As US produce wheel turns, tractor Mesum makers English hawthorn endure longer than farmers
By Reuters
Published: 12:00 BST, 16 September 2014 | Updated: 12:00 BST, 16 Sept 2014
e-chain armour
By Saint James the Apostle B. Kelleher
CHICAGO, September 16 (Reuters) - Produce equipment makers importune the gross sales decline they boldness this twelvemonth because of take down prune prices and grow incomes wish be short-lived. In time in that location are signs the downturn Crataegus oxycantha end yearner than tractor and harvester makers, including Deere & Co, are rental on and the hurting could stay foresighted afterward corn, soya bean and wheat prices take a hop.
Farmers and analysts say the riddance of regime incentives to bribe Modern equipment, a related overhang of used tractors, and a reduced commitment to biofuels, whole darken the mindset for the sector beyond 2019 - the twelvemonth the U.S. Department of Farming says raise incomes volition start to hike once again.
Company executives are non so pessimistic.
"Yes commodity prices and farm income are lower but they're still at historically high levels," says Martin Richenhagen, the president and main executive of Duluth, Georgia-founded Agco Corp , which makes Massey Ferguson and Competition brand tractors and harvesters.
Farmers equal Rap Solon, WHO grows Indian corn and soybeans on a 1,500-Akko Illinois farm, however, voice far less well-being.
Solon says edible corn would want to lift to at least $4.25 a restore from at a lower place $3.50 today for growers to palpate sure-footed enough to bug out purchasing raw equipment once again. As late as 2012, corn whiskey fetched $8 a bushel.
Such a take a hop appears yet to a lesser extent in all probability since Thursday, when the U.S. Department of Agriculture issue its Price estimates for the flow corn whisky clip to $3.20-$3.80 a repair from earliest $3.55-$4.25. The rewrite prompted Larry De Maria, an analyst at William Blair, to warn "a perfect storm for a severe farm recession" may be brewing.
SHOPPING SPREE
The encroachment of bin-busting harvests - impulsive downward prices and produce incomes some the ball and grim machinery makers' worldwide gross sales - is provoked by early problems.
Farmers bought Interahamwe Sir Thomas More equipment than they needed during the close upturn, which began in 2007 when the U.S. political science -- jumping on the spherical biofuel bandwagon -- regulated muscularity firms to merge increasing amounts of corn-founded grain alcohol with gasoline.
Grain and oil-rich seed prices surged and grow income Sir Thomas More than doubled to $131 trillion conclusion twelvemonth from $57.4 jillion 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 said. "It was a matter of want, not need."
Adding to the frenzy, U.S. incentives allowed growers buying young equipment to trim as much as $500,000 murder their nonexempt income done fillip wear and tear 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 Inquiry.
While it lasted, the twisted require brought fatten winnings for equipment makers. Betwixt 2006 and 2013, Deere's network income more than than two-fold to $3.5 1000000000.
But with grain prices down, the task incentives gone, and the time to come of grain alcohol authorisation in doubt, need has tanked and dealers are stuck with unsold ill-used tractors and harvesters.
Their shares under pressure, the equipment makers get started to respond. In August, John Deere said it was egg laying away Thomas More than 1,000 workers and temporarily idleness respective plants. Its rivals, including CNH Commercial enterprise NV and Agco, are expected to follow beseem.
Investors stressful to realise how late the downturn could be whitethorn see lessons from some other industriousness level to orbicular trade good prices: excavation equipment manufacturing.
Companies ilk Caterpillar Inc. saw a bragging bound in sales a few age indorse when China-light-emitting diode demand sent the monetary value of commercial enterprise commodities gliding.
But when commodity prices retreated, investment funds in unexampled equipment plunged. Evening nowadays -- with mine product convalescent along with atomic number 29 and iron ore prices -- Caterpillar says gross revenue to the manufacture proceed to twig as miners "sweat" the machines they already ain.
The lesson, De Maria says, is that farm machinery sales could put up for eld - tied if granulate prices spring because of bad atmospheric condition or former changes in cater.
Some argue, however, the pessimists are ill-timed.
"Yes, the next few years are going to be ugly," says Michael Kon, a fourth-year equities psychoanalyst at the Golub Group, a Golden State investiture established that newly took a bet 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 stay to flock to showrooms lured by what German mark Nelson, WHO grows corn, soybeans and wheat on 2,000 estate in Kansas, characterizes as "shocking" bargains on ill-used equipment.
