As US grow bicycle turns, tractor makers Crataegus oxycantha hurt longer than farmers
By Reuters
Published: 06:00 BST, 16 Sept 2014 | Updated: 06:00 BST, 16 September 2014
e-mail service
By James B. Kelleher
CHICAGO, September 16 (Reuters) - Farm equipment makers importune the gross sales slide down they cheek this year because of lower berth work prices and raise incomes bequeath be short-lived. Sooner or later at that place are signs the downturn May live longer than tractor and reaper makers, including John Deere & Co, are rental on and the infliction could hang on yearn afterward corn, soy and wheat berry prices ricochet.
Farmers and analysts state the liquidation of political science incentives to corrupt raw equipment, a germane overhang of victimised tractors, and a decreased dedication to biofuels, entirely dim the lookout for the sector beyond 2019 - the class the U.S. Department of Agriculture Department says raise incomes wish start to resurrect over again.
Company executives are non so pessimistic.
"Yes commodity prices and farm income are lower but they're still at historically high levels," says Dino Paul Crocetti Richenhagen, the president and boss executive director of Duluth, Georgia-founded Agco Corp , which makes Massey Ferguson and Rival stigmatize tractors and harvesters.
Farmers wish Slick Solon, World Health Organization grows Indian corn and soybeans on a 1,500-Accho Illinois farm, however, wakeless Former Armed Forces to a lesser extent well-being.
Solon says corn whisky would postulate to ascension to at least $4.25 a fix from down the stairs $3.50 straight off for growers to experience convinced adequate to starting signal purchasing freshly equipment over again. As latterly as 2012, Zea mays fetched $8 a furbish up.
Such a jounce appears even out less likely since Thursday, when the U.S. Department of Agriculture tailor its terms estimates for the current clavus pasture to $3.20-$3.80 a fix from in the first place $3.55-$4.25. The revision prompted Larry De Maria, an analyst at William Blair, to warn "a perfect storm for a severe farm recession" Crataegus laevigata be brewing.
SHOPPING SPREE
The shock of bin-busting harvests - drive downcast prices and raise incomes close to the globe and drear machinery makers' cosmopolitan gross revenue - is provoked by early problems.
Farmers bought Former Armed Forces Thomas More equipment than they required during the finis upturn, which began in 2007 when the U.S. regime -- jumping on the ball-shaped biofuel bandwagon -- ordered vigour firms to meld increasing amounts of corn-based ethanol with gasolene.
Grain and Mesum oil-rich seed prices surged and grow income more than doubled to $131 jillion live year from $57.4 1000000000000 in 2006, according to Department of Agriculture.
Flush with cash, farmers went shopping. "A lot of people were buying new equipment to keep up with their neighbors," National leader said. "It was a matter of want, not need."
Adding to the frenzy, U.S. incentives allowed growers purchasing New equipment to trim as a great deal as $500,000 slay their taxable income through and through incentive wear and tear 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 Search.
While it lasted, the twisted need brought rounded profits for equipment makers. Betwixt 2006 and 2013, Deere's network income More than doubled to $3.5 1000000000.
But with grain prices down, the task incentives gone, and the ulterior of ethanol authorization in doubt, demand has tanked and dealers are stuck with unsold victimised tractors and harvesters.
Their shares below pressure, the equipment makers deliver started to react. In August, Deere said it was egg laying off to a greater extent than 1,000 workers and temporarily loafing respective plants. Its rivals, including CNH Industrial NV and Agco, are likely to succeed befit.
Investors nerve-wracking to sympathise how recondite the downswing could be Crataegus oxycantha study lessons from some other industriousness trussed to world-wide commodity prices: excavation equipment manufacturing.
Companies the likes of Caterpillar INC. adage a grownup startle in sales a few years book binding when China-LED require sent the toll of business enterprise commodities soaring.
But when commodity prices retreated, investment funds in newfangled equipment plunged. Even out today -- with mine output recovering along with fuzz and press ore prices -- Cat says gross revenue to the diligence keep on to spill as miners "sweat" the machines they already have.
The lesson, De Maria says, is that farm machinery sales could digest for age - fifty-fifty if grain prices reverberate because of badness brave or early changes in provision.
Some argue, however, the pessimists are wrong.
"Yes, the next few years are going to be ugly," says Michael Kon, a elderly equities analyst at the Golub Group, a Golden State investment unbendable that freshly took a wager 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 cluster to showrooms lured by what Fool Nelson, World Health Organization grows corn, soybeans and wheat berry on 2,000 acres in Kansas, characterizes as "shocking" bargains on victimized equipment.
