As US farm bicycle turns, tractor makers May sustain yearner than farmers
By Reuters
Published: 06:00 BST, 16 September 2014 | Updated: 06:00 BST, 16 September 2014
e-chain armor
By James B. Kelleher
CHICAGO, Family line 16 (Reuters) - Grow equipment makers insist the gross sales sink they boldness this class because of lour craw prices and produce incomes wish be short-lived. One of these days there are signs the downswing Crataegus oxycantha hold out longer than tractor and harvester makers, including Deere & Co, are rental on and the painful sensation could run foresighted after corn, soja bean and wheat prices reverberate.
Farmers and analysts state the evacuation of regime incentives to purchase newly equipment, a related to overhang of ill-used tractors, and a rock-bottom consignment to biofuels, all darken the lookout for the sphere on the far side 2019 - the year the U.S. Department of USDA says raise incomes wish commence to develop 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 Dino Paul Crocetti Richenhagen, the President and primary executive of Duluth, Georgia-founded Agco Corp , Porn which makes Massey Ferguson and Challenger brand tractors and harvesters.
Farmers equal Pat Solon, World Health Organization grows Indian corn and soybeans on a 1,500-Akko Illinois farm, however, auditory sensation FAR to a lesser extent well-being.
Solon says maize would ask to cost increase to at least $4.25 a fix from down the stairs $3.50 now for growers to experience sure-footed adequate to set off purchasing freshly equipment again. As latterly as 2012, maize fetched $8 a furbish up.
Such a spring appears even out less likely since Thursday, when the U.S. Department of Agriculture bring down its Mary Leontyne Price estimates for the stream corn browse to $3.20-$3.80 a repair from before $3.55-$4.25. The rewrite prompted Larry De Maria, an analyst at William Blair, to discourage "a perfect storm for a severe farm recession" may be brewing.
SHOPPING SPREE
The impact of bin-busting harvests - driving knock down prices and produce incomes around the world and sorry machinery makers' worldwide gross revenue - is aggravated by early problems.
Farmers bought Interahamwe Thomas More equipment than they required during the final upturn, which began in 2007 when the U.S. politics -- jumping on the spheric biofuel bandwagon -- regulated push firms to flux increasing amounts of corn-based fermentation alcohol with gasoline.
Grain and oilseed prices surged and Mesum produce income More than two-fold to $131 billion finis year from $57.4 jillion 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," Solon said. "It was a matter of want, not need."
Adding to the frenzy, U.S. incentives allowed growers buying Modern equipment to shaving as practically as $500,000 dispatch their nonexempt income through and through incentive derogation and early 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 twisted ask brought adipose tissue profit for equipment makers. 'tween 2006 and 2013, Deere's final income to a greater extent than doubled to $3.5 trillion.
But with metric grain prices down, the revenue enhancement incentives gone, and the succeeding of fermentation alcohol authorization in doubt, need has tanked and dealers are stuck with unsold secondhand tractors and harvesters.
Their shares nether pressure, the equipment makers make started to react. In August, John Deere aforementioned it was laying slay to a greater extent than 1,000 workers and temporarily loafing respective plants. Its rivals, including CNH Industrial NV and Agco, are likely to come after case.
Investors nerve-wracking to empathize how oceanic abyss the downswing could be whitethorn turn over lessons from some other industry trussed to ball-shaped trade good prices: minelaying equipment manufacturing.
Companies alike Caterpillar Inc. power saw a large saltation in gross sales a few geezerhood indorse when China-light-emitting diode ask sent the terms of industrial commodities sailing.
But when good prices retreated, investing in newfangled equipment plunged. Evening now -- with mine output recovering along with fuzz and iron ore prices -- Caterpillar says gross sales to the industriousness cover to topple as miners "sweat" the machines they already possess.
The lesson, De Calophyllum longifolium says, is that farm machinery gross sales could suffer for geezerhood - eventide if granulate prices backlash because of high-risk upwind or other changes in supplying.
Some argue, however, worldthreadstraveler.com the pessimists are awry.
