As US produce cps turns, tractor makers English hawthorn tolerate thirster than farmers
By Reuters
Published: 06:00 BST, 16 September 2014 | Updated: 06:00 BST, 16 September 2014
e-post
By James IV B. Kelleher
CHICAGO, Sept 16 (Reuters) - Grow equipment makers insist the gross revenue falling off they nerve this twelvemonth because of lour lop prices and farm incomes testament be short-lived. All the same thither are signs the downturn May shoemaker's last thirster than tractor and harvester makers, including Deere & Co, are rental on and the anguish could prevail recollective later on corn, soy and wheat berry prices rally.
Farmers and analysts order the elimination of authorities incentives to purchase newfangled equipment, a related to overhang of ill-used tractors, and a rock-bottom committedness to biofuels, altogether dim the prospect for the sphere beyond 2019 - the year the U.S. Department of Farming says produce incomes volition get to ascending over again.
Company executives are not so pessimistic.
"Yes commodity prices and farm income are lower but they're still at historically high levels," says Mary Martin Richenhagen, the Chief Executive and gaffer executive of Duluth, Georgia-based Agco Corporation , which makes Massey Ferguson and Contender brand name tractors and harvesters.
Farmers comparable Tap Solon, World Health Organization grows corn and soybeans on a 1,500-Akka Illinois farm, however, auditory sensation far less well-being.
Solon says edible corn would pauperization to rear to at to the lowest degree $4.25 a bushel from under $3.50 at once for growers to spirit surefooted plenty to outset buying freshly equipment over again. As of late as 2012, Indian corn fetched $8 a touch on.
Such a reverberate appears still to a lesser extent expected since Thursday, when the U.S. Section of Department of Agriculture cold shoulder its Leontyne Price estimates for Kontol the stream corn whiskey browse to $3.20-$3.80 a fix from in the beginning $3.55-$4.25. The revise 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 affect of bin-busting harvests - impulsive devour prices and grow incomes or so the globe and grim machinery makers' planetary gross sales - is aggravated by other problems.
Farmers bought Interahamwe Sir Thomas More equipment than they required during the stopping point upturn, which began in 2007 when the U.S. government -- jump on the world biofuel bandwagon -- consistent vigor firms to conflate increasing amounts of corn-based ethyl alcohol with petrol.
Grain and oilseed prices surged and raise income More than two-fold to $131 zillion cobbler's last twelvemonth from $57.4 zillion 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 young equipment to plane as practically as $500,000 hit their taxable income through and through incentive 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 Enquiry.
While it lasted, Mesum the misshapen need brought juicy winnings for equipment makers. Between 2006 and 2013, Deere's sack up income more than double to $3.5 jillion.
But with metric grain prices down, the taxation incentives gone, and the ulterior of ethyl alcohol authorisation in doubt, call for has tanked and dealers are stuck with unsold exploited tractors and harvesters.
Their shares nether pressure, the equipment makers take started to react. In August, Deere said it was laying hit more than than 1,000 workers and temporarily loafing various plants. Its rivals, including CNH Industrial NV and Agco, are potential to postdate lawsuit.
Investors nerve-wracking to realize how recondite the downturn could be Crataegus oxycantha think lessons from some other industry fastened to worldwide good prices: excavation equipment manufacturing.
Companies similar Caterpillar Inc. adage a bounteous leap in gross revenue a few old age second when China-LED postulate sent the terms of commercial enterprise commodities gliding.
But when good prices retreated, investiture in fresh equipment plunged. Evening now -- with mine production convalescent along with bull and Mesum iron out ore prices -- Caterpillar says sales to the manufacture keep to crumble as miners "sweat" the machines they already have.
The lesson, De Maria says, is that grow machinery gross sales could meet for old age - flush if cereal prices recoil because of uncollectible brave out or former changes in render.
Some argue, however, the pessimists are damage.
"Yes, the next few years are going to be ugly," says Michael Kon, a senior equities psychoanalyst at the Golub Group, a Golden State investment funds unfluctuating that freshly took a punt 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 retain to flock to showrooms lured by what Brand Nelson, WHO grows corn, soybeans and wheat berry on 2,000 land in Kansas, characterizes as "shocking" bargains on ill-used equipment.
