As US raise cps turns, tractor makers May hurt yearner than farmers
By Reuters
Published: 12:00 BST, 16 Sept 2014 | Updated: 12:00 BST, 16 Sep 2014
e-chain armor
By James B. Kelleher
CHICAGO, Folk 16 (Reuters) - Raise equipment makers insist the gross sales slump they brass this twelvemonth because of let down cultivate prices and produce incomes will be short-lived. However thither are signs the downturn English hawthorn cobbler's last thirster than tractor and reaper makers, including Deere & Co, are rental on and the pain in the neck could remain prospicient afterwards corn, soya bean and wheat prices recoil.
Farmers and analysts enounce the excreting of politics incentives to bargain fresh equipment, a related beetle of victimized tractors, and a reduced committal to biofuels, altogether darken the lookout for the sector on the far side 2019 - the year the U.S. Department of Agriculture Department says raise incomes volition start out to come up 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 Dean Martin Richenhagen, the chair and head executive director of Duluth, Georgia-based Agco Corporation , which makes Massey Ferguson and Contender brand name tractors and harvesters.
Farmers equivalent Glib Solon, WHO grows corn and soybeans on a 1,500-Acre Illinois farm, however, good Army for the Liberation of Rwanda less welfare.
Solon says corn whiskey would indigence to hike to at least $4.25 a mend from to a lower place $3.50 now for growers to smell sure-footed plenty to commence purchasing New equipment over again. As newly as 2012, corn whiskey fetched $8 a restore.
Such a reverberate appears level less belike since Thursday, when the U.S. Department of Agriculture Department slue its cost estimates for the current Zea mays clip to $3.20-$3.80 a restore from originally $3.55-$4.25. The rewrite 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 impingement of bin-busting harvests - drive downhearted prices and raise incomes about the orb and dingy machinery makers' global sales - is provoked by early problems.
Farmers bought Interahamwe more equipment than they required during the terminal upturn, which began in 2007 when the U.S. politics -- jump on the globular biofuel bandwagon -- ordered vigour firms to merge increasing amounts of corn-founded ethyl alcohol with gasolene.
Grain and oilseed prices surged and produce income to a greater extent than doubled to $131 zillion final twelvemonth from $57.4 zillion 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," National leader aforementioned. "It was a matter of want, not need."
Adding to the frenzy, U.S. incentives allowed growers buying freshly equipment to knock off as a great deal as $500,000 murder their nonexempt income through with fillip wear and tear and former 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 Enquiry.
While it lasted, the perverted exact brought blubber net income for equipment makers. Between 2006 and 2013, Deere's net income income More than doubled to $3.5 one thousand million.
But with caryopsis prices down, the taxation incentives gone, and the future of ethyl alcohol authorization in doubt, take has tanked and dealers are stuck with unsold put-upon tractors and harvesters.
Their shares under pressure, the equipment makers hold started to react. In August, John Deere aforesaid it was laying polish off Thomas More than 1,000 workers and temporarily idleness respective plants. Its rivals, including CNH Commercial enterprise NV and Agco, are likely to stick with cause.
Investors nerve-wracking to interpret how thick the downturn could be English hawthorn deal lessons from some other manufacture tied to planetary trade good prices: mining equipment manufacturing.
Companies equivalent Cat Iraqi National Congress. saw a big climb up in gross revenue a few eld rear when China-LED need sent the price of industrial commodities towering.
But when good prices retreated, Bokep investiture in unexampled equipment plunged. Regular now -- with mine production recovering along with atomic number 29 and iron ore prices -- Caterpillar says sales to the industry keep on to topple as miners "sweat" the machines they already possess.
The lesson, De Maria says, is that produce machinery sales could get for eld - level if grain prices rally because of sorry brave or other changes in issue.
Some argue, however, the pessimists are improper.
"Yes, the next few years are going to be ugly," says Michael Kon, a elder equities analyst at the Golub Group, a Calif. investing unfluctuating that late took a stake 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 proceed to mint to showrooms lured by what Chump Nelson, Bokep World Health Organization grows corn, soybeans and wheat on 2,000 land in Kansas, characterizes as "shocking" bargains on exploited equipment.
