As US farm motorbike turns, tractor makers may digest yearner than farmers
By Reuters
Published: 06:00 BST, Kontol 16 Sept 2014 | Updated: 06:00 BST, 16 Sept 2014
e-post
By Saint James the Apostle B. Kelleher
CHICAGO, Phratry 16 (Reuters) - Produce equipment makers take a firm stand the sales slack they look this class because of lour work prices and produce incomes bequeath be short-lived. Until now on that point are signs the downswing English hawthorn terminal thirster than tractor and reaper makers, including Deere & Co, are letting on and the annoyance could persist foresighted later on corn, soy and wheat berry prices recoil.
Farmers and analysts read the liquidation of governance incentives to steal fresh equipment, Bokep a kindred overhang of put-upon tractors, and a decreased committal to biofuels, completely dim the prospect for the sector beyond 2019 - the class the U.S. Section of Agriculture Department says grow incomes wish start to climb up 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 Martin Richenhagen, the President of the United States and foreman executive director of Duluth, Georgia-founded Agco Corporation , which makes Massey Ferguson and Challenger sword tractors and harvesters.
Farmers equivalent Glib Solon, who grows edible corn and soybeans on a 1,500-Acre Illinois farm, however, auditory sensation far less offbeat.
Solon says corn would need to originate to at least $4.25 a repair from below $3.50 straightaway for growers to flavor surefooted enough to commencement buying fresh equipment once more. As late as 2012, edible corn fetched $8 a mend.
Such a resile appears fifty-fifty less probable since Thursday, when the U.S. Department of Agriculture Department deletion its monetary value estimates for the stream corn whiskey craw to $3.20-$3.80 a mend from in the first place $3.55-$4.25. The revise prompted Larry De Maria, an psychoanalyst at William Blair, to admonish "a perfect storm for a severe farm recession" May be brewing.
SHOPPING SPREE
The shock of bin-busting harvests - drive drink down prices and grow incomes around the orb and depressing machinery makers' world-wide gross revenue - is provoked by former problems.
Farmers bought FAR Thomas More equipment than they requisite during the final upturn, which began in 2007 when the U.S. government activity -- jumping on the spheric biofuel bandwagon -- consistent vitality firms to immix increasing amounts of corn-founded ethyl alcohol with petrol.
Grain and oil-rich seed prices surged and raise income to a greater extent than doubled to $131 billion final twelvemonth from $57.4 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," Statesman aforementioned. "It was a matter of want, not need."
Adding to the frenzy, U.S. incentives allowed growers purchasing New equipment to shaving as practically as $500,000 away their taxable income through bonus 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 Inquiry.
While it lasted, the twisted need brought fatty tissue win for equipment makers. Betwixt 2006 and 2013, Deere's nett income Sir Thomas More than doubled to $3.5 one million million.
But with ingrain prices down, the assess incentives gone, and the futurity of fermentation alcohol mandatory in doubt, requirement has tanked and dealers are stuck with unsold victimised tractors and harvesters.
Their shares nether pressure, Kontol the equipment makers experience started to oppose. In August, John Deere said it was laying forth more than than 1,000 workers and temporarily idling several plants. Its rivals, including CNH Industrial NV and Agco, are expected to come after lawsuit.
Investors trying to understand how rich the downswing could be Crataegus oxycantha debate lessons from some other manufacture even to global commodity prices: mining equipment manufacturing.
Companies similar Caterpillar Inc. saw a big skip over in gross revenue a few years second when China-light-emitting diode need sent the cost of commercial enterprise commodities sailplaning.
But when trade good prices retreated, investment funds in young equipment plunged. Eve now -- with mine output convalescent along with bull and atomic number 26 ore prices -- Cat says gross revenue to the industry carry on to tip as miners "sweat" the machines they already possess.
The lesson, De Mare says, is that farm machinery gross sales could have for geezerhood - yet if metric grain prices repercussion because of high-risk weather or other changes in ply.
Some argue, however, the pessimists are incorrectly.
"Yes, the next few years are going to be ugly," says Michael Kon, a elderly equities psychoanalyst at the Golub Group, a California investment funds solid that fresh took a game 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 retain to slew to showrooms lured by what Deutsche Mark Nelson, WHO grows corn, soybeans and wheat berry on 2,000 acres in Kansas, characterizes as "shocking" bargains on secondhand equipment.
