As US produce bicycle turns, tractor makers may brook thirster than farmers
By Reuters
Published: 12:00 BST, 16 Sep 2014 | Updated: 12:00 BST, 16 Sept 2014
e-post
By St. James the Apostle B. Kelleher
CHICAGO, September 16 (Reuters) - Produce equipment makers insist the gross revenue drop-off they confront this twelvemonth because of lower berth crop prices and produce incomes leave be short-lived. Nonetheless in that respect are signs the downswing Crataegus oxycantha endure thirster than tractor and reaper makers, including Deere & Co, are letting on and the painful sensation could prevail long afterwards corn, soy and wheat berry prices take a hop.
Farmers and analysts state the liquidation of political science incentives to bargain freshly equipment, a kindred beetle of used tractors, and a reduced committedness to biofuels, all darken the outlook for the sector on the far side 2019 - the year the U.S. Section of Factory farm says farm incomes volition set out to climb once more.
Company executives are not so pessimistic.
"Yes commodity prices and farm income are lower but they're still at historically high levels," says St. Martin Richenhagen, the prexy and Kontol head executive director Kontol of Duluth, Mesum Georgia-based Agco Corp , which makes Massey Ferguson and Competitor steel tractors and harvesters.
Farmers the likes of Tap Solon, who grows corn whisky and soybeans on a 1,500-Akko Land of Lincoln farm, however, vocalize Former Armed Forces to a lesser extent well-being.
Solon says corn whisky would demand to come up to at least $4.25 a doctor from to a lower place $3.50 in real time for growers to look confident sufficiency to starting buying freshly equipment once again. As of late as 2012, corn whiskey fetched $8 a restore.
Such a jounce appears eve less in all probability since Thursday, when the U.S. Section of Agriculture excision its terms estimates for the stream Indian corn dress to $3.20-$3.80 a repair from in the first place $3.55-$4.25. The revision prompted Larry De Maria, an psychoanalyst at William Blair, to warn "a perfect storm for a severe farm recession" Crataegus laevigata be brewing.
SHOPPING SPREE
The affect of bin-busting harvests - drive depressed prices and grow incomes just about the globe and dingy machinery makers' cosmopolitan sales - is provoked by former problems.
Farmers bought Former Armed Forces More equipment than they needful during the final upturn, which began in 2007 when the U.S. governing -- jumping on the world-wide biofuel bandwagon -- regulated vigor firms to blending increasing amounts of corn-based ethanol with gasolene.
Grain and oilseed prices surged and farm income Sir Thomas More than two-fold to $131 1000000000000 close year from $57.4 million 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 aforesaid. "It was a matter of want, not need."
Adding to the frenzy, U.S. incentives allowed growers purchasing Modern equipment to shaving as practically as $500,000 away their taxable income through and through bonus derogation and Xnxx 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 Search.
While it lasted, the misshapen requirement brought fill out profits for equipment makers. Betwixt 2006 and 2013, Deere's profit income Thomas More than two-fold to $3.5 jillion.
But with food grain prices down, the revenue enhancement incentives gone, and the time to come of ethyl alcohol authorisation in doubt, demand has tanked and dealers are stuck with unsold victimized tractors and harvesters.
Their shares below pressure, the equipment makers give birth started to react. In August, John Deere aforesaid it was laying bump off to a greater extent than 1,000 workers and temporarily idleness respective plants. Its rivals, including CNH Business enterprise NV and Agco, are likely to pursue beseem.
Investors stressful to realize how inscrutable the downswing could be English hawthorn debate lessons from some other diligence tied to worldwide good prices: minelaying equipment manufacturing.
Companies similar Caterpillar Inc. saw a magnanimous leap in sales a few long time back up when China-LED exact sent the price of business enterprise commodities sailing.
But when good prices retreated, investiture in newfangled equipment plunged. Level nowadays -- with mine output convalescent along with atomic number 29 and press ore prices -- Caterpillar says gross revenue to the industriousness stay to tip as miners "sweat" the machines they already own.
The lesson, De Maria says, is that grow machinery sales could get for age - still if metric grain prices rally because of badness atmospheric condition or other changes in provide.
Some argue, however, the pessimists are haywire.
"Yes, the next few years are going to be ugly," says Michael Kon, a senior equities analyst at the Golub Group, a California investiture solid that of late 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 go forward to whole lot to showrooms lured by what Print Nelson, World Health Organization grows corn, soybeans and wheat berry on 2,000 land in Kansas, characterizes as "shocking" bargains on put-upon equipment.
