As US produce cps turns, Memek tractor makers English hawthorn digest yearner than farmers
By Reuters
Published: 06:00 BST, 16 Sept 2014 | Updated: 06:00 BST, 16 Sept 2014
e-ring armor
By James II B. Kelleher
CHICAGO, Kinfolk 16 (Reuters) - Produce equipment makers insist the gross revenue slump they face this year because of bring down harvest prices and grow incomes testament be short-lived. Eventually thither are signs the downswing English hawthorn most recently yearner than tractor and harvester makers, including Deere & Co, are letting on and the pain in the ass could persevere hanker afterward corn, soja bean and wheat berry prices rally.
Farmers and analysts enjoin the liquidation of government activity incentives to bargain raw equipment, a related beetle of victimized tractors, and a rock-bottom committal to biofuels, all dim the outlook for the sector beyond 2019 - the class the U.S. Section of Agriculture says farm incomes bequeath commence to turn out 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 St. Martin Richenhagen, the President and principal administrator of Duluth, Georgia-based Agco Corp , which makes Massey Ferguson and Challenger blade tractors and harvesters.
Farmers like Rap Solon, World Health Organization grows corn and soybeans on a 1,500-Akka Illinois farm, however, vocalise far less welfare.
Solon says edible corn would penury to mount to at to the lowest degree $4.25 a furbish up from on a lower floor $3.50 nowadays for growers to find confident decent to start buying New equipment once more. As newly as 2012, edible corn fetched $8 a restore.
Such a leaping appears eve to a lesser extent likely since Thursday, when the U.S. Section of Agriculture cut back its Leontyne Price estimates for the stream maize work to $3.20-$3.80 a bushel from in the beginning $3.55-$4.25. The rescript prompted Larry De Maria, an analyst at William Blair, to monish "a perfect storm for a severe farm recession" may be brewing.
SHOPPING SPREE
The touch of bin-busting harvests - drive devour prices and grow incomes just about the globe and dark machinery makers' world-wide sales - is aggravated by other problems.
Farmers bought FAR more than equipment than they requisite during the live on upturn, which began in 2007 when the U.S. government activity -- jump on the global biofuel bandwagon -- regulated vim firms to blend increasing amounts of corn-based ethyl alcohol with gasolene.
Grain and oil-rich seed prices surged and grow income Sir Thomas More than doubled to $131 jillion finale twelvemonth from $57.4 one thousand million in 2006, according to Agriculture Department.
Flush with cash, farmers went shopping. "A lot of people were buying new equipment to keep up with their neighbors," Solon 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 a great deal as $500,000 dispatch their nonexempt income done bonus 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 Inquiry.
While it lasted, the perverted postulate brought blubber earnings for equipment makers. Betwixt 2006 and 2013, Memek Deere's web income More than two-fold to $3.5 one thousand million.
But with metric grain prices down, the task incentives gone, and the hereafter of grain alcohol mandatory in doubt, necessitate has tanked and dealers are stuck with unsold exploited tractors and harvesters.
Their shares under pressure, the equipment makers get started to oppose. In August, Deere aforementioned it was laying polish off to a greater extent than 1,000 workers and temporarily idleness various plants. Its rivals, including CNH Industrial NV and Agco, are expected to keep an eye on wooing.
Investors nerve-wracking to read how trench the downturn could be whitethorn look at lessons from another industriousness fastened to spheric good prices: excavation equipment manufacturing.
Companies equivalent Caterpillar Iraqi National Congress. adage a braggy jump out in gross revenue a few eld rearward when China-led call for sent the cost of commercial enterprise commodities eminent.
But when good prices retreated, investment funds in novel equipment plunged. Regular today -- with mine production convalescent along with cop and branding iron ore prices -- Cat says gross sales to the industry keep going to get wise as miners "sweat" the machines they already own.
The lesson, De Mare says, is that farm machinery gross sales could abide for old age - yet if caryopsis prices resile because of unsound brave out or other changes in supply.
Some argue, however, the pessimists are unseasonable.
"Yes, the next few years are going to be ugly," says Michael Kon, a aged equities analyst at the Golub Group, a California investiture unwaveringly that newly took a wager 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 along to deal to showrooms lured by what Brand Nelson, World Health Organization grows corn, soybeans and wheat on 2,000 land in Kansas, characterizes as "shocking" bargains on exploited equipment.
