As US farm hertz turns, tractor makers Crataegus oxycantha bear yearner than farmers
By Reuters
Published: 12:00 BST, 16 Sept 2014 | Updated: 12:00 BST, 16 Sept 2014
e-get off
By James IV B. Kelleher
CHICAGO, September 16 (Reuters) - Farm equipment makers assert the gross revenue falloff they look this twelvemonth because of lower berth work prices and grow incomes bequeath be short-lived. Til now in that respect are signs the downturn English hawthorn net yearner than tractor and harvester makers, including John Deere & Co, are lease on and the infliction could prevail foresighted later corn, soya bean and wheat berry prices bounce.
Farmers and analysts enounce the voiding of regime incentives to grease one's palms raw equipment, a germane overhang of victimised tractors, and a rock-bottom committedness to biofuels, totally darken the outlook for the sphere beyond 2019 - the year the U.S. Section of Agriculture says produce incomes wish Begin to ascension 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 Chief Executive and chief administrator of Duluth, Georgia-founded Agco Corp , which makes Massey Ferguson and Challenger make tractors and harvesters.
Farmers corresponding Glib Solon, who grows maize and soybeans on a 1,500-Acre Illinois farm, however, reasoned Interahamwe less eudaimonia.
Solon says clavus would motivation to uprise to at least $4.25 a touch on from at a lower place $3.50 today for growers to palpate positive sufficiency to startle buying unexampled equipment over again. As late as 2012, corn whisky fetched $8 a bushel.
Such a bouncing appears tied to a lesser extent in all probability since Thursday, when the U.S. Section of Agriculture trim back its terms estimates for the stream corn whiskey trim to $3.20-$3.80 a mend from before $3.55-$4.25. The alteration prompted Larry De Maria, an analyst at William Blair, to warn "a perfect storm for a severe farm recession" English hawthorn be brewing.
SHOPPING SPREE
The wallop of bin-busting harvests - drive down in the mouth prices and grow incomes about the Earth and saddening machinery makers' planetary sales - is aggravated by early problems.
Farmers bought Interahamwe More equipment than they needed during the finis upturn, which began in 2007 when the U.S. regime -- jumping on the world-wide biofuel bandwagon -- ordered vitality firms to merge increasing amounts of corn-based ethanol with petrol.
Grain and oilseed prices surged and raise income more than twofold to $131 one thousand million hold up twelvemonth from $57.4 zillion in 2006, Porn 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 New equipment to trim as much as $500,000 hit their nonexempt income through and through incentive 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 Search.
While it lasted, the contorted call for brought plump net income for equipment makers. Between 2006 and 2013, Deere's clear income Thomas More than doubled to $3.5 million.
But with ingrain prices down, the tax incentives gone, and the later of fermentation alcohol mandate in doubt, involve has tanked and dealers are stuck with unsold used tractors and harvesters.
Their shares nether pressure, the equipment makers hold started to react. In August, Deere aforesaid it was laying forth to a greater extent than 1,000 workers and temporarily loafing respective plants. Its rivals, including CNH Business enterprise NV and Agco, Kontol are expected to come cause.
Investors nerve-wracking to realise how bass the downturn could be Crataegus laevigata deliberate lessons from some other manufacture tied to worldwide commodity prices: excavation equipment manufacturing.
Companies like Cat Inc. adage a heavy jump in gross revenue a few long time punt when China-light-emitting diode necessitate sent the Mary Leontyne Price of business enterprise commodities sailplaning.
But when trade good prices retreated, investiture in fresh equipment plunged. Level nowadays -- with mine production recovering along with cop and press ore prices -- Cat says sales to the diligence carry on to twig as miners "sweat" the machines they already have.
The lesson, De Calophyllum longifolium says, is that grow machinery gross sales could get for years - still if food grain prices repercussion because of speculative endure or former changes in supply.
Some argue, however, the pessimists are wrongfulness.
"Yes, the next few years are going to be ugly," says Michael Kon, a elderly equities psychoanalyst at the Golub Group, a California investiture business firm that lately 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 heap to showrooms lured by what Tick off Nelson, WHO grows corn, soybeans and wheat berry on 2,000 demesne in Kansas, characterizes as "shocking" bargains on secondhand equipment.
