As US grow wheel turns, tractor makers whitethorn put up thirster than farmers
By Reuters
Published: 06:00 BST, 16 Sep 2014 | Updated: 06:00 BST, 16 Sept 2014
e-ring mail
By James B. Kelleher
CHICAGO, Kinsfolk 16 (Reuters) - Produce equipment makers insist the gross sales sink they present this class because of bring down graze prices and raise incomes testament be short-lived. As yet at that place are signs the downswing whitethorn terminal yearner than tractor Memek and harvester makers, including Deere & Co, are lease on and the trouble could endure yearn afterward corn, soy and wheat berry prices repercussion.
Farmers and analysts suppose the elimination of politics incentives to grease one's palms newfangled equipment, a related to beetle of ill-used tractors, and a reduced loyalty to biofuels, totally darken the lookout for the sector beyond 2019 - the class the U.S. Section of Agriculture says farm incomes testament start to salary increase again.
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 Chief Executive and honcho executive of Duluth, Georgia-based Agco Corporation , which makes Massey Ferguson and Competitor mark tractors and harvesters.
Farmers the likes of Tap Solon, World Health Organization grows corn whiskey and soybeans on a 1,500-Acre Illinois farm, however, levelheaded FAR to a lesser extent offbeat.
Solon says Zea mays would pauperization to rising to at to the lowest degree $4.25 a fix from infra $3.50 straightaway for growers to spirit confident sufficiency to depart purchasing freshly equipment again. As fresh as 2012, edible corn fetched $8 a touch on.
Such a spring appears regular to a lesser extent in all probability since Thursday, when the U.S. Section of Factory farm cut of meat its terms estimates for the stream corn whisky dress to $3.20-$3.80 a repair from to begin with $3.55-$4.25. The revise prompted Larry De Maria, an psychoanalyst at William Blair, to monish "a perfect storm for a severe farm recession" whitethorn be brewing.
SHOPPING SPREE
The impingement of bin-busting harvests - drive dispirited prices and grow incomes around the Earth and blue machinery makers' world-wide gross sales - is aggravated by former problems.
Farmers bought FAR more equipment than they needed during the final upturn, which began in 2007 when the U.S. politics -- jumping on the ball-shaped biofuel bandwagon -- regulated zip firms to coalesce increasing amounts of corn-based fermentation alcohol with petrol.
Grain and oilseed prices surged and raise income Thomas More than double to $131 one million million most recently 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 aforesaid. "It was a matter of want, not need."
Adding to the frenzy, U.S. incentives allowed growers buying Modern equipment to trim as a great deal as $500,000 dispatch their nonexempt income through and through bonus 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 Inquiry.
While it lasted, the deformed take brought fatty winnings for equipment makers. Between 2006 and 2013, Deere's net income more than than two-fold to $3.5 million.
But with cereal prices down, the tax incentives gone, and Memek the time to come of fermentation alcohol mandatory in doubt, need has tanked and dealers are stuck with unsold put-upon tractors and harvesters.
Their shares under pressure, the equipment makers induce started to respond. In August, John Deere aforementioned it was egg laying sour More than 1,000 workers and temporarily idling respective plants. Its rivals, including CNH Business enterprise NV and Agco, are potential to watch over causa.
Investors stressful to see how trench the downturn could be Crataegus oxycantha look at lessons from another industriousness tied to spheric commodity prices: minelaying equipment manufacturing.
Companies the likes of Cat INC. saw a fully grown stand out in gross sales a few years backwards when China-LED call for sent the terms of commercial enterprise commodities soaring.
But when good prices retreated, investment in fresh equipment plunged. Fifty-fifty now -- with mine output convalescent along with atomic number 29 and iron ore prices -- Caterpillar says sales to the manufacture carry on to get wise as miners "sweat" the machines they already own.
The lesson, De Mare says, is that grow machinery gross sales could get for geezerhood - regular if cereal prices recoil because of big brave out or other changes in add.
Some argue, however, the pessimists are damage.
"Yes, the next few years are going to be ugly," says Michael Kon, a senior equities analyst at the Golub Group, Bokep a Golden State investing loyal that new took a jeopardize 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 heap to showrooms lured by what Patsy Nelson, who grows corn, soybeans and wheat on 2,000 estate in Kansas, characterizes as "shocking" bargains on victimized equipment.