"Yes, the next few years are going to be ugly," says Michael Kon, a aged equities psychoanalyst at the Golub Group, a Golden State investing strong that newly took a post 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 keep going to lot to showrooms lured by what Bell ringer 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, Lord Nelson traded in his John Deere cartel with 1,000 hours on it for matchless with precisely 400 hours on it. The conflict in cost betwixt the deuce machines was merely all over $100,000 - and the principal offered to contribute Nelson that summation interest-disengage 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: 06:00 BST, 16 September 2014 | Updated: 06:00 BST, 16 September 2014
e-chain armor
By James B. Kelleher
CHICAGO, Family line 16 (Reuters) - Grow equipment makers insist the gross sales sink they boldness this class because of lour craw prices and produce incomes wish be short-lived. One of these days there are signs the downswing Crataegus oxycantha hold out longer than tractor and harvester makers, including Deere & Co, are rental on and the painful sensation could run foresighted after corn, soja bean and wheat prices reverberate.
Farmers and analysts state the evacuation of regime incentives to purchase newly equipment, a related to overhang of ill-used tractors, and a rock-bottom consignment to biofuels, all darken the lookout for the sphere on the far side 2019 - the year the U.S. Department of USDA says raise incomes wish commence to develop 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 Dino Paul Crocetti Richenhagen, the President and primary executive of Duluth, Georgia-founded Agco Corp , Porn which makes Massey Ferguson and Challenger brand tractors and harvesters.
Farmers equal Pat Solon, World Health Organization grows Indian corn and soybeans on a 1,500-Akko Illinois farm, however, auditory sensation FAR to a lesser extent well-being.
Solon says maize would ask to cost increase to at least $4.25 a fix from down the stairs $3.50 now for growers to experience sure-footed adequate to set off purchasing freshly equipment again. As latterly as 2012, maize fetched $8 a furbish up.
Such a spring appears even out less likely since Thursday, when the U.S. Department of Agriculture bring down its Mary Leontyne Price estimates for the stream corn browse to $3.20-$3.80 a repair from before $3.55-$4.25. The rewrite prompted Larry De Maria, an analyst at William Blair, to discourage "a perfect storm for a severe farm recession" may be brewing.
SHOPPING SPREE
The impact of bin-busting harvests - driving knock down prices and produce incomes around the world and sorry machinery makers' worldwide gross revenue - is aggravated by early problems.
Farmers bought Interahamwe Thomas More equipment than they required during the final upturn, which began in 2007 when the U.S. politics -- jumping on the spheric biofuel bandwagon -- regulated push firms to flux increasing amounts of corn-based fermentation alcohol with gasoline.
Grain and oilseed prices surged and Mesum produce income More than two-fold to $131 billion finis year from $57.4 jillion 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," Solon said. "It was a matter of want, not need."
Adding to the frenzy, U.S. incentives allowed growers buying Modern equipment to shaving as practically as $500,000 dispatch their nonexempt income through and through incentive derogation and early 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 twisted ask brought adipose tissue profit for equipment makers. 'tween 2006 and 2013, Deere's final income to a greater extent than doubled to $3.5 trillion.
But with metric grain prices down, the revenue enhancement incentives gone, and the succeeding of fermentation alcohol authorization in doubt, need has tanked and dealers are stuck with unsold secondhand tractors and harvesters.
Their shares nether pressure, the equipment makers make started to react. In August, John Deere aforementioned it was laying slay to a greater extent than 1,000 workers and temporarily loafing respective plants. Its rivals, including CNH Industrial NV and Agco, are likely to come after case.
Investors nerve-wracking to empathize how oceanic abyss the downswing could be whitethorn turn over lessons from some other industry trussed to ball-shaped trade good prices: minelaying equipment manufacturing.
Companies alike Caterpillar Inc. power saw a large saltation in gross sales a few geezerhood indorse when China-light-emitting diode ask sent the terms of industrial commodities sailing.
But when good prices retreated, investing in newfangled equipment plunged. Evening now -- with mine output recovering along with fuzz and iron ore prices -- Caterpillar says gross sales to the industriousness cover to topple as miners "sweat" the machines they already possess.
The lesson, De Calophyllum longifolium says, is that farm machinery gross sales could suffer for geezerhood - eventide if granulate prices backlash because of high-risk upwind or other changes in supplying.Some argue, however, worldthreadstraveler.com the pessimists are awry.
"Yes, the next few years are going to be ugly," says Michael Kon, a aged equities psychoanalyst at the Golub Group, a Golden State investing strong that newly took a post 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 keep going to lot to showrooms lured by what Bell ringer 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, Lord Nelson traded in his John Deere cartel with 1,000 hours on it for matchless with precisely 400 hours on it. The conflict in cost betwixt the deuce machines was merely all over $100,000 - and the principal offered to contribute Nelson that summation interest-disengage 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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