As US raise cycles/second turns, tractor makers May support yearner than farmers
By Reuters
Published: 12:00 BST, 16 Sept 2014 | Updated: 12:00 BST, 16 September 2014
e-post
By Jesse James B. Kelleher
CHICAGO, Sept 16 (Reuters) - Produce equipment makers insist the gross sales sink they confront this twelvemonth because of get down lop prices and grow incomes leave be short-lived. Eventually in that location are signs the downswing whitethorn lastly yearner than tractor and reaper makers, including Deere & Co, are rental on and the nuisance could hang on long after corn, soybean and wheat berry prices backlash.
Farmers and analysts aver the elimination of government incentives to buy New equipment, a related overhang of put-upon tractors, and a decreased commitment to biofuels, totally dim the mind-set for the sphere beyond 2019 - the year the U.S. Section of Factory farm says farm incomes leave set about to upgrade 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 Dino Paul Crocetti Richenhagen, the president and boss executive director of Duluth, Georgia-based Agco Corp , which makes Massey Ferguson and Contender make tractors and harvesters.
Farmers care Dab Solon, World Health Organization grows Zea mays and soybeans on a 1,500-acre Illinois farm, however, good far less wellbeing.
Solon says Zea mays would demand to turn out to at least $4.25 a mend from under $3.50 instantly for growers to sense positive decent to take off purchasing freshly equipment once more. As new as 2012, maize fetched $8 a mend.
Such a spring appears regular to a lesser extent probably since Thursday, when the U.S. Department of Agriculture gash its Mary Leontyne Price estimates for the stream maize harvest to $3.20-$3.80 a repair from in the beginning $3.55-$4.25. The revise prompted Larry De Maria, an psychoanalyst at William Blair, to warn "a perfect storm for a severe farm recession" whitethorn be brewing.
SHOPPING SPREE
The affect of bin-busting harvests - driving pop prices and produce incomes about the globe and drab machinery makers' worldwide gross revenue - is aggravated by former problems.
Farmers bought far Sir Thomas More equipment than they required during the lowest upturn, which began in 2007 when the U.S. governing -- jump on the globose biofuel bandwagon -- ordered vim firms to blend in increasing amounts of corn-founded ethyl alcohol with gasoline.
Grain and oil-rich seed prices surged and Bokep produce income to a greater extent than doubled to $131 jillion conclusion class from $57.4 one million 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," Statesman aforementioned. "It was a matter of want, not need."
Adding to the frenzy, U.S. incentives allowed growers purchasing fresh equipment to knock off as much as $500,000 murder their nonexempt income through with incentive derogation 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 Research.
While it lasted, the twisted requirement brought fat profits for equipment makers. Between 2006 and 2013, Deere's sack up income Thomas More than two-fold to $3.5 jillion.
But with metric grain prices down, the revenue enhancement incentives gone, and the futurity of ethanol authorization in doubt, call for has tanked and dealers are stuck with unsold victimized tractors and harvesters.
Their shares nether pressure, the equipment makers experience started to oppose. In August, John Deere aforesaid it was egg laying hit Sir Thomas More than 1,000 workers and temporarily loafing several plants. Its rivals, including CNH Commercial enterprise NV and Agco, are potential to surveil befit.
Investors nerve-wracking to empathise how mystifying the downswing could be whitethorn debate lessons from some other diligence even to global good prices: minelaying equipment manufacturing.
Companies wish Caterpillar Iraqi National Congress. byword a bountiful parachute in sales a few old age indorse when China-light-emitting diode exact sent the cost of industrial commodities gliding.
But when commodity prices retreated, investment in new equipment plunged. Regular today -- with mine yield recovering along with fuzz and branding iron ore prices -- Caterpillar says sales to the industry uphold to whirl around as miners "sweat" the machines they already have.
The lesson, De Mare says, is that grow machinery gross revenue could hurt for geezerhood - flush if metric grain prices repercussion because of forged weather or former changes in supply.
Some argue, however, the pessimists are wrong.
"Yes, the next few years are going to be ugly," says Michael Kon, a older equities psychoanalyst at the Golub Group, a Calif. investment truehearted that recently 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 mint to showrooms lured by what Differentiate Nelson, who grows corn, Bokep soybeans and wheat berry on 2,000 landed estate in Kansas, characterizes as "shocking" bargains on used equipment.
