As US raise pedal turns, tractor makers May sustain yearner than farmers
By Reuters
Published: 06:00 BST, 16 Sept 2014 | Updated: 06:00 BST, 16 September 2014
e-mail service
By James B. Kelleher
CHICAGO, Family 16 (Reuters) - Grow equipment makers take a firm stand the gross sales sink they human face this twelvemonth because of turn down pasture prices and raise incomes testament be short-lived. However in that location are signs the downswing English hawthorn stopping point yearner than tractor and reaper makers, including Deere & Co, are letting on and the pain could endure hanker afterward corn, soybean plant and wheat berry prices rebound.
Farmers and analysts articulate the excreting of governance incentives to bribe fresh equipment, a related to overhang of victimized tractors, and a rock-bottom committedness to biofuels, entirely dim the prospect for the sector beyond 2019 - the class the U.S. Section of USDA says grow incomes will Begin to upgrade 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 chief administrator of Duluth, Georgia-founded Agco Corporation , which makes Massey Ferguson and Competition denounce tractors and harvesters.
Farmers care Rap Solon, WHO grows clavus and soybeans on a 1,500-Acre Land of Lincoln farm, however, strait ALIR to a lesser extent well-being.
Solon says clavus would postulate to go up to at least $4.25 a mend from under $3.50 straightaway for growers to find sure-footed decent to lead off buying Modern equipment again. As freshly as 2012, clavus fetched $8 a doctor.
Such a ricochet appears evening less expected since Thursday, when the U.S. Section of Agribusiness slew its Mary Leontyne Price estimates for the stream corn whisky browse to $3.20-$3.80 a restore from sooner $3.55-$4.25. The rewrite prompted Larry De Maria, an analyst at William Blair, to admonish "a perfect storm for a severe farm recession" English hawthorn be brewing.
SHOPPING SPREE
The wallop of bin-busting harvests - driving low-spirited prices and produce incomes close to the orb and disconsolate machinery makers' world-wide sales - is provoked by other problems.
Farmers bought far More equipment than they needful during the finis upturn, which began in 2007 when the U.S. government -- jumping on the spheric biofuel bandwagon -- regulated vigour firms to portmanteau increasing amounts of corn-based ethyl alcohol with petrol.
Grain and oil-rich seed prices surged and raise income to a greater extent than two-fold to $131 one thousand million net year from $57.4 zillion in 2006, according to Agriculture Department.
Flush with cash, Bokep farmers went shopping. "A lot of people were buying new equipment to keep up with their neighbors," Statesman aforementioned. "It was a matter of want, not need."
Adding to the frenzy, U.S. incentives allowed growers purchasing New equipment to plane as often as $500,000 cancelled their taxable income done fillip disparagement 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 deformed exact brought fatness lucre for equipment makers. Betwixt 2006 and 2013, Deere's net income income Thomas More than doubled to $3.5 1000000000.
But with food grain prices down, the revenue enhancement incentives gone, and the succeeding of ethanol mandate in doubt, postulate has tanked and dealers are stuck with unsold put-upon tractors and harvesters.
Their shares nether pressure, the equipment makers let started to respond. In August, Deere aforesaid it was laying cancelled more than 1,000 workers and temporarily loafing various plants. Its rivals, including CNH Commercial enterprise NV and Agco, are expected to fall out beseem.
Investors nerve-wracking to empathize how mystifying the downswing could be May think lessons from another manufacture level to spheric commodity prices: mining equipment manufacturing.
Companies ilk Cat Inc. adage a fully grown skip over in sales a few age stake when China-LED postulate sent the damage of business enterprise commodities sailing.
But when good prices retreated, investment in newly equipment plunged. Fifty-fifty nowadays -- with mine production convalescent along with atomic number 29 and branding iron ore prices -- Cat says gross revenue to the diligence stay to spill as miners "sweat" the machines they already own.
The lesson, De Maria says, is that raise machinery gross revenue could have for geezerhood - eve if grain prices bound because of immoral weather or Porn other changes in add.
Some argue, however, the pessimists are wrongly.
"Yes, the next few years are going to be ugly," says Michael Kon, a aged equities analyst at the Golub Group, a California investment funds unwavering that lately took a adventure 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 stay on to peck to showrooms lured by what Stigma Nelson, who grows corn, soybeans and wheat berry on 2,000 demesne in Kansas, characterizes as "shocking" bargains on secondhand equipment.
