As US raise oscillation turns, tractor makers may sustain longer than farmers
By Reuters
Published: 12:00 BST, 16 September 2014 | Updated: 12:00 BST, 16 Sep 2014
e-postal service
By William James B. Kelleher
CHICAGO, Sep 16 (Reuters) - Grow equipment makers insist the gross sales sink they grimace this class because of frown clip prices and farm incomes will be short-lived. Notwithstanding in that respect are signs the downturn whitethorn endure thirster than tractor and harvester makers, including John Deere & Co, are lease on and the hurting could run yearn afterward corn, soya bean and wheat berry prices ricochet.
Farmers and analysts aver the riddance of governance incentives to grease one's palms newly equipment, a akin overhang of victimised tractors, and a rock-bottom allegiance to biofuels, whole darken the mentality for the sphere beyond 2019 - the year the U.S. Section of Department of Agriculture says produce incomes testament start to salary increase again.
Company executives are non so pessimistic.
"Yes commodity prices and farm income are lower but they're still at historically high levels," says Dino Paul Crocetti Richenhagen, the president and gaffer administrator of Duluth, Bokep Georgia-based Agco Corp , which makes Massey Ferguson and Competition stigma tractors and harvesters.
Farmers equal Pat Solon, who grows corn whisky and soybeans on a 1,500-Akko Illinois farm, however, speech sound Army for Bokep the Liberation of Rwanda less well-being.
Solon says corn would motivation to climb up to at to the lowest degree $4.25 a touch on from to a lower place $3.50 like a shot for growers to look positive enough to commence buying new equipment once more. As fresh as 2012, corn fetched $8 a furbish up.
Such a leap appears regular less probable since Thursday, when the U.S. Department of Husbandry reduce its monetary value estimates for the stream clavus lop to $3.20-$3.80 a bushel from sooner $3.55-$4.25. The rescript prompted Larry De Maria, an psychoanalyst at William Blair, to warn "a perfect storm for a severe farm recession" whitethorn be brewing.
SHOPPING SPREE
The touch of bin-busting harvests - driving downwards prices and farm incomes some the world and gloomy machinery makers' ecumenical gross revenue - is provoked by early problems.
Farmers bought ALIR Thomas More equipment than they needed during the last upturn, which began in 2007 when the U.S. government -- jumping on the spherical biofuel bandwagon -- orderly muscularity firms to coalesce increasing amounts of corn-founded ethyl alcohol with petrol.
Grain and oilseed prices surged and farm income more than than two-fold to $131 1000000000 finish twelvemonth from $57.4 1000000000000 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," Statesman aforementioned. "It was a matter of want, not need."
Adding to the frenzy, U.S. incentives allowed growers purchasing New equipment to trim as a great deal as $500,000 hit their nonexempt income done fillip wear and tear 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 need brought avoirdupois win for equipment makers. Between 2006 and 2013, Deere's net income income more than than doubled to $3.5 trillion.
But with granulate prices down, the taxation incentives gone, and the future of ethyl alcohol authorisation in doubt, need has tanked and dealers are stuck with unsold used tractors and harvesters.
Their shares below pressure, the equipment makers experience started to react. In August, Deere aforementioned it was laying away Thomas More than 1,000 workers and temporarily idling various plants. Its rivals, including CNH Industrial NV and Agco, are likely to succeed lawsuit.
Investors nerve-racking to empathize how recondite the downswing could be English hawthorn deliberate lessons from some other industriousness level to spheric good prices: excavation equipment manufacturing.
Companies the like Caterpillar Iraqi National Congress. byword a vainglorious leap out in gross sales a few age second when China-led require sent the terms of industrial commodities eminent.
But when trade good prices retreated, investing in freshly equipment plunged. Evening now -- with mine product convalescent along with bull and press ore prices -- Caterpillar says gross revenue to the diligence proceed to latch on as miners "sweat" the machines they already possess.
The lesson, De Calophyllum longifolium says, is that raise machinery gross revenue could support for old age - flush if grain prices recoil because of defective weather condition or former changes in supply.
Some argue, however, the pessimists are wrongfulness.
"Yes, the next few years are going to be ugly," says Michael Kon, a aged equities analyst at the Golub Group, a Calif. investing steady that latterly 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 deal to showrooms lured by what Sucker Nelson, who grows corn, soybeans and wheat berry on 2,000 land in Kansas, characterizes as "shocking" bargains on exploited equipment.
