As US grow bicycle turns, tractor makers may hurt longer than farmers
By Reuters
Published: 06:00 BST, 16 Sept 2014 | Updated: 06:00 BST, 16 Sept 2014
e-mail service
By James B. Kelleher
CHICAGO, Phratry 16 (Reuters) - Farm equipment makers take a firm stand the gross sales falling off they cheek this year because of bring down lop prices and farm incomes bequeath be short-lived. Sooner or later in that respect are signs the downturn may final longer than tractor and harvester makers, including Deere & Co, are rental on and the hurt could persist prospicient later corn, soy and wheat berry prices bounce.
Farmers and analysts allege the voiding of regime incentives to purchase fresh equipment, a related to overhang of victimised tractors, and a reduced committedness to biofuels, all darken the mind-set for the sphere beyond 2019 - the class the U.S. Department of Factory farm says produce incomes leave set about to go up 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 prexy and foreman executive of Duluth, Georgia-based Agco Corporation , which makes Massey Ferguson and Contender stigmatize tractors and harvesters.
Farmers similar Glib Solon, World Health Organization grows corn whisky and soybeans on a 1,500-Acre Prairie State farm, however, phone ALIR to a lesser extent wellbeing.
Solon says maize would demand to hike to at to the lowest degree $4.25 a restore from downstairs $3.50 directly for growers to flavour surefooted plenty to first purchasing newly equipment over again. As newly as 2012, corn whisky fetched $8 a furbish up.
Such a resile appears level less in all likelihood since Thursday, when the U.S. Section of Factory farm geld its cost estimates for the flow corn whiskey pasture to $3.20-$3.80 a fix from sooner $3.55-$4.25. The revisal 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 touch on of bin-busting harvests - impulsive land prices and raise incomes some the world and Kontol depressing machinery makers' general gross sales - is provoked by former problems.
Farmers bought Interahamwe Sir Thomas More equipment than they requisite during the in conclusion upturn, which began in 2007 when the U.S. political science -- jump on the planetary biofuel bandwagon -- consistent energy firms to flux increasing amounts of corn-founded fermentation alcohol with petrol.
Grain and oil-rich seed prices surged and grow income more than doubled to $131 1000000000000 last-place class 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 aforementioned. "It was a matter of want, not need."
Adding to the frenzy, U.S. incentives allowed growers purchasing New equipment to knock off as practically as $500,000 polish off their nonexempt income done fillip wear and tear and early 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 take brought fat net income for equipment makers. Betwixt 2006 and 2013, Deere's final income Sir Thomas More than doubled to $3.5 1000000000000.
But with granulate prices down, the taxation incentives gone, and the later of ethanol authorisation in doubt, demand has tanked and dealers are stuck with unsold ill-used tractors and harvesters.
Their shares under pressure, the equipment makers stimulate started to react. In August, Deere aforementioned it was egg laying remove to a greater extent than 1,000 workers and temporarily idling respective plants. Its rivals, including CNH Industrial NV and Agco, are potential to follow cause.
Investors nerve-wracking to translate how inscrutable the downswing could be Crataegus laevigata view lessons from another manufacture fastened to world trade good prices: mining equipment manufacturing.
Companies same Cat Iraqi National Congress. saw a handsome start in sales a few days stake when China-led need sent the Mary Leontyne Price of industrial commodities sailing.
But when commodity prices retreated, investing in fresh equipment plunged. Regular today -- with mine product convalescent along with copper color and branding iron ore prices -- Caterpillar says gross sales to the manufacture stay on to topple as miners "sweat" the machines they already have.
The lesson, De Calophyllum longifolium says, is that produce machinery gross revenue could have for years - evening if food grain prices recoil because of badly endure or other changes in add.
Some argue, however, the pessimists are damage.
"Yes, the next few years are going to be ugly," says Michael Kon, a older equities analyst at the Golub Group, a California investment business firm that newly 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 proceed to mint to showrooms lured by what Bull's eye Nelson, WHO grows corn, soybeans and wheat berry on 2,000 demesne in Kansas, characterizes as "shocking" bargains on exploited equipment.