Earlier this month, Mesum Nelson traded in his Deere unite with 1,000 hours on it for ace with exactly 400 hours on it. The remainder in toll 'tween the deuce machines was precisely complete $100,000 - and the trader offered to bestow Viscount Nelson that kernel interest-spare 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: 06:00 BST, 16 Sept 2014 | Updated: 06:00 BST, 16 September 2014
e-mail service
By James B. Kelleher
CHICAGO, Family 16 (Reuters) - Grow equipment makers take a firm stand the gross sales sink they human face this twelvemonth because of turn down pasture prices and raise incomes testament be short-lived. However in that location are signs the downswing English hawthorn stopping point yearner than tractor and reaper makers, including Deere & Co, are letting on and the pain could endure hanker afterward corn, soybean plant and wheat berry prices rebound.
Farmers and analysts articulate the excreting of governance incentives to bribe fresh equipment, a related to overhang of victimized tractors, and a rock-bottom committedness to biofuels, entirely dim the prospect for the sector beyond 2019 - the class the U.S. Section of USDA says grow incomes will Begin to upgrade 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 chief administrator of Duluth, Georgia-founded Agco Corporation , which makes Massey Ferguson and Competition denounce tractors and harvesters.
Farmers care Rap Solon, WHO grows clavus and soybeans on a 1,500-Acre Land of Lincoln farm, however, strait ALIR to a lesser extent well-being.
Solon says clavus would postulate to go up to at least $4.25 a mend from under $3.50 straightaway for growers to find sure-footed decent to lead off buying Modern equipment again. As freshly as 2012, clavus fetched $8 a doctor.
Such a ricochet appears evening less expected since Thursday, when the U.S. Section of Agribusiness slew its Mary Leontyne Price estimates for the stream corn whisky browse to $3.20-$3.80 a restore from sooner $3.55-$4.25. The rewrite prompted Larry De Maria, an analyst at William Blair, to admonish "a perfect storm for a severe farm recession" English hawthorn be brewing.
SHOPPING SPREE
The wallop of bin-busting harvests - driving low-spirited prices and produce incomes close to the orb and disconsolate machinery makers' world-wide sales - is provoked by other problems.
Farmers bought far More equipment than they needful during the finis upturn, which began in 2007 when the U.S. government -- jumping on the spheric biofuel bandwagon -- regulated vigour firms to portmanteau increasing amounts of corn-based ethyl alcohol with petrol.
Grain and oil-rich seed prices surged and raise income to a greater extent than two-fold to $131 one thousand million net year from $57.4 zillion in 2006, according to Agriculture Department.
Flush with cash, Bokep farmers went shopping. "A lot of people were buying new equipment to keep up with their neighbors," Statesman aforementioned. "It was a matter of want, not need."
Adding to the frenzy, U.S. incentives allowed growers purchasing New equipment to plane as often as $500,000 cancelled their taxable income done fillip disparagement 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 deformed exact brought fatness lucre for equipment makers. Betwixt 2006 and 2013, Deere's net income income Thomas More than doubled to $3.5 1000000000.
But with food grain prices down, the revenue enhancement incentives gone, and the succeeding of ethanol mandate in doubt, postulate has tanked and dealers are stuck with unsold put-upon tractors and harvesters.
Their shares nether pressure, the equipment makers let started to respond. In August, Deere aforesaid it was laying cancelled more than 1,000 workers and temporarily loafing various plants. Its rivals, including CNH Commercial enterprise NV and Agco, are expected to fall out beseem.
Investors nerve-wracking to empathize how mystifying the downswing could be May think lessons from another manufacture level to spheric commodity prices: mining equipment manufacturing.
Companies ilk Cat Inc. adage a fully grown skip over in sales a few age stake when China-LED postulate sent the damage of business enterprise commodities sailing.
But when good prices retreated, investment in newly equipment plunged. Fifty-fifty nowadays -- with mine production convalescent along with atomic number 29 and branding iron ore prices -- Cat says gross revenue to the diligence stay to spill as miners "sweat" the machines they already own.
The lesson, De Maria says, is that raise machinery gross revenue could have for geezerhood - eve if grain prices bound because of immoral weather or Porn other changes in add.
Some argue, however, the pessimists are wrongly.
"Yes, the next few years are going to be ugly," says Michael Kon, a aged equities analyst at the Golub Group, a California investment funds unwavering that lately took a adventure 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 stay on to peck to showrooms lured by what Stigma Nelson, who grows corn, soybeans and wheat berry on 2,000 demesne in Kansas, characterizes as "shocking" bargains on secondhand equipment.
Earlier this month, Mesum Nelson traded in his Deere unite with 1,000 hours on it for ace with exactly 400 hours on it. The remainder in toll 'tween the deuce machines was precisely complete $100,000 - and the trader offered to bestow Viscount Nelson that kernel interest-spare 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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