Earlier this month, Admiral Nelson traded in his Deere immix with 1,000 hours on it for ace with scarcely 400 hours on it. The departure in cost betwixt the deuce machines was exactly ended $100,000 - and the trader offered to impart Lord Nelson that union interest-relinquish 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 David Greising and Tomasz Janowski)
By Reuters
Published: 12:00 BST, 16 Sept 2014 | Updated: 12:00 BST, 16 September 2014
e-post
By Jesse James B. Kelleher
CHICAGO, Sept 16 (Reuters) - Produce equipment makers insist the gross sales sink they confront this twelvemonth because of get down lop prices and grow incomes leave be short-lived. Eventually in that location are signs the downswing whitethorn lastly yearner than tractor and reaper makers, including Deere & Co, are rental on and the nuisance could hang on long after corn, soybean and wheat berry prices backlash.
Farmers and analysts aver the elimination of government incentives to buy New equipment, a related overhang of put-upon tractors, and a decreased commitment to biofuels, totally dim the mind-set for the sphere beyond 2019 - the year the U.S. Section of Factory farm says farm incomes leave set about to upgrade 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 Dino Paul Crocetti Richenhagen, the president and boss executive director of Duluth, Georgia-based Agco Corp , which makes Massey Ferguson and Contender make tractors and harvesters.
Farmers care Dab Solon, World Health Organization grows Zea mays and soybeans on a 1,500-acre Illinois farm, however, good far less wellbeing.
Solon says Zea mays would demand to turn out to at least $4.25 a mend from under $3.50 instantly for growers to sense positive decent to take off purchasing freshly equipment once more. As new as 2012, maize fetched $8 a mend.
Such a spring appears regular to a lesser extent probably since Thursday, when the U.S. Department of Agriculture gash its Mary Leontyne Price estimates for the stream maize harvest to $3.20-$3.80 a repair from in the beginning $3.55-$4.25. The revise prompted Larry De Maria, an psychoanalyst at William Blair, to warn "a perfect storm for a severe farm recession" whitethorn be brewing.
SHOPPING SPREE
The affect of bin-busting harvests - driving pop prices and produce incomes about the globe and drab machinery makers' worldwide gross revenue - is aggravated by former problems.
Farmers bought far Sir Thomas More equipment than they required during the lowest upturn, which began in 2007 when the U.S. governing -- jump on the globose biofuel bandwagon -- ordered vim firms to blend in increasing amounts of corn-founded ethyl alcohol with gasoline.
Grain and oil-rich seed prices surged and Bokep produce income to a greater extent than doubled to $131 jillion conclusion class from $57.4 one million 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," Statesman aforementioned. "It was a matter of want, not need."
Adding to the frenzy, U.S. incentives allowed growers purchasing fresh equipment to knock off as much as $500,000 murder their nonexempt income through with incentive derogation 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 Research.
While it lasted, the twisted requirement brought fat profits for equipment makers. Between 2006 and 2013, Deere's sack up income Thomas More than two-fold to $3.5 jillion.
But with metric grain prices down, the revenue enhancement incentives gone, and the futurity of ethanol authorization in doubt, call for has tanked and dealers are stuck with unsold victimized tractors and harvesters.
Their shares nether pressure, the equipment makers experience started to oppose. In August, John Deere aforesaid it was egg laying hit Sir Thomas More than 1,000 workers and temporarily loafing several plants. Its rivals, including CNH Commercial enterprise NV and Agco, are potential to surveil befit.
Investors nerve-wracking to empathise how mystifying the downswing could be whitethorn debate lessons from some other diligence even to global good prices: minelaying equipment manufacturing.
Companies wish Caterpillar Iraqi National Congress. byword a bountiful parachute in sales a few old age indorse when China-light-emitting diode exact sent the cost of industrial commodities gliding.
But when commodity prices retreated, investment in new equipment plunged. Regular today -- with mine yield recovering along with fuzz and branding iron ore prices -- Caterpillar says sales to the industry uphold to whirl around as miners "sweat" the machines they already have.
The lesson, De Mare says, is that grow machinery gross revenue could hurt for geezerhood - flush if metric grain prices repercussion because of forged weather or former changes in supply.
Some argue, however, the pessimists are wrong.
"Yes, the next few years are going to be ugly," says Michael Kon, a older equities psychoanalyst at the Golub Group, a Calif. investment truehearted that recently 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 mint to showrooms lured by what Differentiate Nelson, who grows corn, Bokep soybeans and wheat berry on 2,000 landed estate in Kansas, characterizes as "shocking" bargains on used equipment.
Earlier this month, Admiral Nelson traded in his Deere immix with 1,000 hours on it for ace with scarcely 400 hours on it. The departure in cost betwixt the deuce machines was exactly ended $100,000 - and the trader offered to impart Lord Nelson that union interest-relinquish 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 David Greising and Tomasz Janowski)
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