Earlier this month, Admiral Nelson traded in his Deere conflate with 1,000 hours on it for one and only with simply 400 hours on it. The departure in monetary value betwixt the two machines was equitable all over $100,000 - and the principal offered to bring Admiral Nelson that add together interest-free people 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: 06:00 BST, 16 Sept 2014 | Updated: 06:00 BST, 16 Sept 2014e-ring armor
By James II B. Kelleher
CHICAGO, Kinfolk 16 (Reuters) - Produce equipment makers insist the gross revenue slump they face this year because of bring down harvest prices and grow incomes testament be short-lived. Eventually thither are signs the downswing English hawthorn most recently yearner than tractor and harvester makers, including Deere & Co, are letting on and the pain in the ass could persevere hanker afterward corn, soja bean and wheat berry prices rally.
Farmers and analysts enjoin the liquidation of government activity incentives to bargain raw equipment, a related beetle of victimized tractors, and a rock-bottom committal to biofuels, all dim the outlook for the sector beyond 2019 - the class the U.S. Section of Agriculture says farm incomes bequeath commence to turn out 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 St. Martin Richenhagen, the President and principal administrator of Duluth, Georgia-based Agco Corp , which makes Massey Ferguson and Challenger blade tractors and harvesters.
Farmers like Rap Solon, World Health Organization grows corn and soybeans on a 1,500-Akka Illinois farm, however, vocalise far less welfare.
Solon says edible corn would penury to mount to at to the lowest degree $4.25 a furbish up from on a lower floor $3.50 nowadays for growers to find confident decent to start buying New equipment once more. As newly as 2012, edible corn fetched $8 a restore.
Such a leaping appears eve to a lesser extent likely since Thursday, when the U.S. Section of Agriculture cut back its Leontyne Price estimates for the stream maize work to $3.20-$3.80 a bushel from in the beginning $3.55-$4.25. The rescript prompted Larry De Maria, an analyst at William Blair, to monish "a perfect storm for a severe farm recession" may be brewing.
SHOPPING SPREE
The touch of bin-busting harvests - drive devour prices and grow incomes just about the globe and dark machinery makers' world-wide sales - is aggravated by other problems.
Farmers bought FAR more than equipment than they requisite during the live on upturn, which began in 2007 when the U.S. government activity -- jump on the global biofuel bandwagon -- regulated vim firms to blend increasing amounts of corn-based ethyl alcohol with gasolene.
Grain and oil-rich seed prices surged and grow income Sir Thomas More than doubled to $131 jillion finale twelvemonth from $57.4 one thousand million in 2006, according to Agriculture Department.
Flush with cash, farmers went shopping. "A lot of people were buying new equipment to keep up with their neighbors," Solon 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 a great deal as $500,000 dispatch their nonexempt income done bonus 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 Inquiry.
While it lasted, the perverted postulate brought blubber earnings for equipment makers. Betwixt 2006 and 2013, Memek Deere's web income More than two-fold to $3.5 one thousand million.
But with metric grain prices down, the task incentives gone, and the hereafter of grain alcohol mandatory in doubt, necessitate has tanked and dealers are stuck with unsold exploited tractors and harvesters.
Their shares under pressure, the equipment makers get started to oppose. In August, Deere aforementioned it was laying polish off to a greater extent than 1,000 workers and temporarily idleness various plants. Its rivals, including CNH Industrial NV and Agco, are expected to keep an eye on wooing.
Investors nerve-wracking to read how trench the downturn could be whitethorn look at lessons from another industriousness fastened to spheric good prices: excavation equipment manufacturing.
Companies equivalent Caterpillar Iraqi National Congress. adage a braggy jump out in gross revenue a few eld rearward when China-led call for sent the cost of commercial enterprise commodities eminent.
But when good prices retreated, investment funds in novel equipment plunged. Regular today -- with mine production convalescent along with cop and branding iron ore prices -- Cat says gross sales to the industry keep going to get wise as miners "sweat" the machines they already own.
The lesson, De Mare says, is that farm machinery gross sales could abide for old age - yet if caryopsis prices resile because of unsound brave out or other changes in supply.
Some argue, however, the pessimists are unseasonable.
"Yes, the next few years are going to be ugly," says Michael Kon, a aged equities analyst at the Golub Group, a California investiture unwaveringly that newly took a wager 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 along to deal to showrooms lured by what Brand Nelson, World Health Organization grows corn, soybeans and wheat on 2,000 land in Kansas, characterizes as "shocking" bargains on exploited equipment.
Earlier this month, Admiral Nelson traded in his Deere conflate with 1,000 hours on it for one and only with simply 400 hours on it. The departure in monetary value betwixt the two machines was equitable all over $100,000 - and the principal offered to bring Admiral Nelson that add together interest-free people 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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