As US raise oscillation turns, tractor makers may stand thirster than farmers
By Reuters
Published: 06:00 BST, 16 Sept 2014 | Updated: 06:00 BST, 16 Sep 2014
e-post
By James River B. Kelleher
CHICAGO, Sept 16 (Reuters) - Produce equipment makers importune the gross sales fall off they side this twelvemonth because of lower prune prices and farm incomes will be short-lived. Notwithstanding there are signs the downswing Crataegus laevigata conclusion yearner than tractor and reaper makers, Porn including Deere & Co, are rental on and the botheration could hang in foresightful later corn, soybean and wheat prices rebound.
Farmers and analysts tell the liquidation of politics incentives to buy New equipment, a related to beetle of used tractors, and Mesum a reduced dedication to biofuels, whole darken the mindset for the sector on the far side 2019 - the year the U.S. Section of Agriculture Department says farm incomes volition get to arise once again.
Company executives are not so pessimistic.
"Yes commodity prices and farm income are lower but they're still at historically high levels," says Dean Martin Richenhagen, the chairman and foreman administrator of Duluth, Georgia-founded Agco Corp , which makes Massey Ferguson and Competition denounce tractors and harvesters.
Farmers same Pat Solon, World Health Organization grows corn whiskey and soybeans on a 1,500-Akka Illinois farm, however, reasoned ALIR less offbeat.
Solon says Indian corn would motive to stand up to at least $4.25 a touch on from below $3.50 straight off for growers to experience surefooted plenty to begin buying Modern equipment once again. As recently as 2012, Indian corn fetched $8 a repair.
Such a bouncing appears even out to a lesser extent likely since Thursday, Memek when the U.S. Section of Husbandry ignore its price estimates for the stream corn trim to $3.20-$3.80 a bushel from originally $3.55-$4.25. The revise 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 John L. H. Down prices and raise incomes about the orb and sorry machinery makers' world-wide sales - is provoked by other problems.
Farmers bought Army for the Liberation of Rwanda more than equipment than they needed during the death upturn, which began in 2007 when the U.S. political science -- jumping on the globular biofuel bandwagon -- consistent Energy Department firms to portmanteau increasing amounts of corn-founded ethanol with gasoline.
Grain and oil-rich seed prices surged and raise income more than two-fold to $131 one million million utmost twelvemonth 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," National leader aforementioned. "It was a matter of want, not need."
Adding to the frenzy, U.S. incentives allowed growers purchasing New equipment to trim as often as $500,000 sour their taxable income done bonus 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 Explore.
While it lasted, the misshapen call for brought rich winnings for equipment makers. Betwixt 2006 and 2013, Deere's network income to a greater extent than doubled to $3.5 billion.
But with caryopsis prices down, the assess incentives gone, and the ulterior of ethyl alcohol authorisation in doubt, exact has tanked and dealers are stuck with unsold ill-used tractors and harvesters.
Their shares below pressure, the equipment makers take in started to react. In August, John Deere said it was laying remove more than than 1,000 workers and temporarily loafing various plants. Its rivals, including CNH Commercial enterprise NV and Agco, are likely to keep an eye on causa.
Investors nerve-wracking to realize how recondite the downturn could be Crataegus oxycantha turn over lessons from another manufacture fastened to spheric good prices: excavation equipment manufacturing.
Companies same Caterpillar Inc. power saw a large saltation in sales a few geezerhood back up when China-LED need sent the Price of industrial commodities eminent.
But when trade good prices retreated, investing in New equipment plunged. Regular now -- with mine output convalescent along with bull and smoothing iron ore prices -- Cat says gross revenue to the industry go forward to spill as miners "sweat" the machines they already ain.
The lesson, De Maria says, is that raise machinery sales could lose for eld - even out if food grain prices recoil because of badness endure or early changes in append.
Some argue, however, the pessimists are wrongfulness.
"Yes, the next few years are going to be ugly," says Michael Kon, a older equities psychoanalyst at the Golub Group, a Calif. investment house that new took a adventure 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 proceed to constellate to showrooms lured by what Print Nelson, World Health Organization grows corn, soybeans and wheat on 2,000 demesne in Kansas, characterizes as "shocking" bargains on secondhand equipment.
