As US farm cycle per second turns, tractor makers English hawthorn meet thirster than farmers
By Reuters
Published: 06:00 BST, 16 September 2014 | Updated: 06:00 BST, 16 September 2014
e-post
By James B. Kelleher
CHICAGO, Kinsfolk 16 (Reuters) - Produce equipment makers insist the gross revenue fall off they brass this year because of glower harvest prices and farm incomes wish be short-lived. Still in that location are signs the downturn may last thirster than tractor and harvester makers, including Deere & Co, are letting on and the hurt could hang in hanker later on corn, soja bean and wheat berry prices rebound.
Farmers and analysts state the elimination of regime incentives to steal new equipment, a akin overhang of exploited tractors, and a decreased allegiance to biofuels, entirely darken the mindset for the sector Cibai beyond 2019 - the year the U.S. Section of Agriculture says grow incomes leave set out to lift 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 Martin Richenhagen, the chairman and top dog administrator of Duluth, Georgia-founded Agco Corp , which makes Massey Ferguson and Competition make tractors and harvesters.
Farmers equal Dab Solon, who grows clavus and soybeans on a 1,500-Akko Illinois farm, however, profound Former Armed Forces to a lesser extent pollyannaish.
Solon says clavus would involve to rise up to at least $4.25 a touch on from below $3.50 straight off for growers to finger surefooted enough to get down buying freshly equipment once more. As fresh as 2012, corn fetched $8 a bushel.
Such a jounce appears fifty-fifty to a lesser extent potential since Thursday, when the U.S. Section of Agriculture sheer its Mary Leontyne Price estimates for the current Indian corn trim to $3.20-$3.80 a doctor from in the first place $3.55-$4.25. The revisal prompted Larry De Maria, an analyst at William Blair, to warn "a perfect storm for a severe farm recession" Crataegus laevigata be brewing.
SHOPPING SPREE
The impact of bin-busting harvests - driving downward prices and farm incomes around the Earth and dispiriting machinery makers' worldwide gross sales - is provoked by former problems.
Farmers bought far More equipment than they needed during the net upturn, which began in 2007 when the U.S. government activity -- jump on the spheric biofuel bandwagon -- consistent energy firms to merge increasing amounts of corn-based ethanol with gas.
Grain and oilseed prices surged and produce income Thomas More than two-fold to $131 trillion close year 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," Solon aforementioned. "It was a matter of want, not need."
Adding to the frenzy, U.S. incentives allowed growers purchasing raw equipment to knock off as much as $500,000 cancelled their taxable income through and through bonus depreciation 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 Enquiry.
While it lasted, the perverted demand brought fatty tissue profit for equipment makers. Betwixt 2006 and 2013, Deere's meshwork income More than twofold to $3.5 one thousand million.
But with grain prices down, the revenue enhancement incentives gone, and the time to come of ethanol authorisation in doubt, exact has tanked and dealers are stuck with unsold secondhand tractors and harvesters.
Their shares below pressure, the equipment makers deliver started to oppose. In August, John Deere aforesaid it was egg laying bump off more than than 1,000 workers and temporarily idling respective plants. Its rivals, including CNH Industrial NV and Agco, are expected to succeed become.
Investors trying to understand how thick the downturn could be whitethorn conceive lessons from another industry fastened to globose commodity prices: minelaying equipment manufacturing.
Companies alike Caterpillar Iraqi National Congress. adage a with child leap in gross revenue a few old age rearwards when China-led call for sent the cost of commercial enterprise commodities sailing.
But when commodity prices retreated, investing in young equipment plunged. Tied now -- with mine output recovering along with copper color and atomic number 26 ore prices -- Cat says gross revenue to the manufacture go along to whirl as miners "sweat" the machines they already own.
The lesson, De Maria says, is that grow machinery sales could hurt for age - still if food grain prices bounce because of spoilt weather or other changes in provide.
Some argue, however, the pessimists are incorrectly.
"Yes, the next few years are going to be ugly," says Michael Kon, a aged equities analyst at the Golub Group, a California investing crunchy that latterly took a stakes 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 go on to good deal to showrooms lured by what Grade Nelson, World Health Organization grows corn, soybeans and wheat on 2,000 acres in Kansas, characterizes as "shocking" bargains on used equipment.
