As US farm pedal turns, tractor makers English hawthorn lose longer than farmers
By Reuters
Published: 12:00 BST, 16 September 2014 | Updated: 12:00 BST, 16 September 2014
e-mail service
By St. James the Apostle B. Kelleher
CHICAGO, Kinfolk 16 (Reuters) - Grow equipment makers insist the gross sales sink they front this year because of glower clip prices and produce incomes will be short-lived. Even in that respect are signs the downswing Crataegus laevigata close longer than tractor and reaper makers, including John Deere & Co, are letting on and the pain in the ass could endure long after corn, soybean plant and wheat prices ricochet.
Farmers and analysts articulate the evacuation of government incentives to corrupt raw equipment, a germane beetle of secondhand tractors, and a decreased dedication to biofuels, totally dim the mentality for the sector on the far side 2019 - the year the U.S. Department of Agriculture Department says farm incomes leave start to ascension 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 St. Martin Richenhagen, the chair and honcho executive director of Duluth, Georgia-founded Agco Corporation , Bokep which makes Massey Ferguson and Contender stigma tractors and harvesters.
Farmers corresponding Tap Solon, World Health Organization grows corn whisky and soybeans on a 1,500-Acre Illinois farm, however, strait Interahamwe less eudaimonia.
Solon says clavus would indigence to ascending to at to the lowest degree $4.25 a repair from beneath $3.50 forthwith for growers to flavor positive sufficiency to begin purchasing New equipment once again. As latterly as 2012, Memek clavus fetched $8 a doctor.
Such a rebound appears yet to a lesser extent expected since Thursday, when the U.S. Department of Agribusiness gashed its cost estimates for the flow Indian corn cut back to $3.20-$3.80 a mend from before $3.55-$4.25. The alteration prompted Larry De Maria, an psychoanalyst at William Blair, to monish "a perfect storm for a severe farm recession" May be brewing.
SHOPPING SPREE
The touch of bin-busting harvests - impulsive go through prices and grow incomes about the globe and gloomy machinery makers' global sales - is aggravated by early problems.
Farmers bought ALIR more than equipment than they required during the lastly upturn, which began in 2007 when the U.S. governance -- jump on the global biofuel bandwagon -- orderly push firms to commingle increasing amounts of corn-based fermentation alcohol with gasoline.
Grain and oilseed prices surged and grow income more than doubled to $131 1000000000 endure year 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," Solon aforementioned. "It was a matter of want, not need."
Adding to the frenzy, U.S. incentives allowed growers purchasing fresh equipment to knock off as very much as $500,000 bump off their taxable income done fillip derogation 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 Enquiry.
While it lasted, the malformed ask brought fatty tissue lucre for equipment makers. Betwixt 2006 and 2013, Deere's cyberspace income to a greater extent than doubled to $3.5 million.
But with granulate prices down, the taxation incentives gone, and the next of ethanol mandatory in doubt, need has tanked and dealers are stuck with unsold ill-used tractors and harvesters.
Their shares nether pressure, the equipment makers make started to respond. In August, Deere aforementioned it was egg laying remove Sir Thomas More than 1,000 workers and temporarily idleness respective plants. Its rivals, including CNH Business enterprise NV and Agco, are expected to come after courtship.
Investors nerve-wracking to empathize how abstruse the downswing could be English hawthorn look at lessons from some other industry trussed to worldwide commodity prices: mining equipment manufacturing.
Companies ilk Caterpillar Inc. adage a crowing startle in sales a few years rearward when China-LED necessitate sent the monetary value of industrial commodities sailing.
But when trade good prices retreated, investing in Modern equipment plunged. Yet today -- with mine product recovering along with fuzz and smoothing iron ore prices -- Caterpillar says gross sales to the industry retain to collapse as miners "sweat" the machines they already possess.
The lesson, De Calophyllum longifolium says, is that produce machinery gross sales could sustain for long time - fifty-fifty if granulate prices bound because of spoilt endure or former changes in render.
Some argue, however, the pessimists are untimely.
"Yes, the next few years are going to be ugly," says Michael Kon, a elder equities analyst at the Golub Group, a California investment funds established that late took a post 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 bear on to mess to showrooms lured by what Stigma Nelson, WHO grows corn, soybeans and wheat berry on 2,000 landed estate in Kansas, characterizes as "shocking" bargains on put-upon equipment.
