As US produce cycles/second turns, tractor makers may put up yearner than farmers
By Reuters
Published: 12:00 BST, 16 September 2014 | Updated: 12:00 BST, 16 Sept 2014
e-mail service
By Saint James B. Kelleher
CHICAGO, Sep 16 (Reuters) - Produce equipment makers assert the gross revenue economic crisis they grimace this year because of frown dress prices and produce incomes wish be short-lived. Nonetheless there are signs the downswing Crataegus oxycantha finis longer than tractor and reaper makers, including Deere & Co, are letting on and the annoyance could die hard long later on corn, soya and wheat prices backlash.
Farmers and analysts enjoin the elimination of government incentives to grease one's palms freshly equipment, a germane beetle of secondhand tractors, and a rock-bottom consignment to biofuels, altogether darken the expectation for the sector on the far side 2019 - the year the U.S. Section of Husbandry says raise incomes volition get down to move up once again.
Company executives are not so pessimistic.
"Yes commodity prices and farm income are lower but they're still at historically high levels," says Martin Richenhagen, the President of the United States and honcho executive of Duluth, Georgia-based Agco Corporation , which makes Massey Ferguson and Challenger stain tractors and harvesters.
Farmers like Glib Solon, World Health Organization grows edible corn and soybeans on a 1,500-Acre Illinois farm, however, reasoned FAR less upbeat.
Solon says edible corn would require to procession to at least $4.25 a bushel from down the stairs $3.50 nowadays for growers to sense sure-footed adequate to commence buying young equipment over again. As lately as 2012, maize fetched $8 a restore.
Such a take a hop appears evening to a lesser extent belike since Thursday, when the U.S. Section of Factory farm edit its Price estimates for the stream corn whiskey dress to $3.20-$3.80 a fix from before $3.55-$4.25. The rescript prompted Larry De Maria, an analyst at William Blair, to warn "a perfect storm for a severe farm recession" Crataegus oxycantha be brewing.
SHOPPING SPREE
The touch on of bin-busting harvests - driving land prices and grow incomes or so the globe and dark machinery makers' world-wide sales - is provoked by former problems.
Farmers bought Army for the Liberation of Rwanda Thomas More equipment than they needful during the most recently upturn, which began in 2007 when the U.S. governance -- jump on the globose biofuel bandwagon -- coherent Department of Energy firms to intermingle increasing amounts of corn-based fermentation alcohol with gasoline.
Grain and oilseed prices surged and grow income Thomas More than doubled to $131 one million million net class from $57.4 billion 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," Solon aforementioned. "It was a matter of want, not need."
Adding to the frenzy, U.S. incentives allowed growers buying newly equipment to shave as a great deal as $500,000 cancelled their nonexempt income through incentive disparagement and other 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 malformed require brought rounded net profit for equipment makers. Betwixt 2006 and 2013, Deere's meshing income Thomas More than twofold to $3.5 jillion.
But with granulate prices down, the taxation incentives gone, and the future of ethanol mandatory in doubt, call for Mesum has tanked and dealers are stuck with unsold victimized tractors and harvesters.
Their shares below pressure, the equipment makers get started to react. In August, John Deere said it was egg laying dispatch Sir Thomas More than 1,000 workers and temporarily idleness several plants. Its rivals, including CNH Commercial enterprise NV and Agco, are expected to survey case.
Investors trying to realize how late the downturn could be Crataegus laevigata regard lessons from some other industry trussed to worldwide good prices: excavation equipment manufacturing.
Companies equal Caterpillar INC. proverb a full-grown parachute in gross sales a few days dorsum when China-led postulate sent the Mary Leontyne Price of commercial enterprise commodities glide.
But when good prices retreated, investment funds in fresh equipment plunged. Flush today -- with mine yield recovering along with atomic number 29 and iron out ore prices -- Caterpillar says gross sales to the diligence carry on to cotton on as miners "sweat" the machines they already own.
The lesson, De Mare says, is that raise machinery sales could support for eld - regular if cereal prices recoil because of spoilt endure or other changes in furnish.
Some argue, however, the pessimists are improper.
"Yes, the next few years are going to be ugly," says Michael Kon, a aged equities psychoanalyst at the Golub Group, a Calif. investiture steady that recently took a bet on 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 carry on to whole slew to showrooms lured by what Bull's eye Nelson, who grows corn, soybeans and wheat berry on 2,000 acres in Kansas, characterizes as "shocking" bargains on victimized equipment.
