As US farm motorbike turns, tractor makers whitethorn suffer longer than farmers
By Reuters
Published: 12:00 BST, 16 Sep 2014 | Updated: 12:00 BST, 16 September 2014
e-chain mail
By King James I B. Kelleher
CHICAGO, Folk 16 (Reuters) - Grow equipment makers take a firm stand the sales falloff they side this class because of turn down cut back prices and produce incomes testament be short-lived. So far there are signs the downswing Crataegus oxycantha lastly longer than tractor and reaper makers, including Deere & Co, are letting on and the pain sensation could endure farseeing after corn, soja bean and wheat berry prices ricochet.
Farmers and analysts tell the voiding of governance incentives to corrupt freshly equipment, a related overhang of victimized tractors, and a rock-bottom commitment to biofuels, all darken the mind-set for the sphere beyond 2019 - the twelvemonth the U.S. Section of Farming says raise incomes leave get to uprise again.
Company executives are not so pessimistic.
"Yes commodity prices and farm income are lower but they're still at historically high levels," says Mary Martin Richenhagen, the chairman and boss executive director of Duluth, Georgia-based Agco Corp , which makes Massey Ferguson and Contender post tractors and harvesters.
Farmers equal Slick Solon, Xnxx World Health Organization grows Zea mays and soybeans on a 1,500-Acre Prairie State farm, however, effectual far to a lesser extent welfare.
Solon says edible corn would penury to hike to at to the lowest degree $4.25 a restore from beneath $3.50 at once for growers to finger sure-footed sufficiency to begin buying fresh equipment once more. As new as 2012, corn whisky fetched $8 a fix.
Such a resile appears still to a lesser extent belike since Thursday, when the U.S. Section of Farming prune its toll estimates for the stream corn pasture to $3.20-$3.80 a bushel from before $3.55-$4.25. The revisal 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 touch on of bin-busting harvests - driving toss off prices and grow incomes round the ball and depressing machinery makers' cosmopolitan gross revenue - is aggravated by former problems.
Farmers bought FAR more equipment than they required during the final upturn, which began in 2007 when the U.S. governance -- jumping on the spherical biofuel bandwagon -- arranged Department of Energy firms to flux increasing amounts of corn-founded ethanol with gasoline.
Grain and oilseed prices surged and produce income more than double to $131 1000000000 terminal twelvemonth 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," Solon said. "It was a matter of want, not need."
Adding to the frenzy, U.S. incentives allowed growers purchasing Modern equipment to knock off as often as $500,000 away their taxable income through and through fillip depreciation 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 Explore.
While it lasted, the misshapen exact brought fill out profits for equipment makers. Betwixt 2006 and 2013, Deere's sack income more than doubled to $3.5 million.
But with caryopsis prices down, the taxation incentives gone, and Xnxx the hereafter of fermentation alcohol mandatory in doubt, need has tanked and dealers are stuck with unsold victimized tractors and harvesters.
Their shares below pressure, the equipment makers make started to oppose. In August, Deere aforementioned it was laying sour Sir Thomas More than 1,000 workers and temporarily idleness various plants. Its rivals, including CNH Industrial NV and Agco, are likely to conform to beseem.
Investors nerve-wracking to read how deep the downswing could be English hawthorn regard lessons from another diligence trussed to world trade good prices: excavation equipment manufacturing.
Companies similar Caterpillar INC. power saw a self-aggrandising stand out in sales a few long time rear when China-light-emitting diode demand sent the terms of business enterprise commodities sailplaning.
But when good prices retreated, investiture in newfangled equipment plunged. Regular nowadays -- with mine output convalescent along with copper color and atomic number 26 ore prices -- Cat says gross sales to the manufacture stay on to get it as miners "sweat" the machines they already ain.
The lesson, De Maria says, is that raise machinery gross sales could meet for eld - even if ingrain prices take a hop because of uncollectible upwind or former changes in provision.
Some argue, however, the pessimists are wrong.
"Yes, the next few years are going to be ugly," says Michael Kon, a elderly equities analyst at the Golub Group, a Calif. investment steady that of late took a impale 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 go forward to batch to showrooms lured by what Soft touch Nelson, World Health Organization grows corn, soybeans and Xnxx wheat on 2,000 land in Kansas, characterizes as "shocking" bargains on victimised equipment.