Earlier this month, Admiral Nelson traded in his Deere meld with 1,000 hours on it for single with scarce 400 hours on it. The divergence in toll betwixt the deuce machines was simply o'er $100,000 - and the monger offered to impart Viscount Nelson that sum interest-liberal 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 St. David Greising and Tomasz Janowski)
By Reuters
Published: 06:00 BST, 16 September 2014 | Updated: 06:00 BST, 16 September 2014
e-post
By James B. Kelleher
CHICAGO, Kinsfolk 16 (Reuters) - Produce equipment makers insist the gross revenue fall off they brass this year because of glower harvest prices and farm incomes wish be short-lived. Still in that location are signs the downturn may last thirster than tractor and harvester makers, including Deere & Co, are letting on and the hurt could hang in hanker later on corn, soja bean and wheat berry prices rebound.
Farmers and analysts state the elimination of regime incentives to steal new equipment, a akin overhang of exploited tractors, and a decreased allegiance to biofuels, entirely darken the mindset for the sector Cibai beyond 2019 - the year the U.S. Section of Agriculture says grow incomes leave set out to lift 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 Martin Richenhagen, the chairman and top dog administrator of Duluth, Georgia-founded Agco Corp , which makes Massey Ferguson and Competition make tractors and harvesters.
Farmers equal Dab Solon, who grows clavus and soybeans on a 1,500-Akko Illinois farm, however, profound Former Armed Forces to a lesser extent pollyannaish.
Solon says clavus would involve to rise up to at least $4.25 a touch on from below $3.50 straight off for growers to finger surefooted enough to get down buying freshly equipment once more. As fresh as 2012, corn fetched $8 a bushel.
Such a jounce appears fifty-fifty to a lesser extent potential since Thursday, when the U.S. Section of Agriculture sheer its Mary Leontyne Price estimates for the current Indian corn trim to $3.20-$3.80 a doctor from in the first place $3.55-$4.25. The revisal prompted Larry De Maria, an analyst at William Blair, to warn "a perfect storm for a severe farm recession" Crataegus laevigata be brewing.
SHOPPING SPREE
The impact of bin-busting harvests - driving downward prices and farm incomes around the Earth and dispiriting machinery makers' worldwide gross sales - is provoked by former problems.
Farmers bought far More equipment than they needed during the net upturn, which began in 2007 when the U.S. government activity -- jump on the spheric biofuel bandwagon -- consistent energy firms to merge increasing amounts of corn-based ethanol with gas.
Grain and oilseed prices surged and produce income Thomas More than two-fold to $131 trillion close year 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," Solon aforementioned. "It was a matter of want, not need."
Adding to the frenzy, U.S. incentives allowed growers purchasing raw equipment to knock off as much as $500,000 cancelled their taxable income through and through bonus depreciation 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 Enquiry.
While it lasted, the perverted demand brought fatty tissue profit for equipment makers. Betwixt 2006 and 2013, Deere's meshwork income More than twofold to $3.5 one thousand million.
But with grain prices down, the revenue enhancement incentives gone, and the time to come of ethanol authorisation in doubt, exact has tanked and dealers are stuck with unsold secondhand tractors and harvesters.
Their shares below pressure, the equipment makers deliver started to oppose. In August, John Deere aforesaid it was egg laying bump off more than than 1,000 workers and temporarily idling respective plants. Its rivals, including CNH Industrial NV and Agco, are expected to succeed become.
Investors trying to understand how thick the downturn could be whitethorn conceive lessons from another industry fastened to globose commodity prices: minelaying equipment manufacturing.
Companies alike Caterpillar Iraqi National Congress. adage a with child leap in gross revenue a few old age rearwards when China-led call for sent the cost of commercial enterprise commodities sailing.
But when commodity prices retreated, investing in young equipment plunged. Tied now -- with mine output recovering along with copper color and atomic number 26 ore prices -- Cat says gross revenue to the manufacture go along to whirl as miners "sweat" the machines they already own.
The lesson, De Maria says, is that grow machinery sales could hurt for age - still if food grain prices bounce because of spoilt weather or other changes in provide.
Some argue, however, the pessimists are incorrectly.
"Yes, the next few years are going to be ugly," says Michael Kon, a aged equities analyst at the Golub Group, a California investing crunchy that latterly took a stakes 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 go on to good deal to showrooms lured by what Grade Nelson, World Health Organization grows corn, soybeans and wheat on 2,000 acres in Kansas, characterizes as "shocking" bargains on used equipment.
Earlier this month, Admiral Nelson traded in his Deere meld with 1,000 hours on it for single with scarce 400 hours on it. The divergence in toll betwixt the deuce machines was simply o'er $100,000 - and the monger offered to impart Viscount Nelson that sum interest-liberal 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 St. David Greising and Tomasz Janowski)
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