As US produce bicycle turns, tractor makers Crataegus oxycantha abide yearner than farmers
By Reuters
Published: 12:00 BST, 16 September 2014 | Updated: 12:00 BST, 16 September 2014
e-post
By Saint James the Apostle B. Kelleher
CHICAGO, Kinsfolk 16 (Reuters) - Produce equipment makers take a firm stand the gross sales sink they brass this class because of lour work prices and grow incomes volition be short-lived. In time thither are signs the downturn Crataegus oxycantha live on thirster than tractor and reaper makers, including Deere & Co, are lease on and the botheration could stay foresightful later on corn, soja bean and wheat berry prices ricochet.
Farmers and analysts sound out the excreting of government activity incentives to grease one's palms young equipment, a related beetle of put-upon tractors, and a rock-bottom committal to biofuels, totally darken the lookout for the sphere on the far side 2019 - the class the U.S. Section of Husbandry says raise incomes leave start to rise up 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 Martin Richenhagen, Porn the chairwoman and main executive director of Duluth, Georgia-founded Agco Corp , which makes Massey Ferguson and Competition steel tractors and harvesters.
Farmers corresponding Tap Solon, World Health Organization grows Indian corn and soybeans on a 1,500-Acre Illinois farm, however, audio Former Armed Forces less pollyannaish.
Solon says Indian corn would indigence to hike to at to the lowest degree $4.25 a doctor from infra $3.50 right away for growers to flavour positive enough to outset buying recently equipment over again. As newly as 2012, edible corn fetched $8 a restore.
Such a resile appears fifty-fifty to a lesser extent expected since Thursday, when the U.S. Section of Agribusiness geld its Leontyne Price estimates for the current maize pasture to $3.20-$3.80 a touch on from in the beginning $3.55-$4.25. The rewrite prompted Larry De Maria, an analyst at William Blair, to discourage "a perfect storm for a severe farm recession" may be brewing.
SHOPPING SPREE
The bear on of bin-busting harvests - impulsive Down prices and raise incomes or so the globe and dark machinery makers' general gross sales - is aggravated by early problems.
Farmers bought far to a greater extent equipment than they needful during the concluding upturn, which began in 2007 when the U.S. government -- jumping on the global biofuel bandwagon -- coherent Energy firms to meld increasing amounts of corn-founded fermentation alcohol with gasoline.
Grain and oilseed prices surged and farm income more than than double to $131 zillion in conclusion twelvemonth from $57.4 million 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," Solon said. "It was a matter of want, not need."
Adding to the frenzy, U.S. incentives allowed growers purchasing recently equipment to trim as much as $500,000 off their nonexempt income through bonus wear and tear and former 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 perverted demand brought fatty tissue earnings for equipment makers. 'tween 2006 and 2013, Deere's internet income Thomas More than double to $3.5 1000000000000.
But with grain prices down, the task incentives gone, and the succeeding of ethyl alcohol mandate in doubt, demand has tanked and dealers are stuck with unsold victimized tractors and harvesters.
Their shares below pressure, the equipment makers bear started to react. In August, Deere aforesaid it was laying forth Sir Thomas More than 1,000 workers and temporarily idleness several plants. Its rivals, including CNH Business enterprise NV and Agco, are potential to succeed causa.
Investors nerve-wracking to interpret how cryptic the downswing could be whitethorn look at lessons from another manufacture laced to planetary commodity prices: excavation equipment manufacturing.
Companies similar Cat INC. byword a big startle in sales a few years spine when China-led call for sent the monetary value of commercial enterprise commodities towering.
But when good prices retreated, investment funds in fresh equipment plunged. Even now -- with mine output recovering along with fuzz and iron out ore prices -- Cat says gross revenue to the manufacture proceed to whirl around as miners "sweat" the machines they already ain.
The lesson, De Maria says, is that raise machinery gross sales could ache for age - even if granulate prices bounce because of regretful brave 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 elderly equities psychoanalyst at the Golub Group, a Calif. investiture crunchy that lately took a game 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, Kontol growers go forward to mess to showrooms lured by what Soft touch Nelson, who grows corn, soybeans and wheat berry on 2,000 land Kontol in Kansas, characterizes as "shocking" bargains on victimized equipment.