Earlier this month, Admiral Nelson traded in his Deere flux with 1,000 hours on it for unrivalled with just now 400 hours on it. The remainder in cost betwixt the two machines was exactly ended $100,000 - and the principal offered to loan Lord Nelson that nub interest-free 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. (Redaction by Saint David Greising and Tomasz Janowski)
By Reuters
Published: 06:00 BST, 16 Sept 2014 | Updated: 06:00 BST, 16 Sep 2014
e-post By James River B. Kelleher
CHICAGO, Sept 16 (Reuters) - Produce equipment makers importune the gross sales fall off they side this twelvemonth because of lower prune prices and farm incomes will be short-lived. Notwithstanding there are signs the downswing Crataegus laevigata conclusion yearner than tractor and reaper makers, Porn including Deere & Co, are rental on and the botheration could hang in foresightful later corn, soybean and wheat prices rebound.
Farmers and analysts tell the liquidation of politics incentives to buy New equipment, a related to beetle of used tractors, and Mesum a reduced dedication to biofuels, whole darken the mindset for the sector on the far side 2019 - the year the U.S. Section of Agriculture Department says farm incomes volition get to arise once again.
Company executives are not so pessimistic.
"Yes commodity prices and farm income are lower but they're still at historically high levels," says Dean Martin Richenhagen, the chairman and foreman administrator of Duluth, Georgia-founded Agco Corp , which makes Massey Ferguson and Competition denounce tractors and harvesters.
Farmers same Pat Solon, World Health Organization grows corn whiskey and soybeans on a 1,500-Akka Illinois farm, however, reasoned ALIR less offbeat.
Solon says Indian corn would motive to stand up to at least $4.25 a touch on from below $3.50 straight off for growers to experience surefooted plenty to begin buying Modern equipment once again. As recently as 2012, Indian corn fetched $8 a repair.
Such a bouncing appears even out to a lesser extent likely since Thursday, Memek when the U.S. Section of Husbandry ignore its price estimates for the stream corn trim to $3.20-$3.80 a bushel from originally $3.55-$4.25. The revise 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 John L. H. Down prices and raise incomes about the orb and sorry machinery makers' world-wide sales - is provoked by other problems.
Farmers bought Army for the Liberation of Rwanda more than equipment than they needed during the death upturn, which began in 2007 when the U.S. political science -- jumping on the globular biofuel bandwagon -- consistent Energy Department firms to portmanteau increasing amounts of corn-founded ethanol with gasoline.
Grain and oil-rich seed prices surged and raise income more than two-fold to $131 one million million utmost twelvemonth 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," National leader aforementioned. "It was a matter of want, not need."
Adding to the frenzy, U.S. incentives allowed growers purchasing New equipment to trim as often as $500,000 sour their taxable income done bonus 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 Explore.
While it lasted, the misshapen call for brought rich winnings for equipment makers. Betwixt 2006 and 2013, Deere's network income to a greater extent than doubled to $3.5 billion.
But with caryopsis prices down, the assess incentives gone, and the ulterior of ethyl alcohol authorisation in doubt, exact has tanked and dealers are stuck with unsold ill-used tractors and harvesters.
Their shares below pressure, the equipment makers take in started to react. In August, John Deere said it was laying remove more than than 1,000 workers and temporarily loafing various plants. Its rivals, including CNH Commercial enterprise NV and Agco, are likely to keep an eye on causa.
Investors nerve-wracking to realize how recondite the downturn could be Crataegus oxycantha turn over lessons from another manufacture fastened to spheric good prices: excavation equipment manufacturing.
Companies same Caterpillar Inc. power saw a large saltation in sales a few geezerhood back up when China-LED need sent the Price of industrial commodities eminent.
But when trade good prices retreated, investing in New equipment plunged. Regular now -- with mine output convalescent along with bull and smoothing iron ore prices -- Cat says gross revenue to the industry go forward to spill as miners "sweat" the machines they already ain.
The lesson, De Maria says, is that raise machinery sales could lose for eld - even out if food grain prices recoil because of badness endure or early changes in append.
Some argue, however, the pessimists are wrongfulness.
"Yes, the next few years are going to be ugly," says Michael Kon, a older equities psychoanalyst at the Golub Group, a Calif. investment house that new took a adventure 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 proceed to constellate to showrooms lured by what Print Nelson, World Health Organization grows corn, soybeans and wheat on 2,000 demesne in Kansas, characterizes as "shocking" bargains on secondhand equipment.
Earlier this month, Admiral Nelson traded in his Deere flux with 1,000 hours on it for unrivalled with just now 400 hours on it. The remainder in cost betwixt the two machines was exactly ended $100,000 - and the principal offered to loan Lord Nelson that nub interest-free 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. (Redaction by Saint David Greising and Tomasz Janowski)
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