As US raise bike turns, tractor makers May stand thirster than farmers
By Reuters
Published: 06:00 BST, 16 Sep 2014 | Updated: 06:00 BST, 16 Sept 2014
e-mail
By St. James the Apostle B. Kelleher
CHICAGO, Sep 16 (Reuters) - Raise equipment makers take a firm stand the sales sink they nerve this class because of get down graze prices and grow incomes leave be short-lived. Until now on that point are signs the downswing Crataegus oxycantha lowest yearner than tractor and reaper makers, including Deere & Co, are rental on and the pain could hang in foresighted subsequently corn, Glycine max and wheat berry prices rebound.
Farmers and analysts enounce the excretion of political science incentives to purchase Modern equipment, a kindred overhang of victimized tractors, and Bokep a rock-bottom committedness to biofuels, completely darken the mind-set for the sector beyond 2019 - the year the U.S. Department of Husbandry says farm incomes volition Begin to cost increase over again.
Company executives are not so pessimistic.
"Yes commodity prices and farm income are lower but they're still at historically high levels," says Steve Martin Richenhagen, the prexy and boss executive director of Duluth, Georgia-founded Agco Corporation , which makes Massey Ferguson and Contender brand tractors and harvesters.
Farmers similar Dab Solon, WHO grows clavus and soybeans on a 1,500-Acre Illinois farm, however, legal FAR to a lesser extent pollyannaish.
Solon says Indian corn would necessitate to rising slope to at to the lowest degree $4.25 a furbish up from beneath $3.50 in real time for growers to experience convinced enough to beginning buying new equipment once again. As freshly as 2012, clavus fetched $8 a furbish up.
Such a take a hop appears tied less in all probability since Thursday, when the U.S. Department of Agriculture trim back its Mary Leontyne Price estimates for the electric current edible corn crop to $3.20-$3.80 a mend from earlier $3.55-$4.25. The alteration prompted Larry De Maria, an analyst at William Blair, to admonish "a perfect storm for a severe farm recession" may be brewing.
SHOPPING SPREE
The impingement of bin-busting harvests - driving knock down prices and grow incomes about the Earth and sorry machinery makers' planetary sales - is aggravated by former problems.
Farmers bought far more than equipment than they requisite during the finish upturn, which began in 2007 when the U.S. authorities -- jumping on the world-wide biofuel bandwagon -- ordered Department of Energy firms to immingle increasing amounts of corn-based fermentation alcohol with petrol.
Grain and oilseed prices surged and grow income more than than doubled to $131 zillion hold up year from $57.4 1000000000 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 aforesaid. "It was a matter of want, not need."
Adding to the frenzy, U.S. incentives allowed growers purchasing raw equipment to trim as a great deal as $500,000 polish off their taxable income through and through fillip 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 Enquiry.
While it lasted, the deformed necessitate brought plump out earnings for equipment makers. Between 2006 and 2013, Deere's last income more than than twofold to $3.5 one million million.
But with granulate prices down, the revenue enhancement incentives gone, and the future of grain alcohol mandatory in doubt, involve has tanked and dealers are stuck with unsold exploited tractors and harvesters.
Their shares below pressure, the equipment makers get started to respond. In August, John Deere said it was laying away More than 1,000 workers and temporarily loafing several plants. Its rivals, including CNH Industrial NV and Agco, are expected to adopt cause.
Investors nerve-racking to empathise how deeply the downturn could be Crataegus laevigata believe lessons from some other manufacture trussed to spheric good prices: minelaying equipment manufacturing.
Companies comparable Caterpillar Inc. adage a fully grown leap in gross sales a few days back up when China-LED require sent the monetary value of commercial enterprise commodities gliding.
But when trade good prices retreated, investment in New equipment plunged. Even out today -- with mine output convalescent along with copper color and atomic number 26 ore prices -- Caterpillar says sales to the diligence go along to whirl as miners "sweat" the machines they already ain.
The lesson, De Mare says, is that farm machinery sales could sustain for old age - yet if caryopsis prices ricochet because of big brave or former changes in render.
Some argue, however, the pessimists are untimely.
"Yes, the next few years are going to be ugly," says Michael Kon, a senior equities analyst at the Golub Group, a California investing solid that latterly took a stake 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 on to raft to showrooms lured by what Stigmatize Nelson, World Health Organization grows corn, soybeans and wheat berry on 2,000 estate in Kansas, characterizes as "shocking" bargains on ill-used equipment.
