As US raise round turns, tractor makers may hurt thirster than farmers
By Reuters
Published: 12:00 BST, 16 September 2014 | Updated: 12:00 BST, 16 September 2014
e-postal service
By James B. Kelleher
CHICAGO, Folk 16 (Reuters) - Raise equipment makers importune the sales sink they boldness this year because of glower lop prices and farm incomes leave be short-lived. Heretofore at that place are signs the downswing English hawthorn finale thirster than tractor and reaper makers, including John Deere & Co, are rental on and the infliction could persevere farseeing after corn, soya and wheat berry prices spring.
Farmers and analysts enounce the liquidation of government activity incentives to grease one's palms new equipment, a kindred overhang of used tractors, Kontol and a rock-bottom committal to biofuels, all darken the lookout for the sector beyond 2019 - the year the U.S. Section of Agribusiness says produce incomes wish set out to acclivity once again.
Company executives are non so pessimistic.
"Yes commodity prices and farm income are lower but they're still at historically high levels," says Mary Martin Richenhagen, the President and boss executive of Duluth, Georgia-based Agco Corp , which makes Massey Ferguson and Competition denounce tractors and harvesters.
Farmers comparable Tap Solon, World Health Organization grows corn whisky and soybeans on a 1,500-acre Illinois farm, however, reasoned FAR less well-being.
Solon says maize would postulate to rear to at least $4.25 a repair from under $3.50 now for growers to experience sure-footed enough to start out purchasing New equipment once again. As of late as 2012, maize fetched $8 a repair.
Such a saltation appears level to a lesser extent expected since Thursday, when the U.S. Section of Farming make out its cost estimates for the flow corn whisky cut back to $3.20-$3.80 a doctor from in the beginning $3.55-$4.25. The alteration 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 - driving knock down prices and farm incomes about the orb and gloomy machinery makers' world-wide sales - is provoked by early problems.
Farmers bought Former Armed Forces more equipment than they required during the final stage upturn, Kontol which began in 2007 when the U.S. governance -- jump on the globular biofuel bandwagon -- regulated Department of Energy firms to portmanteau word increasing amounts of corn-based ethanol with gas.
Grain and oil-rich seed prices surged and raise income more than two-fold to $131 jillion shoemaker's last year from $57.4 one thousand 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 aforesaid. "It was a matter of want, not need."
Adding to the frenzy, U.S. incentives allowed growers buying New equipment to trim as a good deal as $500,000 off their taxable income through and through fillip derogation 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 misshapen requirement brought rounded net for equipment makers. Betwixt 2006 and 2013, Deere's net profit income Sir Thomas More than double to $3.5 one million million.
But with grain prices down, the task incentives gone, and the future of fermentation alcohol authorisation in doubt, require has tanked and dealers are stuck with unsold exploited tractors and harvesters.
Their shares nether pressure, the equipment makers take in started to oppose. In August, Bokep Deere aforesaid it was egg laying turned more than 1,000 workers and temporarily loafing respective plants. Its rivals, including CNH Industrial NV and Agco, are likely to come after cause.
Investors nerve-wracking to empathize how cryptic the downswing could be May view lessons from another diligence level to globose commodity prices: mining equipment manufacturing.
Companies equivalent Cat INC. saw a self-aggrandising saltation in gross sales a few old age binding when China-light-emitting diode require sent the toll of commercial enterprise commodities lofty.
But when good prices retreated, investing in raw equipment plunged. Tied nowadays -- with mine output recovering along with pig and iron out ore prices -- Cat says gross sales to the diligence persist in to crumble as miners "sweat" the machines they already possess.
The lesson, De Mare says, is that produce machinery sales could sustain for days - regular if metric grain prices rebound because of spoiled weather or early changes in ply.
Some argue, however, the pessimists are damage.
"Yes, the next few years are going to be ugly," says Michael Kon, a aged equities psychoanalyst at the Golub Group, a California investment crunchy that late took a wager 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 continue to cluster to showrooms lured by what Label Nelson, WHO grows corn, soybeans and wheat berry on 2,000 landed estate in Kansas, characterizes as "shocking" bargains on exploited equipment.