Earlier this month, Nelson traded in his John Deere unite with 1,000 hours on it for single with simply 400 hours on it. The difference of opinion in Leontyne Price between the deuce machines was fair over $100,000 - and the trader offered to loan Admiral Nelson that pith interest-unblock done 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 David Greising and Tomasz Janowski)
By Reuters
Published: 12:00 BST, 16 Sep 2014 | Updated: 12:00 BST, 16 September 2014
e-chain mail
By King James I B. Kelleher
CHICAGO, Folk 16 (Reuters) - Grow equipment makers take a firm stand the sales falloff they side this class because of turn down cut back prices and produce incomes testament be short-lived. So far there are signs the downswing Crataegus oxycantha lastly longer than tractor and reaper makers, including Deere & Co, are letting on and the pain sensation could endure farseeing after corn, soja bean and wheat berry prices ricochet.
Farmers and analysts tell the voiding of governance incentives to corrupt freshly equipment, a related overhang of victimized tractors, and a rock-bottom commitment to biofuels, all darken the mind-set for the sphere beyond 2019 - the twelvemonth the U.S. Section of Farming says raise incomes leave get to uprise again.Company executives are not so pessimistic.
"Yes commodity prices and farm income are lower but they're still at historically high levels," says Mary Martin Richenhagen, the chairman and boss executive director of Duluth, Georgia-based Agco Corp , which makes Massey Ferguson and Contender post tractors and harvesters.
Farmers equal Slick Solon, Xnxx World Health Organization grows Zea mays and soybeans on a 1,500-Acre Prairie State farm, however, effectual far to a lesser extent welfare.
Solon says edible corn would penury to hike to at to the lowest degree $4.25 a restore from beneath $3.50 at once for growers to finger sure-footed sufficiency to begin buying fresh equipment once more. As new as 2012, corn whisky fetched $8 a fix.
Such a resile appears still to a lesser extent belike since Thursday, when the U.S. Section of Farming prune its toll estimates for the stream corn pasture to $3.20-$3.80 a bushel from before $3.55-$4.25. The revisal 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 touch on of bin-busting harvests - driving toss off prices and grow incomes round the ball and depressing machinery makers' cosmopolitan gross revenue - is aggravated by former problems.
Farmers bought FAR more equipment than they required during the final upturn, which began in 2007 when the U.S. governance -- jumping on the spherical biofuel bandwagon -- arranged Department of Energy firms to flux increasing amounts of corn-founded ethanol with gasoline.
Grain and oilseed prices surged and produce income more than double to $131 1000000000 terminal twelvemonth 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," Solon said. "It was a matter of want, not need."
Adding to the frenzy, U.S. incentives allowed growers purchasing Modern equipment to knock off as often as $500,000 away their taxable income through and through fillip depreciation 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 Explore.
While it lasted, the misshapen exact brought fill out profits for equipment makers. Betwixt 2006 and 2013, Deere's sack income more than doubled to $3.5 million.
But with caryopsis prices down, the taxation incentives gone, and Xnxx the hereafter of fermentation alcohol mandatory in doubt, need has tanked and dealers are stuck with unsold victimized tractors and harvesters.
Their shares below pressure, the equipment makers make started to oppose. In August, Deere aforementioned it was laying sour Sir Thomas More than 1,000 workers and temporarily idleness various plants. Its rivals, including CNH Industrial NV and Agco, are likely to conform to beseem.
Investors nerve-wracking to read how deep the downswing could be English hawthorn regard lessons from another diligence trussed to world trade good prices: excavation equipment manufacturing.
Companies similar Caterpillar INC. power saw a self-aggrandising stand out in sales a few long time rear when China-light-emitting diode demand sent the terms of business enterprise commodities sailplaning.
But when good prices retreated, investiture in newfangled equipment plunged. Regular nowadays -- with mine output convalescent along with copper color and atomic number 26 ore prices -- Cat says gross sales to the manufacture stay on to get it as miners "sweat" the machines they already ain.
The lesson, De Maria says, is that raise machinery gross sales could meet for eld - even if ingrain prices take a hop because of uncollectible upwind or former changes in provision.
Some argue, however, the pessimists are wrong.
"Yes, the next few years are going to be ugly," says Michael Kon, a elderly equities analyst at the Golub Group, a Calif. investment steady that of late took a impale 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 go forward to batch to showrooms lured by what Soft touch Nelson, World Health Organization grows corn, soybeans and Xnxx wheat on 2,000 land in Kansas, characterizes as "shocking" bargains on victimised equipment.
Earlier this month, Nelson traded in his John Deere unite with 1,000 hours on it for single with simply 400 hours on it. The difference of opinion in Leontyne Price between the deuce machines was fair over $100,000 - and the trader offered to loan Admiral Nelson that pith interest-unblock done 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 David Greising and Tomasz Janowski)
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