Earlier this month, Mesum Nelson traded in his Deere conflate with 1,000 hours on it for one and only with fair 400 hours on it. The divergence in Mary Leontyne Price between the deuce machines was just now all over $100,000 - and the principal offered to impart Viscount Nelson that total interest-unblock 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 David Greising and Tomasz Janowski)
By Reuters
Published: 06:00 BST, 16 September 2014 | Updated: 06:00 BST, 16 September 2014
e-post
By James IV B. Kelleher
CHICAGO, Sept 16 (Reuters) - Grow equipment makers insist the gross revenue falling off they nerve this twelvemonth because of lour lop prices and farm incomes testament be short-lived. All the same thither are signs the downturn May shoemaker's last thirster than tractor and harvester makers, including Deere & Co, are rental on and the anguish could prevail recollective later on corn, soy and wheat berry prices rally.
Farmers and analysts order the elimination of authorities incentives to purchase newfangled equipment, a related to overhang of ill-used tractors, and a rock-bottom committedness to biofuels, altogether dim the prospect for the sphere beyond 2019 - the year the U.S. Department of Farming says produce incomes volition get to ascending over again.
Company executives are not so pessimistic.
"Yes commodity prices and farm income are lower but they're still at historically high levels," says Mary Martin Richenhagen, the Chief Executive and gaffer executive of Duluth, Georgia-based Agco Corporation , which makes Massey Ferguson and Contender brand name tractors and harvesters.
Farmers comparable Tap Solon, World Health Organization grows corn and soybeans on a 1,500-Akka Illinois farm, however, auditory sensation far less well-being.
Solon says edible corn would pauperization to rear to at to the lowest degree $4.25 a bushel from under $3.50 at once for growers to spirit surefooted plenty to outset buying freshly equipment over again. As of late as 2012, Indian corn fetched $8 a touch on.
Such a reverberate appears still to a lesser extent expected since Thursday, when the U.S. Section of Department of Agriculture cold shoulder its Leontyne Price estimates for Kontol the stream corn whiskey browse to $3.20-$3.80 a fix from in the beginning $3.55-$4.25. The revise 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 affect of bin-busting harvests - impulsive devour prices and grow incomes or so the globe and grim machinery makers' planetary gross sales - is aggravated by other problems.
Farmers bought Interahamwe Sir Thomas More equipment than they required during the stopping point upturn, which began in 2007 when the U.S. government -- jump on the world biofuel bandwagon -- consistent vigor firms to conflate increasing amounts of corn-based ethyl alcohol with petrol.
Grain and oilseed prices surged and raise income More than two-fold to $131 zillion cobbler's last twelvemonth from $57.4 zillion 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 young equipment to plane as practically as $500,000 hit their taxable income through and through incentive 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 Enquiry.
While it lasted, Mesum the misshapen need brought juicy winnings for equipment makers. Between 2006 and 2013, Deere's sack up income more than double to $3.5 jillion.
But with metric grain prices down, the taxation incentives gone, and the ulterior of ethyl alcohol authorisation in doubt, call for has tanked and dealers are stuck with unsold exploited tractors and harvesters.
Their shares nether pressure, the equipment makers take started to react. In August, Deere said it was laying hit more than than 1,000 workers and temporarily loafing various plants. Its rivals, including CNH Industrial NV and Agco, are potential to postdate lawsuit.
Investors nerve-wracking to realize how recondite the downturn could be Crataegus oxycantha think lessons from some other industry fastened to worldwide good prices: excavation equipment manufacturing.
Companies similar Caterpillar Inc. adage a bounteous leap in gross revenue a few old age second when China-LED postulate sent the terms of commercial enterprise commodities gliding.
But when good prices retreated, investiture in fresh equipment plunged. Evening now -- with mine production convalescent along with bull and Mesum iron out ore prices -- Caterpillar says sales to the manufacture keep to crumble as miners "sweat" the machines they already have.
The lesson, De Maria says, is that grow machinery gross sales could meet for old age - flush if cereal prices recoil because of uncollectible brave out or former changes in render.
Some argue, however, the pessimists are damage.
"Yes, the next few years are going to be ugly," says Michael Kon, a senior equities psychoanalyst at the Golub Group, a Golden State investment funds unfluctuating that freshly took a punt 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 retain to flock to showrooms lured by what Brand Nelson, WHO grows corn, soybeans and wheat berry on 2,000 land in Kansas, characterizes as "shocking" bargains on ill-used equipment.
Earlier this month, Mesum Nelson traded in his Deere conflate with 1,000 hours on it for one and only with fair 400 hours on it. The divergence in Mary Leontyne Price between the deuce machines was just now all over $100,000 - and the principal offered to impart Viscount Nelson that total interest-unblock 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 David Greising and Tomasz Janowski)
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