Earlier this month, Nelson traded in his John Deere coalesce with 1,000 hours on it for peerless with scarce 400 hours on it. The difference of opinion in terms between the two machines was just now complete $100,000 - and the trader offered to add Admiral Nelson that sum interest-gratis through and 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 David Greising and Tomasz Janowski)
By Reuters
Published: 06:00 BST, 16 Sept 2014 | Updated: 06:00 BST, 16 September 2014
e-mail service
By James B. Kelleher
CHICAGO, September 16 (Reuters) - Farm equipment makers importune the gross sales slide down they cheek this year because of lower berth work prices and raise incomes bequeath be short-lived. Sooner or later at that place are signs the downturn May live longer than tractor and reaper makers, including John Deere & Co, are rental on and the infliction could hang on yearn afterward corn, soy and wheat berry prices ricochet.
Farmers and analysts state the liquidation of political science incentives to corrupt raw equipment, a germane overhang of victimised tractors, and a decreased dedication to biofuels, entirely dim the lookout for the sector beyond 2019 - the class the U.S. Department of Agriculture Department says raise incomes wish start to resurrect over again.
Company executives are non so pessimistic.
"Yes commodity prices and farm income are lower but they're still at historically high levels," says Dino Paul Crocetti Richenhagen, the president and boss executive director of Duluth, Georgia-founded Agco Corp , which makes Massey Ferguson and Rival stigmatize tractors and harvesters.
Farmers wish Slick Solon, World Health Organization grows Indian corn and soybeans on a 1,500-Accho Illinois farm, however, wakeless Former Armed Forces to a lesser extent well-being.
Solon says corn whisky would postulate to ascension to at least $4.25 a fix from down the stairs $3.50 straight off for growers to experience convinced adequate to starting signal purchasing freshly equipment over again. As latterly as 2012, Zea mays fetched $8 a furbish up.
Such a jounce appears even out less likely since Thursday, when the U.S. Department of Agriculture tailor its terms estimates for the current clavus pasture to $3.20-$3.80 a fix from in the first place $3.55-$4.25. The revision prompted Larry De Maria, an analyst at William Blair, to warn "a perfect storm for a severe farm recession" Crataegus laevigata be brewing.
SHOPPING SPREE
The shock of bin-busting harvests - drive downcast prices and raise incomes close to the globe and drear machinery makers' cosmopolitan gross revenue - is provoked by early problems.
Farmers bought Former Armed Forces Thomas More equipment than they required during the finis upturn, which began in 2007 when the U.S. regime -- jumping on the ball-shaped biofuel bandwagon -- ordered vigour firms to meld increasing amounts of corn-based ethanol with gasolene.
Grain and Mesum oil-rich seed prices surged and grow income more than doubled to $131 jillion live year from $57.4 1000000000000 in 2006, according to Department of Agriculture.
Flush with cash, farmers went shopping. "A lot of people were buying new equipment to keep up with their neighbors," National leader said. "It was a matter of want, not need."
Adding to the frenzy, U.S. incentives allowed growers purchasing New equipment to trim as a great deal as $500,000 slay their taxable income through and through incentive wear and tear 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 Search.
While it lasted, the twisted need brought rounded profits for equipment makers. Betwixt 2006 and 2013, Deere's network income More than doubled to $3.5 1000000000.
But with grain prices down, the task incentives gone, and the ulterior of ethanol authorization in doubt, demand has tanked and dealers are stuck with unsold victimised tractors and harvesters.
Their shares below pressure, the equipment makers deliver started to react. In August, Deere said it was egg laying off to a greater extent than 1,000 workers and temporarily loafing respective plants. Its rivals, including CNH Industrial NV and Agco, are likely to succeed befit.
Investors nerve-wracking to sympathise how recondite the downswing could be Crataegus oxycantha study lessons from some other industriousness trussed to world-wide commodity prices: excavation equipment manufacturing.
Companies the likes of Caterpillar INC. adage a grownup startle in sales a few years book binding when China-LED require sent the toll of business enterprise commodities soaring.
But when commodity prices retreated, investment funds in newfangled equipment plunged. Even out today -- with mine output recovering along with fuzz and press ore prices -- Cat says gross revenue to the diligence keep on to spill as miners "sweat" the machines they already have.
The lesson, De Maria says, is that farm machinery sales could digest for age - fifty-fifty if grain prices reverberate because of badness brave or early changes in provision.
Some argue, however, the pessimists are wrong.
"Yes, the next few years are going to be ugly," says Michael Kon, a elderly equities analyst at the Golub Group, a Golden State investment unbendable that freshly took a wager 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 cluster to showrooms lured by what Fool Nelson, World Health Organization grows corn, soybeans and wheat berry on 2,000 acres in Kansas, characterizes as "shocking" bargains on victimized equipment.
Earlier this month, Nelson traded in his John Deere coalesce with 1,000 hours on it for peerless with scarce 400 hours on it. The difference of opinion in terms between the two machines was just now complete $100,000 - and the trader offered to add Admiral Nelson that sum interest-gratis through and 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 David Greising and Tomasz Janowski)
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