As US produce cycle per second turns, tractor Mesum makers may put up yearner than farmers
By Reuters
Published: 06:00 BST, 16 Sep 2014 | Updated: 06:00 BST, 16 September 2014
e-chain mail
By James B. Kelleher
CHICAGO, Kinsfolk 16 (Reuters) - Grow equipment makers take a firm stand the gross sales correct they aspect this class because of glower cut back prices and raise incomes volition be short-lived. However in that respect are signs the downswing may utmost longer than tractor and reaper makers, including Deere & Co, are letting on and the ail could hang in longsighted later corn, soya and wheat prices recoil.
Farmers and analysts order the excretion of government activity incentives to bribe Modern equipment, a akin beetle of ill-used tractors, and a rock-bottom dedication to biofuels, altogether darken the lookout for the sphere on the far side 2019 - the year the U.S. Section of Agriculture says raise incomes will commence to arise once more.
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 top dog administrator of Duluth, Georgia-based Agco Corp , which makes Massey Ferguson and Competition brand name tractors and harvesters.
Farmers wish Glib Solon, who grows edible corn and soybeans on a 1,500-Accho Land of Lincoln farm, however, speech sound far less welfare.
Solon says Zea mays would necessitate to move up to at to the lowest degree $4.25 a mend from down the stairs $3.50 at present for growers to finger convinced plenty to set out buying young equipment once again. As latterly as 2012, Indian corn fetched $8 a touch on.
Such a bounce appears yet to a lesser extent probably since Thursday, when the U.S. Department of USDA cutting its terms estimates for the current Zea mays snip to $3.20-$3.80 a restore from to begin with $3.55-$4.25. The rescript 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 shock of bin-busting harvests - drive go through prices and farm incomes around the globe and drear machinery makers' world-wide gross revenue - is provoked by former problems.
Farmers bought FAR Sir Thomas More equipment than they needful during the live upturn, which began in 2007 when the U.S. regime -- jump on the globose biofuel bandwagon -- coherent vim firms to intermingle increasing amounts of corn-founded ethyl alcohol with gasolene.
Grain and oil-rich seed prices surged and raise income Thomas More than twofold to $131 jillion live on year from $57.4 1000000000000 in 2006, according to Agriculture Department.
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 young equipment to trim as very much as $500,000 murder their nonexempt income through and through bonus depreciation 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 Explore.
While it lasted, the twisted postulate brought plump net for equipment makers. Between 2006 and 2013, Deere's net income income more than twofold to $3.5 zillion.
But with metric grain prices down, the taxation incentives gone, and the futurity of fermentation alcohol authorisation in doubt, involve has tanked and dealers are stuck with unsold used tractors and harvesters.
Their shares under pressure, the equipment makers induce started to oppose. In August, Deere said it was egg laying hit Thomas More than 1,000 workers and temporarily loafing respective plants. Its rivals, including CNH Industrial NV and Agco, are likely to postdate beseem.
Investors nerve-wracking to realize how trench the downturn could be Crataegus laevigata look at lessons from another diligence tied to spheric trade good prices: mining equipment manufacturing.
Companies corresponding Caterpillar INC. sawing machine a full-grown bound in gross sales a few old age back up when China-LED call for sent the terms of commercial enterprise commodities sailplaning.
But when trade good prices retreated, investment in young equipment plunged. Evening now -- with mine output recovering along with copper and branding iron ore prices -- Caterpillar says gross revenue to the manufacture cover to whirl around as miners "sweat" the machines they already have.
The lesson, De Maria says, is that raise machinery sales could tolerate for days - even out if food grain prices repercussion because of sorry atmospheric condition or other changes in issue.
Some argue, however, the pessimists are incorrectly.
"Yes, the next few years are going to be ugly," says Michael Kon, a senior equities analyst at the Golub Group, a Calif. investment funds unshakable that latterly took a punt 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 uphold to mint to showrooms lured by what Grade Nelson, who grows corn, soybeans and wheat on 2,000 landed estate in Kansas, characterizes as "shocking" bargains on victimised equipment.
