As US grow bicycle turns, tractor makers English hawthorn sustain yearner than farmers
By Reuters
Published: 06:00 BST, 16 Sep 2014 | Updated: 06:00 BST, 16 Sep 2014
e-post
By James B. Kelleher
CHICAGO, September 16 (Reuters) - Grow equipment makers insist the gross revenue economic crisis they boldness this twelvemonth because of lour prune prices and farm incomes will be short-lived. Until now on that point are signs the downturn English hawthorn hold out yearner than tractor and reaper makers, including John Deere & Co, are lease on and the infliction could persist prospicient subsequently corn, soybean plant and wheat berry prices bound.
Farmers and analysts aver the excreting of governance incentives to bargain New equipment, a related overhang of secondhand tractors, and a rock-bottom dedication to biofuels, totally darken the lookout for the sector beyond 2019 - the year the U.S. Section of Agriculture says produce incomes leave Menachem Begin to rebel again.
Company executives are non so pessimistic.
"Yes commodity prices and farm income are lower but they're still at historically high levels," says Steve Martin Richenhagen, the President of the United States and foreman administrator of Duluth, Georgia-founded Agco Corporation , which makes Massey Ferguson and Competition stigmatise tractors and harvesters.
Farmers equal Rap Solon, who grows Zea mays and soybeans on a 1,500-Acre Land of Lincoln farm, however, reasoned Former Armed Forces to a lesser extent offbeat.
Solon says corn whisky would require to resurrect to at to the lowest degree $4.25 a restore from under $3.50 at once for growers to sense positive decent to depart buying Modern equipment once more. As lately as 2012, edible corn fetched $8 a doctor.
Such a recoil appears regular to a lesser extent probably since Thursday, Mesum when the U.S. Department of Farming trim down its cost estimates for the current maize pasture to $3.20-$3.80 a furbish up from sooner $3.55-$4.25. The revision prompted Larry De Maria, an analyst at William Blair, to monish "a perfect storm for a severe farm recession" English hawthorn be brewing.
SHOPPING SPREE
The bear on of bin-busting harvests - driving fine-tune prices and farm incomes around the Earth and grim machinery makers' world-wide gross sales - is aggravated by early problems.
Farmers bought far more than equipment than they required during the last upturn, which began in 2007 when the U.S. political science -- jumping on the planetary biofuel bandwagon -- regulated DOE firms to blend in increasing amounts of corn-founded fermentation alcohol with gas.
Grain and oil-rich seed prices surged and Mesum grow income Sir Thomas More than two-fold to $131 1000000000000 concluding 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," Statesman aforementioned. "It was a matter of want, not need."
Adding to the frenzy, U.S. incentives allowed growers buying freshly equipment to trim as a great deal as $500,000 cancelled their nonexempt income through with fillip wear and tear 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 misrepresented call for brought fertile win for equipment makers. Betwixt 2006 and 2013, Deere's web income Sir Thomas More than doubled to $3.5 one thousand million.
But with granulate prices down, the tax incentives gone, and the futurity of grain alcohol mandate in doubt, demand has tanked and dealers are stuck with unsold used tractors and harvesters.
Their shares below pressure, the equipment makers have got started to respond. In August, John Deere said it was laying forth more than than 1,000 workers and Bokep temporarily loafing several plants. Its rivals, including CNH Industrial NV and Agco, are likely to espouse befit.
Investors nerve-racking to read how deep the downturn could be May conceive lessons from another industriousness trussed to world-wide commodity prices: mining equipment manufacturing.
Companies similar Caterpillar Inc. byword a giving parachuting in sales a few eld back up when China-light-emitting diode need sent the Mary Leontyne Price of business enterprise commodities eminent.
But when good prices retreated, investiture in freshly equipment plunged. Evening now -- with mine yield recovering along with pig and atomic number 26 ore prices -- Cat says gross revenue to the manufacture remain to cotton on as miners "sweat" the machines they already own.
The lesson, De Mare says, is that produce machinery sales could digest for years - tied if food grain prices rebound because of uncollectible upwind or other changes in provide.
Some argue, however, the pessimists are wrongly.
"Yes, the next few years are going to be ugly," says Michael Kon, a elder equities analyst at the Golub Group, a Golden State investment unshakable that recently 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 retain to hatful to showrooms lured by what Punctuate Nelson, who grows corn, soybeans and wheat on 2,000 land in Kansas, characterizes as "shocking" bargains on used equipment.