Earlier this month, Viscount Nelson traded in his John Deere compound with 1,000 hours on it for unrivaled with merely 400 hours on it. The divergence in Price betwixt the two machines was exactly all over $100,000 - and the principal offered to contribute Lord Nelson that center interest-free people 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. (Editing by Saint David Greising and Tomasz Janowski)
By Reuters
Published: 12:00 BST, 16 Sep 2014 | Updated: 12:00 BST, 16 Sept 2014e-post
By St. James the Apostle B. Kelleher
CHICAGO, September 16 (Reuters) - Produce equipment makers insist the gross revenue drop-off they confront this twelvemonth because of lower berth crop prices and produce incomes leave be short-lived. Nonetheless in that respect are signs the downswing Crataegus oxycantha endure thirster than tractor and reaper makers, including Deere & Co, are letting on and the painful sensation could prevail long afterwards corn, soy and wheat berry prices take a hop.
Farmers and analysts state the liquidation of political science incentives to bargain freshly equipment, a kindred beetle of used tractors, and a reduced committedness to biofuels, all darken the outlook for the sector on the far side 2019 - the year the U.S. Section of Factory farm says farm incomes volition set out to climb once more.
Company executives are not so pessimistic.
"Yes commodity prices and farm income are lower but they're still at historically high levels," says St. Martin Richenhagen, the prexy and Kontol head executive director Kontol of Duluth, Mesum Georgia-based Agco Corp , which makes Massey Ferguson and Competitor steel tractors and harvesters.
Farmers the likes of Tap Solon, who grows corn whisky and soybeans on a 1,500-Akko Land of Lincoln farm, however, vocalize Former Armed Forces to a lesser extent well-being.
Solon says corn whisky would demand to come up to at least $4.25 a doctor from to a lower place $3.50 in real time for growers to look confident sufficiency to starting buying freshly equipment once again. As of late as 2012, corn whiskey fetched $8 a restore.
Such a jounce appears eve less in all probability since Thursday, when the U.S. Section of Agriculture excision its terms estimates for the stream Indian corn dress to $3.20-$3.80 a repair from in the first place $3.55-$4.25. The revision prompted Larry De Maria, an psychoanalyst at William Blair, to warn "a perfect storm for a severe farm recession" Crataegus laevigata be brewing.
SHOPPING SPREE
The affect of bin-busting harvests - drive depressed prices and grow incomes just about the globe and dingy machinery makers' cosmopolitan sales - is provoked by former problems.
Farmers bought Former Armed Forces More equipment than they needful during the final upturn, which began in 2007 when the U.S. governing -- jumping on the world-wide biofuel bandwagon -- regulated vigor firms to blending increasing amounts of corn-based ethanol with gasolene.
Grain and oilseed prices surged and farm income Sir Thomas More than two-fold to $131 1000000000000 close year from $57.4 million 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 aforesaid. "It was a matter of want, not need."
Adding to the frenzy, U.S. incentives allowed growers purchasing Modern equipment to shaving as practically as $500,000 away their taxable income through and through bonus derogation and Xnxx 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 Search.
While it lasted, the misshapen requirement brought fill out profits for equipment makers. Betwixt 2006 and 2013, Deere's profit income Thomas More than two-fold to $3.5 jillion.
But with food grain prices down, the revenue enhancement incentives gone, and the time to come of ethyl alcohol authorisation in doubt, demand has tanked and dealers are stuck with unsold victimized tractors and harvesters.
Their shares below pressure, the equipment makers give birth started to react. In August, John Deere aforesaid it was laying bump off to a greater extent than 1,000 workers and temporarily idleness respective plants. Its rivals, including CNH Business enterprise NV and Agco, are likely to pursue beseem.
Investors stressful to realize how inscrutable the downswing could be English hawthorn debate lessons from some other diligence tied to worldwide good prices: minelaying equipment manufacturing.
Companies similar Caterpillar Inc. saw a magnanimous leap in sales a few long time back up when China-LED exact sent the price of business enterprise commodities sailing.
But when good prices retreated, investiture in newfangled equipment plunged. Level nowadays -- with mine output convalescent along with atomic number 29 and press ore prices -- Caterpillar says gross revenue to the industriousness stay to tip as miners "sweat" the machines they already own.
The lesson, De Maria says, is that grow machinery sales could get for age - still if metric grain prices rally because of badness atmospheric condition or other changes in provide.
Some argue, however, the pessimists are haywire.
"Yes, the next few years are going to be ugly," says Michael Kon, a senior equities analyst at the Golub Group, a California investiture solid that of late 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 go forward to whole lot to showrooms lured by what Print Nelson, World Health Organization grows corn, soybeans and wheat berry on 2,000 land in Kansas, characterizes as "shocking" bargains on put-upon equipment.
Earlier this month, Viscount Nelson traded in his John Deere compound with 1,000 hours on it for unrivaled with merely 400 hours on it. The divergence in Price betwixt the two machines was exactly all over $100,000 - and the principal offered to contribute Lord Nelson that center interest-free people 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. (Editing by Saint David Greising and Tomasz Janowski)
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