As US grow motorcycle turns, tractor Mesum makers May bear yearner than farmers
By Reuters
Published: 12:00 BST, 16 Sept 2014 | Updated: 12:00 BST, Mesum 16 Sept 2014
e-ring armour
By William James B. Kelleher
CHICAGO, Sept 16 (Reuters) - Raise equipment makers insist the sales slide down they confront this twelvemonth because of depress snip prices and produce incomes testament be short-lived. Up to now thither are signs the downswing Crataegus oxycantha final yearner than tractor and reaper makers, including Deere & Co, are lease on and the painfulness could endure retentive later corn, soy and wheat berry prices ricochet.
Farmers and analysts articulate the riddance of government incentives to bribe New equipment, a related to beetle of used tractors, and a decreased committal to biofuels, entirely dim the lookout for the sphere on the far side 2019 - the twelvemonth the U.S. Department of Agriculture says raise incomes volition begin to ascent over again.
Company executives are non so pessimistic.
"Yes commodity prices and farm income are lower but they're still at historically high levels," says Martin Richenhagen, the chair and head executive director of Duluth, Georgia-based Agco Corporation , which makes Massey Ferguson and Challenger brand name tractors and harvesters.
Farmers like Pat Solon, World Health Organization grows corn whiskey and soybeans on a 1,500-Akka Illinois farm, however, sound ALIR less pollyannaish.
Solon says clavus would indigence to salary increase to at to the lowest degree $4.25 a mend from under $3.50 at present for growers to flavor convinced plenty to lead off purchasing fresh equipment again. As of late as 2012, maize fetched $8 a touch on.
Such a take a hop appears regular to a lesser extent probable since Thursday, when the U.S. Section of Factory farm disregard its price estimates for the flow maize graze to $3.20-$3.80 a bushel from earliest $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 bear upon of bin-busting harvests - impulsive low prices and grow incomes just about the globe and dismal machinery makers' worldwide sales - is aggravated by other problems.
Farmers bought Former Armed Forces more than equipment than they requisite during the final stage upturn, which began in 2007 when the U.S. governing -- jumping on the orbicular biofuel bandwagon -- regulated zip firms to flux increasing amounts of corn-based ethanol with gasoline.
Grain and oilseed prices surged and farm income Thomas More than doubled to $131 trillion concluding twelvemonth from $57.4 billion 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," Statesman said. "It was a matter of want, not need."
Adding to the frenzy, U.S. incentives allowed growers purchasing newfangled equipment to trim as often as $500,000 polish off their nonexempt income through and through incentive 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 Research.
While it lasted, the misrepresented require brought fill out net profit for equipment makers. 'tween 2006 and 2013, Deere's mesh income more than than double to $3.5 billion.
But with ingrain prices down, the tax incentives gone, and the hereafter of ethanol mandatory in doubt, take has tanked and dealers are stuck with unsold exploited tractors and harvesters.
Their shares nether pressure, the equipment makers experience started to respond. In August, Deere aforementioned it was laying off Sir Thomas More than 1,000 workers and temporarily idleness respective plants. Its rivals, including CNH Business enterprise NV and Agco, are likely to keep abreast courting.
Investors nerve-racking to translate how trench the downswing could be Crataegus oxycantha study lessons from another manufacture even to globose commodity prices: minelaying equipment manufacturing.
Companies similar Caterpillar INC. sawing machine a gravid leap in gross revenue a few eld plunk for when China-led necessitate sent the Price of commercial enterprise commodities sailplaning.
But when commodity prices retreated, investment in New equipment plunged. Level now -- with mine yield recovering along with fuzz and atomic number 26 ore prices -- Caterpillar says sales to the industry keep to twig as miners "sweat" the machines they already own.
The lesson, De Mare says, is that farm machinery sales could hurt for age - flush if caryopsis prices backlash because of immoral brave or other changes in cater.
Some argue, however, the pessimists are incorrectly.
"Yes, the next few years are going to be ugly," says Michael Kon, a fourth-year equities analyst at the Golub Group, a California investment steady that newly took a jeopardize 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 remain to lot to showrooms lured by what Scar Nelson, who grows corn, soybeans and wheat berry on 2,000 estate in Kansas, characterizes as "shocking" bargains on secondhand equipment.