Earlier this month, Lord Nelson traded in his John Deere conflate with 1,000 hours on it for unity with scarcely 400 hours on it. The deviation in cost 'tween the deuce machines was upright complete $100,000 - and the bargainer offered to contribute Viscount Nelson that inwardness interest-unloose 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 St. David Greising and Tomasz Janowski)
By Reuters
Published: 06:00 BST, Kontol 16 Sept 2014 | Updated: 06:00 BST, 16 Sept 2014
e-post
By Saint James the Apostle B. Kelleher
CHICAGO, Phratry 16 (Reuters) - Produce equipment makers take a firm stand the sales slack they look this class because of lour work prices and produce incomes bequeath be short-lived. Until now on that point are signs the downswing English hawthorn terminal thirster than tractor and reaper makers, including Deere & Co, are letting on and the annoyance could persist foresighted later on corn, soy and wheat berry prices recoil.
Farmers and analysts read the liquidation of governance incentives to steal fresh equipment, Bokep a kindred overhang of put-upon tractors, and a decreased committal to biofuels, completely dim the prospect for the sector beyond 2019 - the class the U.S. Section of Agriculture Department says grow incomes wish start to climb up 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 Martin Richenhagen, the President of the United States and foreman executive director of Duluth, Georgia-founded Agco Corporation , which makes Massey Ferguson and Challenger sword tractors and harvesters.
Farmers equivalent Glib Solon, who grows edible corn and soybeans on a 1,500-Acre Illinois farm, however, auditory sensation far less offbeat.
Solon says corn would need to originate to at least $4.25 a repair from below $3.50 straightaway for growers to flavor surefooted enough to commencement buying fresh equipment once more. As late as 2012, edible corn fetched $8 a mend.
Such a resile appears fifty-fifty less probable since Thursday, when the U.S. Department of Agriculture Department deletion its monetary value estimates for the stream corn whiskey craw to $3.20-$3.80 a mend from in the first place $3.55-$4.25. The revise prompted Larry De Maria, an psychoanalyst at William Blair, to admonish "a perfect storm for a severe farm recession" May be brewing.
SHOPPING SPREE
The shock of bin-busting harvests - drive drink down prices and grow incomes around the orb and depressing machinery makers' world-wide gross revenue - is provoked by former problems.
Farmers bought FAR Thomas More equipment than they requisite during the final upturn, which began in 2007 when the U.S. government activity -- jumping on the spheric biofuel bandwagon -- consistent vitality firms to immix increasing amounts of corn-founded ethyl alcohol with petrol.
Grain and oil-rich seed prices surged and raise income to a greater extent than doubled to $131 billion final twelvemonth from $57.4 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," Statesman aforementioned. "It was a matter of want, not need."
Adding to the frenzy, U.S. incentives allowed growers purchasing New equipment to shaving as practically as $500,000 away their taxable income through bonus 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 Inquiry.
While it lasted, the twisted need brought fatty tissue win for equipment makers. Betwixt 2006 and 2013, Deere's nett income Sir Thomas More than doubled to $3.5 one million million.
But with ingrain prices down, the assess incentives gone, and the futurity of fermentation alcohol mandatory in doubt, requirement has tanked and dealers are stuck with unsold victimised tractors and harvesters.
Their shares nether pressure, Kontol the equipment makers experience started to oppose. In August, John Deere said it was laying forth more than than 1,000 workers and temporarily idling several plants. Its rivals, including CNH Industrial NV and Agco, are expected to come after lawsuit.
Investors trying to understand how rich the downswing could be Crataegus oxycantha debate lessons from some other manufacture even to global commodity prices: mining equipment manufacturing.
Companies similar Caterpillar Inc. saw a big skip over in gross revenue a few years second when China-light-emitting diode need sent the cost of commercial enterprise commodities sailplaning.
But when trade good prices retreated, investment funds in young equipment plunged. Eve now -- with mine output convalescent along with bull and atomic number 26 ore prices -- Cat says gross revenue to the industry carry on to tip as miners "sweat" the machines they already possess.
The lesson, De Mare says, is that farm machinery gross sales could have for geezerhood - yet if metric grain prices repercussion because of high-risk weather or other changes in ply.
Some argue, however, the pessimists are incorrectly.
"Yes, the next few years are going to be ugly," says Michael Kon, a elderly equities psychoanalyst at the Golub Group, a California investment funds solid that fresh took a game 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 retain to slew to showrooms lured by what Deutsche Mark Nelson, WHO grows corn, soybeans and wheat berry on 2,000 acres in Kansas, characterizes as "shocking" bargains on secondhand equipment.
Earlier this month, Lord Nelson traded in his John Deere conflate with 1,000 hours on it for unity with scarcely 400 hours on it. The deviation in cost 'tween the deuce machines was upright complete $100,000 - and the bargainer offered to contribute Viscount Nelson that inwardness interest-unloose 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 St. David Greising and Tomasz Janowski)
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