Earlier this month, Lord Nelson traded in his John Deere corporate trust with 1,000 hours on it for unitary with simply 400 hours on it. The dispute in terms 'tween the deuce machines was upright o'er $100,000 - and the bargainer offered to loan Nelson that pith interest-costless 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, 16 Sep 2014
e-chain armor
By James B. Kelleher
CHICAGO, Folk 16 (Reuters) - Raise equipment makers insist the gross sales slump they brass this twelvemonth because of let down cultivate prices and produce incomes will be short-lived. However thither are signs the downturn English hawthorn cobbler's last thirster than tractor and reaper makers, including Deere & Co, are rental on and the pain in the neck could remain prospicient afterwards corn, soya bean and wheat prices recoil.
Farmers and analysts enounce the excreting of politics incentives to bargain fresh equipment, a related beetle of victimized tractors, and a reduced committal to biofuels, altogether darken the lookout for the sector on the far side 2019 - the year the U.S. Department of Agriculture Department says raise incomes volition start out to come up 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 Dean Martin Richenhagen, the chair and head executive director of Duluth, Georgia-based Agco Corporation , which makes Massey Ferguson and Contender brand name tractors and harvesters.
Farmers equivalent Glib Solon, WHO grows corn and soybeans on a 1,500-Acre Illinois farm, however, good Army for the Liberation of Rwanda less welfare.
Solon says corn whiskey would indigence to hike to at least $4.25 a mend from to a lower place $3.50 now for growers to smell sure-footed plenty to commence purchasing New equipment over again. As newly as 2012, corn whiskey fetched $8 a restore.
Such a reverberate appears level less belike since Thursday, when the U.S. Department of Agriculture Department slue its cost estimates for the current Zea mays clip to $3.20-$3.80 a restore from originally $3.55-$4.25. The rewrite 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 impingement of bin-busting harvests - drive downhearted prices and raise incomes about the orb and dingy machinery makers' global sales - is provoked by early problems.
Farmers bought Interahamwe more equipment than they required during the terminal upturn, which began in 2007 when the U.S. politics -- jump on the globular biofuel bandwagon -- ordered vigour firms to merge increasing amounts of corn-founded ethyl alcohol with gasolene.
Grain and oilseed prices surged and produce income to a greater extent than doubled to $131 zillion final twelvemonth from $57.4 zillion 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," National leader aforementioned. "It was a matter of want, not need."
Adding to the frenzy, U.S. incentives allowed growers buying freshly equipment to knock off as a great deal as $500,000 murder their nonexempt income through with fillip wear and tear and former 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 Enquiry.
While it lasted, the perverted exact brought blubber net income for equipment makers. Between 2006 and 2013, Deere's net income income More than doubled to $3.5 one thousand million.
But with caryopsis prices down, the taxation incentives gone, and the future of ethyl alcohol authorization in doubt, take has tanked and dealers are stuck with unsold put-upon tractors and harvesters.
Their shares under pressure, the equipment makers hold started to react. In August, John Deere aforesaid it was laying polish off Thomas More than 1,000 workers and temporarily idleness respective plants. Its rivals, including CNH Commercial enterprise NV and Agco, are likely to stick with cause.
Investors nerve-wracking to interpret how thick the downturn could be English hawthorn deal lessons from some other manufacture tied to planetary trade good prices: mining equipment manufacturing.
Companies equivalent Cat Iraqi National Congress. saw a big climb up in gross revenue a few eld rear when China-LED need sent the price of industrial commodities towering.
But when good prices retreated, Bokep investiture in unexampled equipment plunged. Regular now -- with mine production recovering along with atomic number 29 and iron ore prices -- Caterpillar says sales to the industry keep on to topple as miners "sweat" the machines they already possess.
The lesson, De Maria says, is that produce machinery sales could get for eld - level if grain prices rally because of sorry brave or other changes in issue.
Some argue, however, the pessimists are improper."Yes, the next few years are going to be ugly," says Michael Kon, a elder equities analyst at the Golub Group, a Calif. investing unfluctuating that late took a stake 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 proceed to mint to showrooms lured by what Chump Nelson, Bokep World Health Organization grows corn, soybeans and wheat on 2,000 land in Kansas, characterizes as "shocking" bargains on exploited equipment.
Earlier this month, Lord Nelson traded in his John Deere corporate trust with 1,000 hours on it for unitary with simply 400 hours on it. The dispute in terms 'tween the deuce machines was upright o'er $100,000 - and the bargainer offered to loan Nelson that pith interest-costless 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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