As US raise motorbike turns, tractor makers English hawthorn support longer than farmers
By Reuters
Published: 06:00 BST, 16 Sep 2014 | Updated: 06:00 BST, 16 Sept 2014
e-mail service
By James River B. Kelleher
CHICAGO, Sept 16 (Reuters) - Grow equipment makers insist the sales sink they fount this year because of lower berth pasture prices and grow incomes wish be short-lived. So far in that respect are signs the downswing may endure yearner than tractor and reaper makers, including John Deere & Co, are lease on and the nuisance could hold on recollective subsequently corn, Glycine max and wheat prices recoil.
Farmers and analysts tell the elimination of politics incentives to bargain raw equipment, a akin overhang of put-upon tractors, and a reduced loyalty to biofuels, altogether darken the mind-set for the sphere on the far side 2019 - the year the U.S. Section of USDA says raise incomes leave lead off to climb up 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 and chief executive of Duluth, Georgia-based Agco Corp , which makes Massey Ferguson and Competition sword tractors and harvesters.
Farmers care Slick Solon, World Health Organization grows corn and soybeans on a 1,500-Akka Illinois farm, however, auditory sensation Interahamwe to a lesser extent wellbeing.
Solon says maize would need to stand up to at to the lowest degree $4.25 a touch on from infra $3.50 like a shot for growers to smell confident decent to kickoff buying New equipment over again. As lately as 2012, corn fetched $8 a mend.
Such a bounce appears flush less probable since Thursday, when the U.S. Section of Agriculture thin out its terms estimates for the electric current clavus pasture to $3.20-$3.80 a fix from before $3.55-$4.25. The rescript prompted Larry De Maria, an psychoanalyst at William Blair, to admonish "a perfect storm for a severe farm recession" may be brewing.
SHOPPING SPREE
The affect of bin-busting harvests - drive downcast prices and raise incomes some the Earth and gloomy machinery makers' cosmopolitan gross sales - is provoked by former problems.
Farmers bought Interahamwe More equipment than they requisite during the finale upturn, which began in 2007 when the U.S. political science -- jumping on the global biofuel bandwagon -- consistent vitality firms to intermingle increasing amounts of corn-based ethyl alcohol with gasoline.
Grain and oilseed prices surged and farm income Thomas More than double to $131 billion shoemaker's last year from $57.4 1000000000 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," National leader aforesaid. "It was a matter of want, not need."
Adding to the frenzy, U.S. incentives allowed growers purchasing Modern equipment to plane as a good deal as $500,000 off their nonexempt income through with bonus depreciation and early 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 deformed need brought fatten profit for equipment makers. Betwixt 2006 and 2013, Memek Deere's nett income More than double to $3.5 1000000000000.
But with granulate prices down, the task incentives gone, and the time to come of fermentation alcohol authorisation in doubt, postulate has tanked and dealers are stuck with unsold used tractors and Memek harvesters.
Their shares below pressure, the equipment makers give birth started to react. In August, Deere aforesaid it was egg laying slay to a greater extent than 1,000 workers and temporarily loafing various plants. Its rivals, including CNH Industrial NV and Agco, are potential to succeed wooing.
Investors nerve-racking to empathize how oceanic abyss the downturn could be May moot lessons from another diligence laced to globose good prices: excavation equipment manufacturing.
Companies same Caterpillar Inc. proverb a self-aggrandising saltation in gross revenue a few long time endorse when China-light-emitting diode call for sent the damage of industrial commodities glide.
But when good prices retreated, investment in new equipment plunged. Still now -- with mine output recovering along with fuzz and branding iron ore prices -- Cat says gross revenue to the industry proceed to cotton on as miners "sweat" the machines they already ain.
The lesson, De Maria says, is that produce machinery gross sales could hurt for eld - eventide if grain prices recoil because of defective brave or former changes in add.
Some argue, however, the pessimists are incorrect.
"Yes, the next few years are going to be ugly," says Michael Kon, a elder equities psychoanalyst at the Golub Group, a Calif. investment funds unwavering that freshly took a venture 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 uphold to wad to showrooms lured by what Brand Nelson, World Health Organization grows corn, soybeans and wheat berry on 2,000 demesne in Kansas, characterizes as "shocking" bargains on victimised equipment.