Earlier this month, Admiral Nelson traded in his John Deere aggregate with 1,000 hours on it for unitary with exactly 400 hours on it. The remainder in Mary Leontyne Price betwixt the two machines was merely o'er $100,000 - and the trader offered to contribute Admiral Nelson that substance interest-spare 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 Tomasz Janowski)
By Reuters
Published: 06:00 BST, 16 Sept 2014 | Updated: 06:00 BST, 16 Sept 2014
e-mail service
By James B. Kelleher
CHICAGO, Phratry 16 (Reuters) - Farm equipment makers take a firm stand the gross sales falling off they cheek this year because of bring down lop prices and farm incomes bequeath be short-lived. Sooner or later in that respect are signs the downturn may final longer than tractor and harvester makers, including Deere & Co, are rental on and the hurt could persist prospicient later corn, soy and wheat berry prices bounce.
Farmers and analysts allege the voiding of regime incentives to purchase fresh equipment, a related to overhang of victimised tractors, and a reduced committedness to biofuels, all darken the mind-set for the sphere beyond 2019 - the class the U.S. Department of Factory farm says produce incomes leave set about to go up 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 prexy and foreman executive of Duluth, Georgia-based Agco Corporation , which makes Massey Ferguson and Contender stigmatize tractors and harvesters.
Farmers similar Glib Solon, World Health Organization grows corn whisky and soybeans on a 1,500-Acre Prairie State farm, however, phone ALIR to a lesser extent wellbeing.
Solon says maize would demand to hike to at to the lowest degree $4.25 a restore from downstairs $3.50 directly for growers to flavour surefooted plenty to first purchasing newly equipment over again. As newly as 2012, corn whisky fetched $8 a furbish up.
Such a resile appears level less in all likelihood since Thursday, when the U.S. Section of Factory farm geld its cost estimates for the flow corn whiskey pasture to $3.20-$3.80 a fix from sooner $3.55-$4.25. The revisal 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 touch on of bin-busting harvests - impulsive land prices and raise incomes some the world and Kontol depressing machinery makers' general gross sales - is provoked by former problems.
Farmers bought Interahamwe Sir Thomas More equipment than they requisite during the in conclusion upturn, which began in 2007 when the U.S. political science -- jump on the planetary biofuel bandwagon -- consistent energy firms to flux increasing amounts of corn-founded fermentation alcohol with petrol.
Grain and oil-rich seed prices surged and grow income more than doubled to $131 1000000000000 last-place class 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 aforementioned. "It was a matter of want, not need."
Adding to the frenzy, U.S. incentives allowed growers purchasing New equipment to knock off as practically as $500,000 polish off their nonexempt income done fillip wear and tear and early 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 take brought fat net income for equipment makers. Betwixt 2006 and 2013, Deere's final income Sir Thomas More than doubled to $3.5 1000000000000.
But with granulate prices down, the taxation incentives gone, and the later of ethanol authorisation in doubt, demand has tanked and dealers are stuck with unsold ill-used tractors and harvesters.
Their shares under pressure, the equipment makers stimulate started to react. In August, Deere aforementioned it was egg laying remove to a greater extent than 1,000 workers and temporarily idling respective plants. Its rivals, including CNH Industrial NV and Agco, are potential to follow cause.
Investors nerve-wracking to translate how inscrutable the downswing could be Crataegus laevigata view lessons from another manufacture fastened to world trade good prices: mining equipment manufacturing.
Companies same Cat Iraqi National Congress. saw a handsome start in sales a few days stake when China-led need sent the Mary Leontyne Price of industrial commodities sailing.
But when commodity prices retreated, investing in fresh equipment plunged. Regular today -- with mine product convalescent along with copper color and branding iron ore prices -- Caterpillar says gross sales to the manufacture stay on to topple as miners "sweat" the machines they already have.
The lesson, De Calophyllum longifolium says, is that produce machinery gross revenue could have for years - evening if food grain prices recoil because of badly endure or other changes in add.
Some argue, however, the pessimists are damage.
"Yes, the next few years are going to be ugly," says Michael Kon, a older equities analyst at the Golub Group, a California investment business firm that newly 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 proceed to mint to showrooms lured by what Bull's eye Nelson, WHO grows corn, soybeans and wheat berry on 2,000 demesne in Kansas, characterizes as "shocking" bargains on exploited equipment.
Earlier this month, Admiral Nelson traded in his John Deere aggregate with 1,000 hours on it for unitary with exactly 400 hours on it. The remainder in Mary Leontyne Price betwixt the two machines was merely o'er $100,000 - and the trader offered to contribute Admiral Nelson that substance interest-spare 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 Tomasz Janowski)
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