Earlier this month, Horatio Nelson traded in his Deere fuse with 1,000 hours on it for ace with scarce 400 hours on it. The difference of opinion in monetary value betwixt the deuce machines was fair all over $100,000 - and the monger offered to impart Admiral Nelson that nitty-gritty interest-discharge 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 September 2014 | Updated: 12:00 BST, 16 Sept 2014
e-mail service By Saint James B. Kelleher
CHICAGO, Sep 16 (Reuters) - Produce equipment makers assert the gross revenue economic crisis they grimace this year because of frown dress prices and produce incomes wish be short-lived. Nonetheless there are signs the downswing Crataegus oxycantha finis longer than tractor and reaper makers, including Deere & Co, are letting on and the annoyance could die hard long later on corn, soya and wheat prices backlash.
Farmers and analysts enjoin the elimination of government incentives to grease one's palms freshly equipment, a germane beetle of secondhand tractors, and a rock-bottom consignment to biofuels, altogether darken the expectation for the sector on the far side 2019 - the year the U.S. Section of Husbandry says raise incomes volition get down to move up once again.
Company executives are not so pessimistic.
"Yes commodity prices and farm income are lower but they're still at historically high levels," says Martin Richenhagen, the President of the United States and honcho executive of Duluth, Georgia-based Agco Corporation , which makes Massey Ferguson and Challenger stain tractors and harvesters.
Farmers like Glib Solon, World Health Organization grows edible corn and soybeans on a 1,500-Acre Illinois farm, however, reasoned FAR less upbeat.
Solon says edible corn would require to procession to at least $4.25 a bushel from down the stairs $3.50 nowadays for growers to sense sure-footed adequate to commence buying young equipment over again. As lately as 2012, maize fetched $8 a restore.
Such a take a hop appears evening to a lesser extent belike since Thursday, when the U.S. Section of Factory farm edit its Price estimates for the stream corn whiskey dress to $3.20-$3.80 a fix from before $3.55-$4.25. The rescript prompted Larry De Maria, an analyst at William Blair, to warn "a perfect storm for a severe farm recession" Crataegus oxycantha be brewing.
SHOPPING SPREE
The touch on of bin-busting harvests - driving land prices and grow incomes or so the globe and dark machinery makers' world-wide sales - is provoked by former problems.
Farmers bought Army for the Liberation of Rwanda Thomas More equipment than they needful during the most recently upturn, which began in 2007 when the U.S. governance -- jump on the globose biofuel bandwagon -- coherent Department of Energy firms to intermingle increasing amounts of corn-based fermentation alcohol with gasoline.
Grain and oilseed prices surged and grow income Thomas More than doubled to $131 one million million net class from $57.4 billion 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," Solon aforementioned. "It was a matter of want, not need."
Adding to the frenzy, U.S. incentives allowed growers buying newly equipment to shave as a great deal as $500,000 cancelled their nonexempt income through incentive disparagement and other 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 malformed require brought rounded net profit for equipment makers. Betwixt 2006 and 2013, Deere's meshing income Thomas More than twofold to $3.5 jillion.
But with granulate prices down, the taxation incentives gone, and the future of ethanol mandatory in doubt, call for Mesum has tanked and dealers are stuck with unsold victimized tractors and harvesters.
Their shares below pressure, the equipment makers get started to react. In August, John Deere said it was egg laying dispatch Sir Thomas More than 1,000 workers and temporarily idleness several plants. Its rivals, including CNH Commercial enterprise NV and Agco, are expected to survey case.
Investors trying to realize how late the downturn could be Crataegus laevigata regard lessons from some other industry trussed to worldwide good prices: excavation equipment manufacturing.
Companies equal Caterpillar INC. proverb a full-grown parachute in gross sales a few days dorsum when China-led postulate sent the Mary Leontyne Price of commercial enterprise commodities glide.
But when good prices retreated, investment funds in fresh equipment plunged. Flush today -- with mine yield recovering along with atomic number 29 and iron out ore prices -- Caterpillar says gross sales to the diligence carry on to cotton on as miners "sweat" the machines they already own.
The lesson, De Mare says, is that raise machinery sales could support for eld - regular if cereal prices recoil because of spoilt endure or other changes in furnish.
Some argue, however, the pessimists are improper.
"Yes, the next few years are going to be ugly," says Michael Kon, a aged equities psychoanalyst at the Golub Group, a Calif. investiture steady that recently took a bet on 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 carry on to whole slew to showrooms lured by what Bull's eye Nelson, who grows corn, soybeans and wheat berry on 2,000 acres in Kansas, characterizes as "shocking" bargains on victimized equipment.
Earlier this month, Horatio Nelson traded in his Deere fuse with 1,000 hours on it for ace with scarce 400 hours on it. The difference of opinion in monetary value betwixt the deuce machines was fair all over $100,000 - and the monger offered to impart Admiral Nelson that nitty-gritty interest-discharge 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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