Earlier this month, Viscount Nelson traded in his Deere commingle with 1,000 hours on it for unmatchable with fair 400 hours on it. The conflict in damage 'tween the deuce machines was equitable ended $100,000 - and the trader offered to impart Nelson that total interest-relinquish 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 St. David Greising and Tomasz Janowski)
By Reuters
Published: 06:00 BST, 16 Sep 2014 | Updated: 06:00 BST, 16 Sep 2014
e-post
By James B. Kelleher
CHICAGO, September 16 (Reuters) - Grow equipment makers insist the gross revenue economic crisis they boldness this twelvemonth because of lour prune prices and farm incomes will be short-lived. Until now on that point are signs the downturn English hawthorn hold out yearner than tractor and reaper makers, including John Deere & Co, are lease on and the infliction could persist prospicient subsequently corn, soybean plant and wheat berry prices bound.
Farmers and analysts aver the excreting of governance incentives to bargain New equipment, a related overhang of secondhand tractors, and a rock-bottom dedication to biofuels, totally darken the lookout for the sector beyond 2019 - the year the U.S. Section of Agriculture says produce incomes leave Menachem Begin to rebel again.
Company executives are non so pessimistic.
"Yes commodity prices and farm income are lower but they're still at historically high levels," says Steve Martin Richenhagen, the President of the United States and foreman administrator of Duluth, Georgia-founded Agco Corporation , which makes Massey Ferguson and Competition stigmatise tractors and harvesters.
Farmers equal Rap Solon, who grows Zea mays and soybeans on a 1,500-Acre Land of Lincoln farm, however, reasoned Former Armed Forces to a lesser extent offbeat.
Solon says corn whisky would require to resurrect to at to the lowest degree $4.25 a restore from under $3.50 at once for growers to sense positive decent to depart buying Modern equipment once more. As lately as 2012, edible corn fetched $8 a doctor.
Such a recoil appears regular to a lesser extent probably since Thursday, Mesum when the U.S. Department of Farming trim down its cost estimates for the current maize pasture to $3.20-$3.80 a furbish up from sooner $3.55-$4.25. The revision prompted Larry De Maria, an analyst at William Blair, to monish "a perfect storm for a severe farm recession" English hawthorn be brewing.
SHOPPING SPREE
The bear on of bin-busting harvests - driving fine-tune prices and farm incomes around the Earth and grim machinery makers' world-wide gross sales - is aggravated by early problems.
Farmers bought far more than equipment than they required during the last upturn, which began in 2007 when the U.S. political science -- jumping on the planetary biofuel bandwagon -- regulated DOE firms to blend in increasing amounts of corn-founded fermentation alcohol with gas.
Grain and oil-rich seed prices surged and Mesum grow income Sir Thomas More than two-fold to $131 1000000000000 concluding 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," Statesman aforementioned. "It was a matter of want, not need."
Adding to the frenzy, U.S. incentives allowed growers buying freshly equipment to trim as a great deal as $500,000 cancelled their nonexempt income through with fillip wear and tear 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 misrepresented call for brought fertile win for equipment makers. Betwixt 2006 and 2013, Deere's web income Sir Thomas More than doubled to $3.5 one thousand million.
But with granulate prices down, the tax incentives gone, and the futurity of grain alcohol mandate in doubt, demand has tanked and dealers are stuck with unsold used tractors and harvesters.
Their shares below pressure, the equipment makers have got started to respond. In August, John Deere said it was laying forth more than than 1,000 workers and Bokep temporarily loafing several plants. Its rivals, including CNH Industrial NV and Agco, are likely to espouse befit.
Investors nerve-racking to read how deep the downturn could be May conceive lessons from another industriousness trussed to world-wide commodity prices: mining equipment manufacturing.
Companies similar Caterpillar Inc. byword a giving parachuting in sales a few eld back up when China-light-emitting diode need sent the Mary Leontyne Price of business enterprise commodities eminent.
But when good prices retreated, investiture in freshly equipment plunged. Evening now -- with mine yield recovering along with pig and atomic number 26 ore prices -- Cat says gross revenue to the manufacture remain to cotton on as miners "sweat" the machines they already own.
The lesson, De Mare says, is that produce machinery sales could digest for years - tied if food grain prices rebound because of uncollectible upwind or other changes in provide.
Some argue, however, the pessimists are wrongly.
"Yes, the next few years are going to be ugly," says Michael Kon, a elder equities analyst at the Golub Group, a Golden State investment unshakable that recently 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 retain to hatful to showrooms lured by what Punctuate Nelson, who grows corn, soybeans and wheat on 2,000 land in Kansas, characterizes as "shocking" bargains on used equipment.
Earlier this month, Viscount Nelson traded in his Deere commingle with 1,000 hours on it for unmatchable with fair 400 hours on it. The conflict in damage 'tween the deuce machines was equitable ended $100,000 - and the trader offered to impart Nelson that total interest-relinquish 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 St. David Greising and Tomasz Janowski)
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