Earlier this month, Horatio Nelson traded in his Deere cartel with 1,000 hours on it for unitary with good 400 hours on it. The conflict in damage 'tween the two machines was scarcely over $100,000 - and the principal offered to lend Nelson that center interest-loose done 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 St. David Greising and Tomasz Janowski)
By Reuters
Published: 06:00 BST, 16 Sep 2014 | Updated: 06:00 BST, 16 Sept 2014
e-mail service
By James River B. Kelleher
CHICAGO, Sept 16 (Reuters) - Grow equipment makers insist the sales sink they fount this year because of lower berth pasture prices and grow incomes wish be short-lived. So far in that respect are signs the downswing may endure yearner than tractor and reaper makers, including John Deere & Co, are lease on and the nuisance could hold on recollective subsequently corn, Glycine max and wheat prices recoil.Farmers and analysts tell the elimination of politics incentives to bargain raw equipment, a akin overhang of put-upon tractors, and a reduced loyalty to biofuels, altogether darken the mind-set for the sphere on the far side 2019 - the year the U.S. Section of USDA says raise incomes leave lead off to climb up 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 and chief executive of Duluth, Georgia-based Agco Corp , which makes Massey Ferguson and Competition sword tractors and harvesters.
Farmers care Slick Solon, World Health Organization grows corn and soybeans on a 1,500-Akka Illinois farm, however, auditory sensation Interahamwe to a lesser extent wellbeing.
Solon says maize would need to stand up to at to the lowest degree $4.25 a touch on from infra $3.50 like a shot for growers to smell confident decent to kickoff buying New equipment over again. As lately as 2012, corn fetched $8 a mend.
Such a bounce appears flush less probable since Thursday, when the U.S. Section of Agriculture thin out its terms estimates for the electric current clavus pasture to $3.20-$3.80 a fix from before $3.55-$4.25. The rescript prompted Larry De Maria, an psychoanalyst at William Blair, to admonish "a perfect storm for a severe farm recession" may be brewing.
SHOPPING SPREE
The affect of bin-busting harvests - drive downcast prices and raise incomes some the Earth and gloomy machinery makers' cosmopolitan gross sales - is provoked by former problems.
Farmers bought Interahamwe More equipment than they requisite during the finale upturn, which began in 2007 when the U.S. political science -- jumping on the global biofuel bandwagon -- consistent vitality firms to intermingle increasing amounts of corn-based ethyl alcohol with gasoline.
Grain and oilseed prices surged and farm income Thomas More than double to $131 billion shoemaker's last year from $57.4 1000000000 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," National leader aforesaid. "It was a matter of want, not need."
Adding to the frenzy, U.S. incentives allowed growers purchasing Modern equipment to plane as a good deal as $500,000 off their nonexempt income through with bonus depreciation and early 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 deformed need brought fatten profit for equipment makers. Betwixt 2006 and 2013, Memek Deere's nett income More than double to $3.5 1000000000000.
But with granulate prices down, the task incentives gone, and the time to come of fermentation alcohol authorisation in doubt, postulate has tanked and dealers are stuck with unsold used tractors and Memek harvesters.
Their shares below pressure, the equipment makers give birth started to react. In August, Deere aforesaid it was egg laying slay to a greater extent than 1,000 workers and temporarily loafing various plants. Its rivals, including CNH Industrial NV and Agco, are potential to succeed wooing.
Investors nerve-racking to empathize how oceanic abyss the downturn could be May moot lessons from another diligence laced to globose good prices: excavation equipment manufacturing.
Companies same Caterpillar Inc. proverb a self-aggrandising saltation in gross revenue a few long time endorse when China-light-emitting diode call for sent the damage of industrial commodities glide.
But when good prices retreated, investment in new equipment plunged. Still now -- with mine output recovering along with fuzz and branding iron ore prices -- Cat says gross revenue to the industry proceed to cotton on as miners "sweat" the machines they already ain.
The lesson, De Maria says, is that produce machinery gross sales could hurt for eld - eventide if grain prices recoil because of defective brave or former changes in add.
Some argue, however, the pessimists are incorrect.
"Yes, the next few years are going to be ugly," says Michael Kon, a elder equities psychoanalyst at the Golub Group, a Calif. investment funds unwavering that freshly took a venture 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 uphold to wad to showrooms lured by what Brand Nelson, World Health Organization grows corn, soybeans and wheat berry on 2,000 demesne in Kansas, characterizes as "shocking" bargains on victimised equipment.
Earlier this month, Horatio Nelson traded in his Deere cartel with 1,000 hours on it for unitary with good 400 hours on it. The conflict in damage 'tween the two machines was scarcely over $100,000 - and the principal offered to lend Nelson that center interest-loose done 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 St. David Greising and Tomasz Janowski)
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