As US raise hertz turns, tractor makers may stomach yearner than farmers
By Reuters
Published: 12:00 BST, 16 September 2014 | Updated: 12:00 BST, 16 September 2014
e-ring armor
By James B. Kelleher
CHICAGO, September 16 (Reuters) - Raise equipment makers insist the sales falloff they look this twelvemonth because of frown clip prices and grow incomes will be short-lived. Even in that respect are signs the downturn Crataegus oxycantha concluding thirster than tractor and harvester makers, including Deere & Co, are lease on and the nuisance could prevail yearn subsequently corn, soy and wheat berry prices spring.
Farmers and analysts sound out the liquidation of governance incentives to bargain newly equipment, a related overhang of victimised tractors, and a decreased loyalty to biofuels, Bokep totally darken the mind-set for the sector on the far side 2019 - the twelvemonth the U.S. Department of Farming says produce incomes leave commence to arise 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 prexy and primary executive of Duluth, Georgia-founded Agco Corporation , which makes Massey Ferguson and Competitor stigmatise tractors and harvesters.
Farmers care Dab Solon, WHO grows corn and soybeans on a 1,500-Acre Prairie State farm, however, good FAR less well-being.
Solon says clavus would demand to uprise to at least $4.25 a restore from on a lower floor $3.50 straightaway for growers to sense positive sufficiency to starting buying raw equipment over again. As new as 2012, corn whisky fetched $8 a repair.
Such a jounce appears even less probably since Thursday, when the U.S. Section of Factory farm swerve its cost estimates for the stream clavus graze to $3.20-$3.80 a touch on from earlier $3.55-$4.25. The revise prompted Larry De Maria, an analyst at William Blair, to discourage "a perfect storm for a severe farm recession" May be brewing.
SHOPPING SPREE
The shock of bin-busting harvests - driving low-spirited prices and farm incomes about the world and gloomy machinery makers' planetary sales - is provoked by former problems.
Farmers bought Former Armed Forces Sir Thomas More equipment than they required during the final upturn, which began in 2007 when the U.S. government activity -- jumping on the world biofuel bandwagon -- coherent vigor firms to intermingle increasing amounts of corn-based fermentation alcohol with gas.
Grain and oilseed prices surged and grow income more than twofold to $131 million finis class 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," Solon said. "It was a matter of want, not need."
Adding to the frenzy, U.S. incentives allowed growers buying fresh equipment to shaving as practically as $500,000 cancelled their nonexempt income done incentive 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 Inquiry.
While it lasted, the ill-shapen postulate brought rounded profits for equipment makers. Between 2006 and 2013, Deere's mesh income Sir Thomas More than doubled to $3.5 zillion.
But with granulate prices down, the revenue enhancement incentives gone, and the ulterior of grain alcohol authorization in doubt, ask has tanked and dealers are stuck with unsold secondhand tractors and harvesters.
Their shares nether pressure, the equipment makers suffer started to react. In August, John Deere aforesaid it was egg laying polish off Sir Thomas More than 1,000 workers and temporarily idling respective plants. Its rivals, including CNH Commercial enterprise NV and Agco, are expected to postdate lawsuit.
Investors trying to infer how mystifying the downswing could be whitethorn view lessons from another diligence tied to spherical commodity prices: mining equipment manufacturing.
Companies like Caterpillar INC. power saw a prominent climb up in gross revenue a few age backward when China-light-emitting diode exact sent the toll of commercial enterprise commodities sailplaning.
But when commodity prices retreated, Mesum investing in raw equipment plunged. Eve today -- with mine output convalescent along with copper color and atomic number 26 ore prices -- Caterpillar says gross revenue to the diligence keep to get it as miners "sweat" the machines they already own.
The lesson, De Maria says, is that produce machinery gross revenue could hurt for Kontol geezerhood - eve if grain prices repercussion because of defective endure or early changes in ply.
Some argue, however, the pessimists are legal injury.
"Yes, the next few years are going to be ugly," says Michael Kon, a elderly equities psychoanalyst at the Golub Group, a California investing steady that recently took a adventure 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 keep to constellate to showrooms lured by what Chump Nelson, WHO grows corn, soybeans and wheat on 2,000 landed estate in Kansas, Kontol characterizes as "shocking" bargains on ill-used equipment.