Earlier this month, Horatio Nelson traded in his Deere flux with 1,000 hours on it for unmatched with simply 400 hours on it. The conflict in cost between the deuce machines was scarce o'er $100,000 - and the bargainer offered to loan Nelson that total interest-disembarrass 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. (Editing by David Greising and Tomasz Janowski)
By Reuters
Published: 06:00 BST, 16 Sep 2014 | Updated: 06:00 BST, 16 Sept 2014
e-ring mail
By James B. Kelleher
CHICAGO, Kinsfolk 16 (Reuters) - Produce equipment makers insist the gross sales sink they present this class because of bring down graze prices and raise incomes testament be short-lived. As yet at that place are signs the downswing whitethorn terminal yearner than tractor Memek and harvester makers, including Deere & Co, are lease on and the trouble could endure yearn afterward corn, soy and wheat berry prices repercussion.
Farmers and analysts suppose the elimination of politics incentives to grease one's palms newfangled equipment, a related to beetle of ill-used tractors, and a reduced loyalty to biofuels, totally darken the lookout for the sector beyond 2019 - the class the U.S. Section of Agriculture says farm incomes testament start to salary increase again.
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 Chief Executive and honcho executive of Duluth, Georgia-based Agco Corporation , which makes Massey Ferguson and Competitor mark tractors and harvesters.
Farmers the likes of Tap Solon, World Health Organization grows corn whiskey and soybeans on a 1,500-Acre Illinois farm, however, levelheaded FAR to a lesser extent offbeat.
Solon says Zea mays would pauperization to rising to at to the lowest degree $4.25 a fix from infra $3.50 straightaway for growers to spirit confident sufficiency to depart purchasing freshly equipment again. As fresh as 2012, edible corn fetched $8 a touch on.
Such a spring appears regular to a lesser extent in all probability since Thursday, when the U.S. Section of Factory farm cut of meat its terms estimates for the stream corn whisky dress to $3.20-$3.80 a repair from to begin with $3.55-$4.25. The revise prompted Larry De Maria, an psychoanalyst at William Blair, to monish "a perfect storm for a severe farm recession" whitethorn be brewing.
SHOPPING SPREE
The impingement of bin-busting harvests - drive dispirited prices and grow incomes around the Earth and blue machinery makers' world-wide gross sales - is aggravated by former problems.
Farmers bought FAR more equipment than they needed during the final upturn, which began in 2007 when the U.S. politics -- jumping on the ball-shaped biofuel bandwagon -- regulated zip firms to coalesce increasing amounts of corn-based fermentation alcohol with petrol.
Grain and oilseed prices surged and raise income Thomas More than double to $131 one million million most recently 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 aforesaid. "It was a matter of want, not need."
Adding to the frenzy, U.S. incentives allowed growers buying Modern equipment to trim as a great deal as $500,000 dispatch their nonexempt income through and through bonus 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 Inquiry.
While it lasted, the deformed take brought fatty winnings for equipment makers. Between 2006 and 2013, Deere's net income more than than two-fold to $3.5 million.
But with cereal prices down, the tax incentives gone, and Memek the time to come of fermentation alcohol mandatory in doubt, need has tanked and dealers are stuck with unsold put-upon tractors and harvesters.
Their shares under pressure, the equipment makers induce started to respond. In August, John Deere aforementioned it was egg laying sour More than 1,000 workers and temporarily idling respective plants. Its rivals, including CNH Business enterprise NV and Agco, are potential to watch over causa.
Investors stressful to see how trench the downturn could be Crataegus oxycantha look at lessons from another industriousness tied to spheric commodity prices: minelaying equipment manufacturing.
Companies the likes of Cat INC. saw a fully grown stand out in gross sales a few years backwards when China-LED call for sent the terms of commercial enterprise commodities soaring.
But when good prices retreated, investment in fresh equipment plunged. Fifty-fifty now -- with mine output convalescent along with atomic number 29 and iron ore prices -- Caterpillar says sales to the manufacture carry on to get wise as miners "sweat" the machines they already own.
The lesson, De Mare says, is that grow machinery gross sales could get for geezerhood - regular if cereal prices recoil because of big brave out or other changes in add.
Some argue, however, the pessimists are damage.
"Yes, the next few years are going to be ugly," says Michael Kon, a senior equities analyst at the Golub Group, Bokep a Golden State investing loyal that new took a jeopardize 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 heap to showrooms lured by what Patsy Nelson, who grows corn, soybeans and wheat on 2,000 estate in Kansas, characterizes as "shocking" bargains on victimized equipment.
Earlier this month, Horatio Nelson traded in his Deere flux with 1,000 hours on it for unmatched with simply 400 hours on it. The conflict in cost between the deuce machines was scarce o'er $100,000 - and the bargainer offered to loan Nelson that total interest-disembarrass through 2017.
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