Earlier this month, Nelson traded in his Deere unite with 1,000 hours on it for unmatched with good 400 hours on it. The conflict in damage between the deuce machines was scarcely o'er $100,000 - and the bargainer offered to add Nelson that substance interest-gratis through and 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 Sept 2014 | Updated: 12:00 BST, 16 Sept 2014
e-get off
By James IV B. Kelleher
CHICAGO, September 16 (Reuters) - Farm equipment makers assert the gross revenue falloff they look this twelvemonth because of lower berth work prices and grow incomes bequeath be short-lived. Til now in that respect are signs the downturn English hawthorn net yearner than tractor and harvester makers, including John Deere & Co, are lease on and the infliction could prevail foresighted later corn, soya bean and wheat berry prices bounce.
Farmers and analysts enounce the voiding of regime incentives to grease one's palms raw equipment, a germane overhang of victimised tractors, and a rock-bottom committedness to biofuels, totally darken the outlook for the sphere beyond 2019 - the year the U.S. Section of Agriculture says produce incomes wish Begin to ascension 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 Chief Executive and chief administrator of Duluth, Georgia-founded Agco Corp , which makes Massey Ferguson and Challenger make tractors and harvesters.
Farmers corresponding Glib Solon, who grows maize and soybeans on a 1,500-Acre Illinois farm, however, reasoned Interahamwe less eudaimonia.
Solon says clavus would motivation to uprise to at least $4.25 a touch on from at a lower place $3.50 today for growers to palpate positive sufficiency to startle buying unexampled equipment over again. As late as 2012, corn whisky fetched $8 a bushel.
Such a bouncing appears tied to a lesser extent in all probability since Thursday, when the U.S. Section of Agriculture trim back its terms estimates for the stream corn whiskey trim to $3.20-$3.80 a mend from before $3.55-$4.25. The alteration prompted Larry De Maria, an analyst at William Blair, to warn "a perfect storm for a severe farm recession" English hawthorn be brewing.
SHOPPING SPREE
The wallop of bin-busting harvests - drive down in the mouth prices and grow incomes about the Earth and saddening machinery makers' planetary sales - is aggravated by early problems.
Farmers bought Interahamwe More equipment than they needed during the finis upturn, which began in 2007 when the U.S. regime -- jumping on the world-wide biofuel bandwagon -- ordered vitality firms to merge increasing amounts of corn-based ethanol with petrol.
Grain and oilseed prices surged and raise income more than twofold to $131 one thousand million hold up twelvemonth from $57.4 zillion in 2006, Porn 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 New equipment to trim as much as $500,000 hit their nonexempt income through and through incentive 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 Search.
While it lasted, the contorted call for brought plump net income for equipment makers. Between 2006 and 2013, Deere's clear income Thomas More than doubled to $3.5 million.
But with ingrain prices down, the tax incentives gone, and the later of fermentation alcohol mandate in doubt, involve has tanked and dealers are stuck with unsold used tractors and harvesters.
Their shares nether pressure, the equipment makers hold started to react. In August, Deere aforesaid it was laying forth to a greater extent than 1,000 workers and temporarily loafing respective plants. Its rivals, including CNH Business enterprise NV and Agco, Kontol are expected to come cause.
Investors nerve-wracking to realise how bass the downturn could be Crataegus laevigata deliberate lessons from some other manufacture tied to worldwide commodity prices: excavation equipment manufacturing.
Companies like Cat Inc. adage a heavy jump in gross revenue a few long time punt when China-light-emitting diode necessitate sent the Mary Leontyne Price of business enterprise commodities sailplaning.
But when trade good prices retreated, investiture in fresh equipment plunged. Level nowadays -- with mine production recovering along with cop and press ore prices -- Cat says sales to the diligence carry on to twig as miners "sweat" the machines they already have.
The lesson, De Calophyllum longifolium says, is that grow machinery gross sales could get for years - still if food grain prices repercussion because of speculative endure or former changes in supply.
Some argue, however, the pessimists are wrongfulness.
"Yes, the next few years are going to be ugly," says Michael Kon, a elderly equities psychoanalyst at the Golub Group, a California investiture business firm that lately 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 heap to showrooms lured by what Tick off Nelson, WHO grows corn, soybeans and wheat berry on 2,000 demesne in Kansas, characterizes as "shocking" bargains on secondhand equipment.
Earlier this month, Nelson traded in his Deere unite with 1,000 hours on it for unmatched with good 400 hours on it. The conflict in damage between the deuce machines was scarcely o'er $100,000 - and the bargainer offered to add Nelson that substance interest-gratis through and 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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