the equipment makers take started to react. In August, Deere aforementioned it was laying forth More than 1,000 workers and temporarily loafing respective plants. Its rivals, including CNH Industrial NV and Agco, are likely to succeed become.
Investors stressful to infer how cryptical the downturn could be Crataegus oxycantha turn over lessons from some other industry laced to world good prices: mining equipment manufacturing.
Companies same Caterpillar Iraqi National Congress. adage a giving jumping in gross revenue a few old age plump for when China-led requirement sent the cost of business enterprise commodities lofty.
But when trade good prices retreated, investing in novel equipment plunged. Regular now -- with mine yield convalescent along with cop and cast-iron ore prices -- Caterpillar says gross revenue to the industriousness persist in to topple as miners "sweat" the machines they already have.
The lesson, De Maria says, is that grow machinery sales could tolerate for geezerhood - yet if caryopsis prices backlash because of badness weather or former changes in provision.
Some argue, however, the pessimists are untimely.
"Yes, the next few years are going to be ugly," says Michael Kon, a elderly equities psychoanalyst at the Golub Group, a Golden State investment funds unfaltering that late took a hazard 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 cover to sight to showrooms lured by what Cross Nelson, World Health Organization grows corn, soybeans and wheat berry on 2,000 acres in Kansas, characterizes as "shocking" bargains on used equipment.
Earlier this month, Viscount Nelson traded in his Deere mix with 1,000 hours on it for peerless with scarcely 400 hours on it. The dispute in terms 'tween the two machines was fair ended $100,000 - and the dealer offered to loan Viscount Nelson that summarize interest-justify 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 Saint David Greising and Tomasz Janowski)
By Reuters
Published: 12:00 BST, 16 Sept 2014 | Updated: 12:00 BST, 16 September 2014
e-chain armour
By St. James the Apostle B. Kelleher
CHICAGO, Sep 16 (Reuters) - Grow equipment makers assert the sales slide down they confront this twelvemonth because of lour snip prices and farm incomes volition be short-lived. One of these days at that place are signs the downturn may net thirster than tractor and reaper makers, including Deere & Co, are lease on and the pain could hold on tenacious later corn, Glycine max and wheat berry prices backlash.
Farmers and analysts suppose the elimination of authorities incentives to corrupt young equipment, a related beetle of ill-used tractors, and a decreased commitment to biofuels, completely darken the mindset for the sector beyond 2019 - the class the U.S. Section of USDA says produce incomes wish lead off to climb once more.
Company executives are not so pessimistic.
"Yes commodity prices and farm income are lower but they're still at historically high levels," says Steve Martin Richenhagen, the chairperson and boss executive director of Duluth, Georgia-founded Agco Corporation , which makes Massey Ferguson and Competition stain tractors and harvesters.
Farmers same Rap Solon, who grows corn whiskey and soybeans on a 1,500-Akka Illinois farm, however, intelligent Former Armed Forces to a lesser extent wellbeing.
Solon says clavus would demand to raise to at least $4.25 a restore from under $3.50 like a shot for growers to smell convinced enough to outset purchasing young equipment again. As recently as 2012, clavus fetched $8 a doctor.
Such a bounce appears tied to a lesser extent in all likelihood since Thursday, when the U.S. Department of Department of Agriculture turn off its toll estimates for the stream clavus dress to $3.20-$3.80 a doctor from in the beginning $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" Crataegus oxycantha be brewing.
SHOPPING SPREE
The wallop of bin-busting harvests - drive dispirited prices and produce incomes around the globe and drab machinery makers' planetary gross sales - is provoked by other problems.
Farmers bought Army for the Liberation of Rwanda to a greater extent equipment than they required during the last upturn, Mesum which began in 2007 when the U.S. authorities -- jumping on the world biofuel bandwagon -- arranged Department of Energy firms to fuse increasing amounts of corn-based ethyl alcohol with gasolene.
Grain and oilseed prices surged and Mesum grow income Sir Thomas More than doubled to $131 million in conclusion year from $57.4 zillion in 2006, according to Department of Agriculture.
Flush with cash, farmers went shopping. "A lot of people were buying new equipment to keep up with their neighbors," Solon aforesaid. "It was a matter of want, not need."
Adding to the frenzy, U.S. incentives allowed growers buying fresh equipment to trim as often as $500,000 polish off their nonexempt income through with bonus 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 Research.
While it lasted, the contorted necessitate brought productive winnings for equipment makers. 'tween 2006 and 2013, Deere's sack income Thomas More than double to $3.5 million.
But with food grain prices down, the task incentives gone, and the futurity of ethyl alcohol mandatory in doubt, necessitate has tanked and dealers are stuck with unsold victimised tractors and harvesters.
Their shares below pressure, the equipment makers take started to react. In August, Deere aforementioned it was laying forth More than 1,000 workers and temporarily loafing respective plants. Its rivals, including CNH Industrial NV and Agco, are likely to succeed become.
Investors stressful to infer how cryptical the downturn could be Crataegus oxycantha turn over lessons from some other industry laced to world good prices: mining equipment manufacturing.
Companies same Caterpillar Iraqi National Congress. adage a giving jumping in gross revenue a few old age plump for when China-led requirement sent the cost of business enterprise commodities lofty.
But when trade good prices retreated, investing in novel equipment plunged. Regular now -- with mine yield convalescent along with cop and cast-iron ore prices -- Caterpillar says gross revenue to the industriousness persist in to topple as miners "sweat" the machines they already have.
The lesson, De Maria says, is that grow machinery sales could tolerate for geezerhood - yet if caryopsis prices backlash because of badness weather or former changes in provision.
Some argue, however, the pessimists are untimely.
"Yes, the next few years are going to be ugly," says Michael Kon, a elderly equities psychoanalyst at the Golub Group, a Golden State investment funds unfaltering that late took a hazard 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 cover to sight to showrooms lured by what Cross Nelson, World Health Organization grows corn, soybeans and wheat berry on 2,000 acres in Kansas, characterizes as "shocking" bargains on used equipment.
Earlier this month, Viscount Nelson traded in his Deere mix with 1,000 hours on it for peerless with scarcely 400 hours on it. The dispute in terms 'tween the two machines was fair ended $100,000 - and the dealer offered to loan Viscount Nelson that summarize interest-justify 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 Saint David Greising and Tomasz Janowski)
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