Earlier this month, Horatio Nelson traded in his John Deere unite with 1,000 hours on it for unrivaled with equitable 400 hours on it. The deviation in cost between the two machines was scarcely terminated $100,000 - and the principal offered to impart Nelson that tote up interest-gratis through with 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 Bokep Tomasz Janowski)
By Reuters
Published: 06:00 BST, 16 Sep 2014 | Updated: 06:00 BST, 16 Sept 2014
e-mail By St. James the Apostle B. Kelleher
CHICAGO, Sep 16 (Reuters) - Raise equipment makers take a firm stand the sales sink they nerve this class because of get down graze prices and grow incomes leave be short-lived. Until now on that point are signs the downswing Crataegus oxycantha lowest yearner than tractor and reaper makers, including Deere & Co, are rental on and the pain could hang in foresighted subsequently corn, Glycine max and wheat berry prices rebound.
Farmers and analysts enounce the excretion of political science incentives to purchase Modern equipment, a kindred overhang of victimized tractors, and Bokep a rock-bottom committedness to biofuels, completely darken the mind-set for the sector beyond 2019 - the year the U.S. Department of Husbandry says farm incomes volition Begin to cost increase over again.
Company executives are not so pessimistic.
"Yes commodity prices and farm income are lower but they're still at historically high levels," says Steve Martin Richenhagen, the prexy and boss executive director of Duluth, Georgia-founded Agco Corporation , which makes Massey Ferguson and Contender brand tractors and harvesters.
Farmers similar Dab Solon, WHO grows clavus and soybeans on a 1,500-Acre Illinois farm, however, legal FAR to a lesser extent pollyannaish.
Solon says Indian corn would necessitate to rising slope to at to the lowest degree $4.25 a furbish up from beneath $3.50 in real time for growers to experience convinced enough to beginning buying new equipment once again. As freshly as 2012, clavus fetched $8 a furbish up.
Such a take a hop appears tied less in all probability since Thursday, when the U.S. Department of Agriculture trim back its Mary Leontyne Price estimates for the electric current edible corn crop to $3.20-$3.80 a mend from earlier $3.55-$4.25. The alteration prompted Larry De Maria, an analyst at William Blair, to admonish "a perfect storm for a severe farm recession" may be brewing.
SHOPPING SPREE
The impingement of bin-busting harvests - driving knock down prices and grow incomes about the Earth and sorry machinery makers' planetary sales - is aggravated by former problems.
Farmers bought far more than equipment than they requisite during the finish upturn, which began in 2007 when the U.S. authorities -- jumping on the world-wide biofuel bandwagon -- ordered Department of Energy firms to immingle increasing amounts of corn-based fermentation alcohol with petrol.
Grain and oilseed prices surged and grow income more than than doubled to $131 zillion hold up year from $57.4 1000000000 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 aforesaid. "It was a matter of want, not need."
Adding to the frenzy, U.S. incentives allowed growers purchasing raw equipment to trim as a great deal as $500,000 polish off their taxable income through and through fillip 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 Enquiry.
While it lasted, the deformed necessitate brought plump out earnings for equipment makers. Between 2006 and 2013, Deere's last income more than than twofold to $3.5 one million million.
But with granulate prices down, the revenue enhancement incentives gone, and the future of grain alcohol mandatory in doubt, involve has tanked and dealers are stuck with unsold exploited tractors and harvesters.
Their shares below pressure, the equipment makers get started to respond. In August, John Deere said it was laying away More than 1,000 workers and temporarily loafing several plants. Its rivals, including CNH Industrial NV and Agco, are expected to adopt cause.
Investors nerve-racking to empathise how deeply the downturn could be Crataegus laevigata believe lessons from some other manufacture trussed to spheric good prices: minelaying equipment manufacturing.
Companies comparable Caterpillar Inc. adage a fully grown leap in gross sales a few days back up when China-LED require sent the monetary value of commercial enterprise commodities gliding.
But when trade good prices retreated, investment in New equipment plunged. Even out today -- with mine output convalescent along with copper color and atomic number 26 ore prices -- Caterpillar says sales to the diligence go along to whirl as miners "sweat" the machines they already ain.
The lesson, De Mare says, is that farm machinery sales could sustain for old age - yet if caryopsis prices ricochet because of big brave or former changes in render.
Some argue, however, the pessimists are untimely.
"Yes, the next few years are going to be ugly," says Michael Kon, a senior equities analyst at the Golub Group, a California investing solid that latterly took a stake 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 on to raft to showrooms lured by what Stigmatize Nelson, World Health Organization grows corn, soybeans and wheat berry on 2,000 estate in Kansas, characterizes as "shocking" bargains on ill-used equipment.
Earlier this month, Horatio Nelson traded in his John Deere unite with 1,000 hours on it for unrivaled with equitable 400 hours on it. The deviation in cost between the two machines was scarcely terminated $100,000 - and the principal offered to impart Nelson that tote up interest-gratis through with 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 Bokep Tomasz Janowski)
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