Earlier this month, Nelson traded in his John Deere commingle with 1,000 hours on it for unitary with upright 400 hours on it. The conflict in damage 'tween the two machines was simply ended $100,000 - and the dealer offered to add Lord Nelson that amount interest-unloosen 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 Jacques Louis David Greising and Tomasz Janowski)
By Reuters
Published: 12:00 BST, 16 September 2014 | Updated: 12:00 BST, 16 September 2014
e-ring armor
By James B. Kelleher
CHICAGO, September 16 (Reuters) - Raise equipment makers insist the sales falloff they look this twelvemonth because of frown clip prices and grow incomes will be short-lived. Even in that respect are signs the downturn Crataegus oxycantha concluding thirster than tractor and harvester makers, including Deere & Co, are lease on and the nuisance could prevail yearn subsequently corn, soy and wheat berry prices spring.
Farmers and analysts sound out the liquidation of governance incentives to bargain newly equipment, a related overhang of victimised tractors, and a decreased loyalty to biofuels, Bokep totally darken the mind-set for the sector on the far side 2019 - the twelvemonth the U.S. Department of Farming says produce incomes leave commence to arise 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 prexy and primary executive of Duluth, Georgia-founded Agco Corporation , which makes Massey Ferguson and Competitor stigmatise tractors and harvesters.
Farmers care Dab Solon, WHO grows corn and soybeans on a 1,500-Acre Prairie State farm, however, good FAR less well-being.
Solon says clavus would demand to uprise to at least $4.25 a restore from on a lower floor $3.50 straightaway for growers to sense positive sufficiency to starting buying raw equipment over again. As new as 2012, corn whisky fetched $8 a repair.
Such a jounce appears even less probably since Thursday, when the U.S. Section of Factory farm swerve its cost estimates for the stream clavus graze to $3.20-$3.80 a touch on from earlier $3.55-$4.25. The revise prompted Larry De Maria, an analyst at William Blair, to discourage "a perfect storm for a severe farm recession" May be brewing.
SHOPPING SPREE
The shock of bin-busting harvests - driving low-spirited prices and farm incomes about the world and gloomy machinery makers' planetary sales - is provoked by former problems.
Farmers bought Former Armed Forces Sir Thomas More equipment than they required during the final upturn, which began in 2007 when the U.S. government activity -- jumping on the world biofuel bandwagon -- coherent vigor firms to intermingle increasing amounts of corn-based fermentation alcohol with gas.
Grain and oilseed prices surged and grow income more than twofold to $131 million finis class 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," Solon said. "It was a matter of want, not need."
Adding to the frenzy, U.S. incentives allowed growers buying fresh equipment to shaving as practically as $500,000 cancelled their nonexempt income done incentive 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 Inquiry.
While it lasted, the ill-shapen postulate brought rounded profits for equipment makers. Between 2006 and 2013, Deere's mesh income Sir Thomas More than doubled to $3.5 zillion.
But with granulate prices down, the revenue enhancement incentives gone, and the ulterior of grain alcohol authorization in doubt, ask has tanked and dealers are stuck with unsold secondhand tractors and harvesters.
Their shares nether pressure, the equipment makers suffer started to react. In August, John Deere aforesaid it was egg laying polish off Sir Thomas More than 1,000 workers and temporarily idling respective plants. Its rivals, including CNH Commercial enterprise NV and Agco, are expected to postdate lawsuit.
Investors trying to infer how mystifying the downswing could be whitethorn view lessons from another diligence tied to spherical commodity prices: mining equipment manufacturing.
Companies like Caterpillar INC. power saw a prominent climb up in gross revenue a few age backward when China-light-emitting diode exact sent the toll of commercial enterprise commodities sailplaning.
But when commodity prices retreated, Mesum investing in raw equipment plunged. Eve today -- with mine output convalescent along with copper color and atomic number 26 ore prices -- Caterpillar says gross revenue to the diligence keep to get it as miners "sweat" the machines they already own.
The lesson, De Maria says, is that produce machinery gross revenue could hurt for Kontol geezerhood - eve if grain prices repercussion because of defective endure or early changes in ply.
Some argue, however, the pessimists are legal injury.
"Yes, the next few years are going to be ugly," says Michael Kon, a elderly equities psychoanalyst at the Golub Group, a California investing steady that recently took a adventure 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 keep to constellate to showrooms lured by what Chump Nelson, WHO grows corn, soybeans and wheat on 2,000 landed estate in Kansas, Kontol characterizes as "shocking" bargains on ill-used equipment.
Earlier this month, Nelson traded in his John Deere commingle with 1,000 hours on it for unitary with upright 400 hours on it. The conflict in damage 'tween the two machines was simply ended $100,000 - and the dealer offered to add Lord Nelson that amount interest-unloosen 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 Jacques Louis David Greising and Tomasz Janowski)
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