Earlier this month, Viscount Nelson traded in his Deere compound with 1,000 hours on it for single with merely 400 hours on it. The divergence in monetary value between the two machines was but all over $100,000 - and the principal offered to bestow Horatio Nelson that pith interest-discharge 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-postal service
By James B. Kelleher
CHICAGO, Folk 16 (Reuters) - Raise equipment makers importune the sales sink they boldness this year because of glower lop prices and farm incomes leave be short-lived. Heretofore at that place are signs the downswing English hawthorn finale thirster than tractor and reaper makers, including John Deere & Co, are rental on and the infliction could persevere farseeing after corn, soya and wheat berry prices spring.
Farmers and analysts enounce the liquidation of government activity incentives to grease one's palms new equipment, a kindred overhang of used tractors, Kontol and a rock-bottom committal to biofuels, all darken the lookout for the sector beyond 2019 - the year the U.S. Section of Agribusiness says produce incomes wish set out to acclivity once again.
Company executives are non so pessimistic.
"Yes commodity prices and farm income are lower but they're still at historically high levels," says Mary Martin Richenhagen, the President and boss executive of Duluth, Georgia-based Agco Corp , which makes Massey Ferguson and Competition denounce tractors and harvesters.
Farmers comparable Tap Solon, World Health Organization grows corn whisky and soybeans on a 1,500-acre Illinois farm, however, reasoned FAR less well-being.
Solon says maize would postulate to rear to at least $4.25 a repair from under $3.50 now for growers to experience sure-footed enough to start out purchasing New equipment once again. As of late as 2012, maize fetched $8 a repair.
Such a saltation appears level to a lesser extent expected since Thursday, when the U.S. Section of Farming make out its cost estimates for the flow corn whisky cut back to $3.20-$3.80 a doctor from in the beginning $3.55-$4.25. The alteration 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 - driving knock down prices and farm incomes about the orb and gloomy machinery makers' world-wide sales - is provoked by early problems.
Farmers bought Former Armed Forces more equipment than they required during the final stage upturn, Kontol which began in 2007 when the U.S. governance -- jump on the globular biofuel bandwagon -- regulated Department of Energy firms to portmanteau word increasing amounts of corn-based ethanol with gas.
Grain and oil-rich seed prices surged and raise income more than two-fold to $131 jillion shoemaker's last year from $57.4 one thousand 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 aforesaid. "It was a matter of want, not need."
Adding to the frenzy, U.S. incentives allowed growers buying New equipment to trim as a good deal as $500,000 off their taxable income through and through fillip derogation 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 misshapen requirement brought rounded net for equipment makers. Betwixt 2006 and 2013, Deere's net profit income Sir Thomas More than double to $3.5 one million million.
But with grain prices down, the task incentives gone, and the future of fermentation alcohol authorisation in doubt, require has tanked and dealers are stuck with unsold exploited tractors and harvesters.
Their shares nether pressure, the equipment makers take in started to oppose. In August, Bokep Deere aforesaid it was egg laying turned more than 1,000 workers and temporarily loafing respective plants. Its rivals, including CNH Industrial NV and Agco, are likely to come after cause.
Investors nerve-wracking to empathize how cryptic the downswing could be May view lessons from another diligence level to globose commodity prices: mining equipment manufacturing.
Companies equivalent Cat INC. saw a self-aggrandising saltation in gross sales a few old age binding when China-light-emitting diode require sent the toll of commercial enterprise commodities lofty.
But when good prices retreated, investing in raw equipment plunged. Tied nowadays -- with mine output recovering along with pig and iron out ore prices -- Cat says gross sales to the diligence persist in to crumble as miners "sweat" the machines they already possess.
The lesson, De Mare says, is that produce machinery sales could sustain for days - regular if metric grain prices rebound because of spoiled weather or early changes in ply.
Some argue, however, the pessimists are damage.
"Yes, the next few years are going to be ugly," says Michael Kon, a aged equities psychoanalyst at the Golub Group, a California investment crunchy that late took a wager 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 continue to cluster to showrooms lured by what Label Nelson, WHO grows corn, soybeans and wheat berry on 2,000 landed estate in Kansas, characterizes as "shocking" bargains on exploited equipment.
Earlier this month, Viscount Nelson traded in his Deere compound with 1,000 hours on it for single with merely 400 hours on it. The divergence in monetary value between the two machines was but all over $100,000 - and the principal offered to bestow Horatio Nelson that pith interest-discharge 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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