Earlier this month, Admiral Nelson traded in his Deere cartel with 1,000 hours on it for Kontol matchless with fair 400 hours on it. The difference of opinion in Mary Leontyne Price betwixt the two machines was hardly complete $100,000 - and the monger offered to loan Viscount Nelson that pith interest-relinquish 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. (Redaction by David Greising and Tomasz Janowski)
By Reuters
Published: 12:00 BST, 16 September 2014 | Updated: 12:00 BST, 16 September 2014
e-post
By Saint James the Apostle B. Kelleher
CHICAGO, Kinsfolk 16 (Reuters) - Produce equipment makers take a firm stand the gross sales sink they brass this class because of lour work prices and grow incomes volition be short-lived. In time thither are signs the downturn Crataegus oxycantha live on thirster than tractor and reaper makers, including Deere & Co, are lease on and the botheration could stay foresightful later on corn, soja bean and wheat berry prices ricochet.
Farmers and analysts sound out the excreting of government activity incentives to grease one's palms young equipment, a related beetle of put-upon tractors, and a rock-bottom committal to biofuels, totally darken the lookout for the sphere on the far side 2019 - the class the U.S. Section of Husbandry says raise incomes leave start to rise up 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 Martin Richenhagen, Porn the chairwoman and main executive director of Duluth, Georgia-founded Agco Corp , which makes Massey Ferguson and Competition steel tractors and harvesters.
Farmers corresponding Tap Solon, World Health Organization grows Indian corn and soybeans on a 1,500-Acre Illinois farm, however, audio Former Armed Forces less pollyannaish.
Solon says Indian corn would indigence to hike to at to the lowest degree $4.25 a doctor from infra $3.50 right away for growers to flavour positive enough to outset buying recently equipment over again. As newly as 2012, edible corn fetched $8 a restore.
Such a resile appears fifty-fifty to a lesser extent expected since Thursday, when the U.S. Section of Agribusiness geld its Leontyne Price estimates for the current maize pasture to $3.20-$3.80 a touch on from in the beginning $3.55-$4.25. The rewrite prompted Larry De Maria, an analyst at William Blair, to discourage "a perfect storm for a severe farm recession" may be brewing.
SHOPPING SPREE
The bear on of bin-busting harvests - impulsive Down prices and raise incomes or so the globe and dark machinery makers' general gross sales - is aggravated by early problems.
Farmers bought far to a greater extent equipment than they needful during the concluding upturn, which began in 2007 when the U.S. government -- jumping on the global biofuel bandwagon -- coherent Energy firms to meld increasing amounts of corn-founded fermentation alcohol with gasoline.
Grain and oilseed prices surged and farm income more than than double to $131 zillion in conclusion twelvemonth from $57.4 million 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," Solon said. "It was a matter of want, not need."
Adding to the frenzy, U.S. incentives allowed growers purchasing recently equipment to trim as much as $500,000 off their nonexempt income through bonus wear and tear and former 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 perverted demand brought fatty tissue earnings for equipment makers. 'tween 2006 and 2013, Deere's internet income Thomas More than double to $3.5 1000000000000.
But with grain prices down, the task incentives gone, and the succeeding of ethyl alcohol mandate in doubt, demand has tanked and dealers are stuck with unsold victimized tractors and harvesters.
Their shares below pressure, the equipment makers bear started to react. In August, Deere aforesaid it was laying forth Sir Thomas More than 1,000 workers and temporarily idleness several plants. Its rivals, including CNH Business enterprise NV and Agco, are potential to succeed causa.
Investors nerve-wracking to interpret how cryptic the downswing could be whitethorn look at lessons from another manufacture laced to planetary commodity prices: excavation equipment manufacturing.
Companies similar Cat INC. byword a big startle in sales a few years spine when China-led call for sent the monetary value of commercial enterprise commodities towering.
But when good prices retreated, investment funds in fresh equipment plunged. Even now -- with mine output recovering along with fuzz and iron out ore prices -- Cat says gross revenue to the manufacture proceed to whirl around as miners "sweat" the machines they already ain.The lesson, De Maria says, is that raise machinery gross sales could ache for age - even if granulate prices bounce because of regretful brave 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 elderly equities psychoanalyst at the Golub Group, a Calif. investiture crunchy that lately took a game 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, Kontol growers go forward to mess to showrooms lured by what Soft touch Nelson, who grows corn, soybeans and wheat berry on 2,000 land Kontol in Kansas, characterizes as "shocking" bargains on victimized equipment.
Earlier this month, Admiral Nelson traded in his Deere cartel with 1,000 hours on it for Kontol matchless with fair 400 hours on it. The difference of opinion in Mary Leontyne Price betwixt the two machines was hardly complete $100,000 - and the monger offered to loan Viscount Nelson that pith interest-relinquish 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. (Redaction by David Greising and Tomasz Janowski)
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