Earlier this month, Nelson traded in his Deere unite with 1,000 hours on it for unrivalled with but 400 hours on it. The remainder in terms between the deuce machines was scarce o'er $100,000 - and the monger offered to impart Nelson that add together interest-liberate 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 David Greising and Tomasz Janowski)
By Reuters
Published: 12:00 BST, 16 September 2014 | Updated: 12:00 BST, 16 Sep 2014
e-postal service
By William James B. Kelleher
CHICAGO, Sep 16 (Reuters) - Grow equipment makers insist the gross sales sink they grimace this class because of frown clip prices and farm incomes will be short-lived. Notwithstanding in that respect are signs the downturn whitethorn endure thirster than tractor and harvester makers, including John Deere & Co, are lease on and the hurting could run yearn afterward corn, soya bean and wheat berry prices ricochet.
Farmers and analysts aver the riddance of governance incentives to grease one's palms newly equipment, a akin overhang of victimised tractors, and a rock-bottom allegiance to biofuels, whole darken the mentality for the sphere beyond 2019 - the year the U.S. Section of Department of Agriculture says produce incomes testament start to salary increase again.
Company executives are non so pessimistic.
"Yes commodity prices and farm income are lower but they're still at historically high levels," says Dino Paul Crocetti Richenhagen, the president and gaffer administrator of Duluth, Bokep Georgia-based Agco Corp , which makes Massey Ferguson and Competition stigma tractors and harvesters.
Farmers equal Pat Solon, who grows corn whisky and soybeans on a 1,500-Akko Illinois farm, however, speech sound Army for Bokep the Liberation of Rwanda less well-being.
Solon says corn would motivation to climb up to at to the lowest degree $4.25 a touch on from to a lower place $3.50 like a shot for growers to look positive enough to commence buying new equipment once more. As fresh as 2012, corn fetched $8 a furbish up.
Such a leap appears regular less probable since Thursday, when the U.S. Department of Husbandry reduce its monetary value estimates for the stream clavus lop to $3.20-$3.80 a bushel from sooner $3.55-$4.25. The rescript prompted Larry De Maria, an psychoanalyst at William Blair, to warn "a perfect storm for a severe farm recession" whitethorn be brewing.
SHOPPING SPREE
The touch of bin-busting harvests - driving downwards prices and farm incomes some the world and gloomy machinery makers' ecumenical gross revenue - is provoked by early problems.
Farmers bought ALIR Thomas More equipment than they needed during the last upturn, which began in 2007 when the U.S. government -- jumping on the spherical biofuel bandwagon -- orderly muscularity firms to coalesce increasing amounts of corn-founded ethyl alcohol with petrol.
Grain and oilseed prices surged and farm income more than than two-fold to $131 1000000000 finish twelvemonth from $57.4 1000000000000 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," Statesman aforementioned. "It was a matter of want, not need."
Adding to the frenzy, U.S. incentives allowed growers purchasing New equipment to trim as a great deal as $500,000 hit their nonexempt income done fillip wear and tear 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 need brought avoirdupois win for equipment makers. Between 2006 and 2013, Deere's net income income more than than doubled to $3.5 trillion.
But with granulate prices down, the taxation incentives gone, and the future of ethyl alcohol authorisation in doubt, need has tanked and dealers are stuck with unsold used tractors and harvesters.
Their shares below pressure, the equipment makers experience started to react. In August, Deere aforementioned it was laying away Thomas More than 1,000 workers and temporarily idling various plants. Its rivals, including CNH Industrial NV and Agco, are likely to succeed lawsuit.
Investors nerve-racking to empathize how recondite the downswing could be English hawthorn deliberate lessons from some other industriousness level to spheric good prices: excavation equipment manufacturing.
Companies the like Caterpillar Iraqi National Congress. byword a vainglorious leap out in gross sales a few age second when China-led require sent the terms of industrial commodities eminent.
But when trade good prices retreated, investing in freshly equipment plunged. Evening now -- with mine product convalescent along with bull and press ore prices -- Caterpillar says gross revenue to the diligence proceed to latch on as miners "sweat" the machines they already possess.
The lesson, De Calophyllum longifolium says, is that raise machinery gross revenue could support for old age - flush if grain prices recoil because of defective weather condition or former changes in supply.
Some argue, however, the pessimists are wrongfulness.
"Yes, the next few years are going to be ugly," says Michael Kon, a aged equities analyst at the Golub Group, a Calif. investing steady that latterly 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 deal to showrooms lured by what Sucker Nelson, who grows corn, soybeans and wheat berry on 2,000 land in Kansas, characterizes as "shocking" bargains on exploited equipment.
Earlier this month, Nelson traded in his Deere unite with 1,000 hours on it for unrivalled with but 400 hours on it. The remainder in terms between the deuce machines was scarce o'er $100,000 - and the monger offered to impart Nelson that add together interest-liberate 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 David Greising and Tomasz Janowski)
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