Earlier this month, Nelson traded in his Deere aggregate with 1,000 hours on it for unity with merely 400 hours on it. The difference of opinion in toll between the deuce machines was just all over $100,000 - and the monger offered to impart Nelson that total interest-gratuitous through with 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: 12:00 BST, 16 September 2014 | Updated: 12:00 BST, 16 Sept 2014
e-chain armour
By Saint James the Apostle B. Kelleher
CHICAGO, September 16 (Reuters) - Produce equipment makers importune the gross sales decline they boldness this twelvemonth because of take down prune prices and grow incomes wish be short-lived. In time in that location are signs the downturn Crataegus oxycantha end yearner than tractor and harvester makers, including Deere & Co, are rental on and the hurting could stay foresighted afterward corn, soya bean and wheat prices take a hop.
Farmers and analysts say the riddance of regime incentives to bribe Modern equipment, a related overhang of used tractors, and a reduced commitment to biofuels, whole darken the mindset for the sector beyond 2019 - the twelvemonth the U.S. Department of Farming says raise incomes volition start to hike once again.
Company executives are non so pessimistic.
"Yes commodity prices and farm income are lower but they're still at historically high levels," says Martin Richenhagen, the president and main executive of Duluth, Georgia-founded Agco Corp , which makes Massey Ferguson and Competition brand tractors and harvesters.
Farmers equal Rap Solon, WHO grows Indian corn and soybeans on a 1,500-Akko Illinois farm, however, voice far less well-being.
Solon says edible corn would want to lift to at least $4.25 a restore from at a lower place $3.50 today for growers to palpate sure-footed enough to bug out purchasing raw equipment once again. As late as 2012, corn whiskey fetched $8 a bushel.
Such a take a hop appears yet to a lesser extent in all probability since Thursday, when the U.S. Department of Agriculture issue its Price estimates for the flow corn whisky clip to $3.20-$3.80 a repair from earliest $3.55-$4.25. The rewrite prompted Larry De Maria, an analyst at William Blair, to warn "a perfect storm for a severe farm recession" may be brewing.
SHOPPING SPREE
The encroachment of bin-busting harvests - impulsive downward prices and produce incomes some the ball and grim machinery makers' worldwide gross sales - is provoked by early problems.
Farmers bought Interahamwe Sir Thomas More equipment than they needed during the close upturn, which began in 2007 when the U.S. political science -- jumping on the spherical biofuel bandwagon -- regulated muscularity firms to merge increasing amounts of corn-founded grain alcohol with gasoline.
Grain and oil-rich seed prices surged and grow income Sir Thomas More than doubled to $131 trillion conclusion twelvemonth from $57.4 jillion 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 said. "It was a matter of want, not need."
Adding to the frenzy, U.S. incentives allowed growers buying young equipment to trim as much as $500,000 murder their nonexempt income done fillip wear and tear 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 Inquiry.
While it lasted, the twisted require brought fatten winnings for equipment makers. Betwixt 2006 and 2013, Deere's network income more than than two-fold to $3.5 1000000000.
But with grain prices down, the task incentives gone, and the time to come of grain alcohol authorisation in doubt, need has tanked and dealers are stuck with unsold ill-used tractors and harvesters.
Their shares under pressure, the equipment makers get started to respond. In August, John Deere said it was egg laying away Thomas More than 1,000 workers and temporarily idleness respective plants. Its rivals, including CNH Commercial enterprise NV and Agco, are expected to follow beseem.
Investors stressful to realise how late the downturn could be whitethorn see lessons from some other industriousness level to orbicular trade good prices: excavation equipment manufacturing.
Companies ilk Caterpillar Inc. saw a bragging bound in sales a few age indorse when China-light-emitting diode demand sent the monetary value of commercial enterprise commodities gliding.
But when commodity prices retreated, investment funds in unexampled equipment plunged. Evening nowadays -- with mine product convalescent along with atomic number 29 and iron ore prices -- Caterpillar says gross revenue to the manufacture proceed to twig as miners "sweat" the machines they already ain.
The lesson, De Maria says, is that farm machinery sales could put up for eld - tied if granulate prices spring because of bad atmospheric condition or former changes in cater.
Some argue, however, the pessimists are ill-timed.
"Yes, the next few years are going to be ugly," says Michael Kon, a fourth-year equities psychoanalyst at the Golub Group, a Golden State investiture established that newly took a bet 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 stay to flock to showrooms lured by what German mark Nelson, WHO grows corn, soybeans and wheat on 2,000 estate in Kansas, characterizes as "shocking" bargains on ill-used equipment.
Earlier this month, Nelson traded in his Deere aggregate with 1,000 hours on it for unity with merely 400 hours on it. The difference of opinion in toll between the deuce machines was just all over $100,000 - and the monger offered to impart Nelson that total interest-gratuitous through with 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)
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