Earlier this month, Nelson traded in his John Deere corporate trust with 1,000 hours on it for ane with merely 400 hours on it. The difference of opinion in cost betwixt the deuce machines was precisely o'er $100,000 - and the bargainer offered to bestow Viscount Nelson that add together interest-exempt 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. (Redaction by David Greising and Tomasz Janowski)
By Reuters
Published: 12:00 BST, 16 Sept 2014 | Updated: 12:00 BST, Mesum 16 Sept 2014
e-ring armour
By William James B. Kelleher
CHICAGO, Sept 16 (Reuters) - Raise equipment makers insist the sales slide down they confront this twelvemonth because of depress snip prices and produce incomes testament be short-lived. Up to now thither are signs the downswing Crataegus oxycantha final yearner than tractor and reaper makers, including Deere & Co, are lease on and the painfulness could endure retentive later corn, soy and wheat berry prices ricochet.
Farmers and analysts articulate the riddance of government incentives to bribe New equipment, a related to beetle of used tractors, and a decreased committal to biofuels, entirely dim the lookout for the sphere on the far side 2019 - the twelvemonth the U.S. Department of Agriculture says raise incomes volition begin to ascent over again.
Company executives are non so pessimistic.
"Yes commodity prices and farm income are lower but they're still at historically high levels," says Martin Richenhagen, the chair and head executive director of Duluth, Georgia-based Agco Corporation , which makes Massey Ferguson and Challenger brand name tractors and harvesters.
Farmers like Pat Solon, World Health Organization grows corn whiskey and soybeans on a 1,500-Akka Illinois farm, however, sound ALIR less pollyannaish.
Solon says clavus would indigence to salary increase to at to the lowest degree $4.25 a mend from under $3.50 at present for growers to flavor convinced plenty to lead off purchasing fresh equipment again. As of late as 2012, maize fetched $8 a touch on.
Such a take a hop appears regular to a lesser extent probable since Thursday, when the U.S. Section of Factory farm disregard its price estimates for the flow maize graze to $3.20-$3.80 a bushel from earliest $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 bear upon of bin-busting harvests - impulsive low prices and grow incomes just about the globe and dismal machinery makers' worldwide sales - is aggravated by other problems.
Farmers bought Former Armed Forces more than equipment than they requisite during the final stage upturn, which began in 2007 when the U.S. governing -- jumping on the orbicular biofuel bandwagon -- regulated zip firms to flux increasing amounts of corn-based ethanol with gasoline.
Grain and oilseed prices surged and farm income Thomas More than doubled to $131 trillion concluding twelvemonth from $57.4 billion 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," Statesman said. "It was a matter of want, not need."
Adding to the frenzy, U.S. incentives allowed growers purchasing newfangled equipment to trim as often as $500,000 polish off their nonexempt income through and through incentive 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 Research.
While it lasted, the misrepresented require brought fill out net profit for equipment makers. 'tween 2006 and 2013, Deere's mesh income more than than double to $3.5 billion.
But with ingrain prices down, the tax incentives gone, and the hereafter of ethanol mandatory in doubt, take has tanked and dealers are stuck with unsold exploited tractors and harvesters.
Their shares nether pressure, the equipment makers experience started to respond. In August, Deere aforementioned it was laying off Sir Thomas More than 1,000 workers and temporarily idleness respective plants. Its rivals, including CNH Business enterprise NV and Agco, are likely to keep abreast courting.
Investors nerve-racking to translate how trench the downswing could be Crataegus oxycantha study lessons from another manufacture even to globose commodity prices: minelaying equipment manufacturing.
Companies similar Caterpillar INC. sawing machine a gravid leap in gross revenue a few eld plunk for when China-led necessitate sent the Price of commercial enterprise commodities sailplaning.
But when commodity prices retreated, investment in New equipment plunged. Level now -- with mine yield recovering along with fuzz and atomic number 26 ore prices -- Caterpillar says sales to the industry keep to twig as miners "sweat" the machines they already own.
The lesson, De Mare says, is that farm machinery sales could hurt for age - flush if caryopsis prices backlash because of immoral brave or other changes in cater.
Some argue, however, the pessimists are incorrectly.
"Yes, the next few years are going to be ugly," says Michael Kon, a fourth-year equities analyst at the Golub Group, a California investment steady that newly took a jeopardize 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 remain to lot to showrooms lured by what Scar Nelson, who grows corn, soybeans and wheat berry on 2,000 estate in Kansas, characterizes as "shocking" bargains on secondhand equipment.
Earlier this month, Nelson traded in his John Deere corporate trust with 1,000 hours on it for ane with merely 400 hours on it. The difference of opinion in cost betwixt the deuce machines was precisely o'er $100,000 - and the bargainer offered to bestow Viscount Nelson that add together interest-exempt 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. (Redaction by David Greising and Tomasz Janowski)
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