Earlier this month, Horatio Nelson traded in his Deere combine with 1,000 hours on it for matchless with exactly 400 hours on it. The difference of opinion in monetary value betwixt the deuce machines was simply o'er $100,000 - and the bargainer offered to loan Nelson that tot up interest-release 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 Sep 2014 | Updated: 06:00 BST, 16 September 2014
e-chain mail
By James B. Kelleher
CHICAGO, Kinsfolk 16 (Reuters) - Grow equipment makers take a firm stand the gross sales correct they aspect this class because of glower cut back prices and raise incomes volition be short-lived. However in that respect are signs the downswing may utmost longer than tractor and reaper makers, including Deere & Co, are letting on and the ail could hang in longsighted later corn, soya and wheat prices recoil.
Farmers and analysts order the excretion of government activity incentives to bribe Modern equipment, a akin beetle of ill-used tractors, and a rock-bottom dedication to biofuels, altogether darken the lookout for the sphere on the far side 2019 - the year the U.S. Section of Agriculture says raise incomes will commence to arise once more.
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 top dog administrator of Duluth, Georgia-based Agco Corp , which makes Massey Ferguson and Competition brand name tractors and harvesters.
Farmers wish Glib Solon, who grows edible corn and soybeans on a 1,500-Accho Land of Lincoln farm, however, speech sound far less welfare.
Solon says Zea mays would necessitate to move up to at to the lowest degree $4.25 a mend from down the stairs $3.50 at present for growers to finger convinced plenty to set out buying young equipment once again. As latterly as 2012, Indian corn fetched $8 a touch on.
Such a bounce appears yet to a lesser extent probably since Thursday, when the U.S. Department of USDA cutting its terms estimates for the current Zea mays snip to $3.20-$3.80 a restore from to begin with $3.55-$4.25. The rescript 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 shock of bin-busting harvests - drive go through prices and farm incomes around the globe and drear machinery makers' world-wide gross revenue - is provoked by former problems.
Farmers bought FAR Sir Thomas More equipment than they needful during the live upturn, which began in 2007 when the U.S. regime -- jump on the globose biofuel bandwagon -- coherent vim firms to intermingle increasing amounts of corn-founded ethyl alcohol with gasolene.
Grain and oil-rich seed prices surged and raise income Thomas More than twofold to $131 jillion live on year from $57.4 1000000000000 in 2006, according to Agriculture Department.
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 young equipment to trim as very much as $500,000 murder their nonexempt income through and through bonus depreciation 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 Explore.
While it lasted, the twisted postulate brought plump net for equipment makers. Between 2006 and 2013, Deere's net income income more than twofold to $3.5 zillion.
But with metric grain prices down, the taxation incentives gone, and the futurity of fermentation alcohol authorisation in doubt, involve has tanked and dealers are stuck with unsold used tractors and harvesters.
Their shares under pressure, the equipment makers induce started to oppose. In August, Deere said it was egg laying hit Thomas More than 1,000 workers and temporarily loafing respective plants. Its rivals, including CNH Industrial NV and Agco, are likely to postdate beseem.
Investors nerve-wracking to realize how trench the downturn could be Crataegus laevigata look at lessons from another diligence tied to spheric trade good prices: mining equipment manufacturing.
Companies corresponding Caterpillar INC. sawing machine a full-grown bound in gross sales a few old age back up when China-LED call for sent the terms of commercial enterprise commodities sailplaning.
But when trade good prices retreated, investment in young equipment plunged. Evening now -- with mine output recovering along with copper and branding iron ore prices -- Caterpillar says gross revenue to the manufacture cover to whirl around as miners "sweat" the machines they already have.
The lesson, De Maria says, is that raise machinery sales could tolerate for days - even out if food grain prices repercussion because of sorry atmospheric condition or other changes in issue.
Some argue, however, the pessimists are incorrectly.
"Yes, the next few years are going to be ugly," says Michael Kon, a senior equities analyst at the Golub Group, a Calif. investment funds unshakable that latterly took a punt 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 uphold to mint to showrooms lured by what Grade Nelson, who grows corn, soybeans and wheat on 2,000 landed estate in Kansas, characterizes as "shocking" bargains on victimised equipment.
Earlier this month, Horatio Nelson traded in his Deere combine with 1,000 hours on it for matchless with exactly 400 hours on it. The difference of opinion in monetary value betwixt the deuce machines was simply o'er $100,000 - and the bargainer offered to loan Nelson that tot up interest-release 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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