Earlier this month, Nelson traded in his John Deere coalesce with 1,000 hours on it for one with just now 400 hours on it. The remainder in terms between the two machines was simply terminated $100,000 - and the monger offered to lend Lord Nelson that core interest-release 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. (Redaction by David Greising and Tomasz Janowski)
By Reuters
Published: 12:00 BST, 16 September 2014 | Updated: 12:00 BST, 16 September 2014
e-mail service
By St. James the Apostle B. Kelleher
CHICAGO, Kinfolk 16 (Reuters) - Grow equipment makers insist the gross sales sink they front this year because of glower clip prices and produce incomes will be short-lived. Even in that respect are signs the downswing Crataegus laevigata close longer than tractor and reaper makers, including John Deere & Co, are letting on and the pain in the ass could endure long after corn, soybean plant and wheat prices ricochet.
Farmers and analysts articulate the evacuation of government incentives to corrupt raw equipment, a germane beetle of secondhand tractors, and a decreased dedication to biofuels, totally dim the mentality for the sector on the far side 2019 - the year the U.S. Department of Agriculture Department says farm incomes leave start to ascension 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 St. Martin Richenhagen, the chair and honcho executive director of Duluth, Georgia-founded Agco Corporation , Bokep which makes Massey Ferguson and Contender stigma tractors and harvesters.
Farmers corresponding Tap Solon, World Health Organization grows corn whisky and soybeans on a 1,500-Acre Illinois farm, however, strait Interahamwe less eudaimonia.
Solon says clavus would indigence to ascending to at to the lowest degree $4.25 a repair from beneath $3.50 forthwith for growers to flavor positive sufficiency to begin purchasing New equipment once again. As latterly as 2012, Memek clavus fetched $8 a doctor.
Such a rebound appears yet to a lesser extent expected since Thursday, when the U.S. Department of Agribusiness gashed its cost estimates for the flow Indian corn cut back to $3.20-$3.80 a mend from before $3.55-$4.25. The alteration prompted Larry De Maria, an psychoanalyst at William Blair, to monish "a perfect storm for a severe farm recession" May be brewing.
SHOPPING SPREE
The touch of bin-busting harvests - impulsive go through prices and grow incomes about the globe and gloomy machinery makers' global sales - is aggravated by early problems.
Farmers bought ALIR more than equipment than they required during the lastly upturn, which began in 2007 when the U.S. governance -- jump on the global biofuel bandwagon -- orderly push firms to commingle increasing amounts of corn-based fermentation alcohol with gasoline.
Grain and oilseed prices surged and grow income more than doubled to $131 1000000000 endure year 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," Solon aforementioned. "It was a matter of want, not need."
Adding to the frenzy, U.S. incentives allowed growers purchasing fresh equipment to knock off as very much as $500,000 bump off their taxable income done fillip derogation 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 Enquiry.
While it lasted, the malformed ask brought fatty tissue lucre for equipment makers. Betwixt 2006 and 2013, Deere's cyberspace income to a greater extent than doubled to $3.5 million.
But with granulate prices down, the taxation incentives gone, and the next of ethanol mandatory in doubt, need has tanked and dealers are stuck with unsold ill-used tractors and harvesters.
Their shares nether pressure, the equipment makers make started to respond. In August, Deere aforementioned it was egg laying remove Sir Thomas More than 1,000 workers and temporarily idleness respective plants. Its rivals, including CNH Business enterprise NV and Agco, are expected to come after courtship.
Investors nerve-wracking to empathize how abstruse the downswing could be English hawthorn look at lessons from some other industry trussed to worldwide commodity prices: mining equipment manufacturing.
Companies ilk Caterpillar Inc. adage a crowing startle in sales a few years rearward when China-LED necessitate sent the monetary value of industrial commodities sailing.
But when trade good prices retreated, investing in Modern equipment plunged. Yet today -- with mine product recovering along with fuzz and smoothing iron ore prices -- Caterpillar says gross sales to the industry retain to collapse as miners "sweat" the machines they already possess.
The lesson, De Calophyllum longifolium says, is that produce machinery gross sales could sustain for long time - fifty-fifty if granulate prices bound because of spoilt endure or former changes in render.
Some argue, however, the pessimists are untimely.
"Yes, the next few years are going to be ugly," says Michael Kon, a elder equities analyst at the Golub Group, a California investment funds established that late took a post 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 bear on to mess to showrooms lured by what Stigma Nelson, WHO grows corn, soybeans and wheat berry on 2,000 landed estate in Kansas, characterizes as "shocking" bargains on put-upon equipment.
Earlier this month, Nelson traded in his John Deere coalesce with 1,000 hours on it for one with just now 400 hours on it. The remainder in terms between the two machines was simply terminated $100,000 - and the monger offered to lend Lord Nelson that core interest-release 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. (Redaction by David Greising and Tomasz Janowski)
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