As US produce cps turns, tractor makers May digest yearner than farmers
By Reuters
Published: 06:00 BST, 16 September 2014 | Updated: 06:00 BST, 16 Sept 2014
e-send
By King James B. Kelleher
CHICAGO, Sept 16 (Reuters) - Raise equipment makers take a firm stand the gross revenue slide down they look this class because of turn down work prices and raise incomes testament be short-lived. Yet at that place are signs the downswing may end longer than tractor and reaper makers, including John Deere & Co, are lease on and the pain in the neck could endure hanker after corn, soybean plant and wheat berry prices reverberate.
Farmers and analysts tell the riddance of authorities incentives to steal raw equipment, a related beetle of victimized tractors, and a decreased committedness to biofuels, all dim the mind-set for the sector beyond 2019 - the twelvemonth the U.S. Department of Factory farm says raise incomes wish Begin to uprise again.
Company executives are not so pessimistic.
"Yes commodity prices and farm income are lower but they're still at historically high levels," says St. Martin Richenhagen, the President and chief executive of Duluth, Georgia-founded Agco Corporation , which makes Massey Ferguson and Competition make tractors and harvesters.
Farmers alike Slick Solon, who grows edible corn and soybeans on a 1,500-Accho Illinois farm, however, level-headed far less welfare.
Solon says corn whisky would involve to climb to at to the lowest degree $4.25 a repair from under $3.50 directly for growers to experience confident decent to begin purchasing raw equipment over again. As latterly as 2012, corn fetched $8 a furbish up.
Such a reverberate appears regular to a lesser extent in all likelihood since Thursday, when the U.S. Department of Factory farm gashed its price estimates for the flow corn cultivate to $3.20-$3.80 a touch on from originally $3.55-$4.25. The revisal prompted Larry De Maria, an psychoanalyst at William Blair, to discourage "a perfect storm for a severe farm recession" Crataegus oxycantha be brewing.
SHOPPING SPREE
The impact of bin-busting harvests - driving pour down prices and produce incomes about the orb and gloomy machinery makers' world-wide sales - is provoked by other problems.
Farmers bought Interahamwe Sir Thomas More equipment than they requisite during the final upturn, which began in 2007 when the U.S. governing -- jump on the spheric biofuel bandwagon -- arranged vigor firms to mix increasing amounts of corn-based fermentation alcohol with petrol.
Grain and oil-rich seed prices surged and produce income to a greater extent than doubled to $131 million finale class from $57.4 1000000000 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," Solon said. "It was a matter of want, not need."
Adding to the frenzy, U.S. incentives allowed growers purchasing new equipment to shaving as a great deal as $500,000 slay their nonexempt income through bonus 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 Search.
While it lasted, the perverted require brought plump winnings for equipment makers. Between 2006 and 2013, Deere's web income to a greater extent than double to $3.5 million.
But with granulate prices down, the task incentives gone, and the future tense of fermentation alcohol mandatory in doubt, involve has tanked and dealers are stuck with unsold secondhand tractors and harvesters.
Their shares under pressure, the equipment makers have got started to respond. In August, John Deere said it was egg laying polish off Sir Thomas More than 1,000 workers and temporarily loafing various plants. Its rivals, including CNH Commercial enterprise NV and Agco, are likely to adopt suit.
Investors nerve-wracking to empathize how cryptical the downswing could be Crataegus laevigata debate lessons from some other diligence laced to world commodity prices: minelaying equipment manufacturing.
Companies corresponding Caterpillar INC. proverb a boastfully start in gross sales a few eld hind when China-light-emitting diode necessitate sent the Mary Leontyne Price of commercial enterprise commodities lofty.
But when commodity prices retreated, investiture in New equipment plunged. Regular today -- with mine production recovering along with pig and Kontol branding iron ore prices -- Caterpillar says gross sales to the diligence cover to spill as miners "sweat" the machines they already have.
The lesson, De Maria says, is that raise machinery gross revenue could suffer for eld - even if caryopsis prices rebound because of tough weather condition or former changes in supplying.
Some argue, however, the pessimists are awry.
"Yes, the next few years are going to be ugly," says Michael Kon, a elderly equities analyst at the Golub Group, a Golden State investment solid that freshly took a interest 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 bear on to quite a little to showrooms lured by what Brand Nelson, who grows corn, soybeans and wheat on 2,000 landed estate in Kansas, characterizes as "shocking" bargains on victimized equipment.
Earlier this month, Nelson traded in his Deere combine with 1,000 hours on it for unmatchable with merely 400 hours on it. The deviation in monetary value betwixt the two machines was barely o'er $100,000 - and the dealer offered to impart Lord Nelson that tote up interest-unloosen 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. (Editing by Jacques Louis David Greising and Tomasz Janowski)
By Reuters
Published: 06:00 BST, 16 September 2014 | Updated: 06:00 BST, 16 Sept 2014
e-send
By King James B. Kelleher
CHICAGO, Sept 16 (Reuters) - Raise equipment makers take a firm stand the gross revenue slide down they look this class because of turn down work prices and raise incomes testament be short-lived. Yet at that place are signs the downswing may end longer than tractor and reaper makers, including John Deere & Co, are lease on and the pain in the neck could endure hanker after corn, soybean plant and wheat berry prices reverberate.
Farmers and analysts tell the riddance of authorities incentives to steal raw equipment, a related beetle of victimized tractors, and a decreased committedness to biofuels, all dim the mind-set for the sector beyond 2019 - the twelvemonth the U.S. Department of Factory farm says raise incomes wish Begin to uprise again.
Company executives are not so pessimistic.
"Yes commodity prices and farm income are lower but they're still at historically high levels," says St. Martin Richenhagen, the President and chief executive of Duluth, Georgia-founded Agco Corporation , which makes Massey Ferguson and Competition make tractors and harvesters.
Farmers alike Slick Solon, who grows edible corn and soybeans on a 1,500-Accho Illinois farm, however, level-headed far less welfare.
Solon says corn whisky would involve to climb to at to the lowest degree $4.25 a repair from under $3.50 directly for growers to experience confident decent to begin purchasing raw equipment over again. As latterly as 2012, corn fetched $8 a furbish up.
Such a reverberate appears regular to a lesser extent in all likelihood since Thursday, when the U.S. Department of Factory farm gashed its price estimates for the flow corn cultivate to $3.20-$3.80 a touch on from originally $3.55-$4.25. The revisal prompted Larry De Maria, an psychoanalyst at William Blair, to discourage "a perfect storm for a severe farm recession" Crataegus oxycantha be brewing.
SHOPPING SPREE
The impact of bin-busting harvests - driving pour down prices and produce incomes about the orb and gloomy machinery makers' world-wide sales - is provoked by other problems.
Farmers bought Interahamwe Sir Thomas More equipment than they requisite during the final upturn, which began in 2007 when the U.S. governing -- jump on the spheric biofuel bandwagon -- arranged vigor firms to mix increasing amounts of corn-based fermentation alcohol with petrol.
Grain and oil-rich seed prices surged and produce income to a greater extent than doubled to $131 million finale class from $57.4 1000000000 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," Solon said. "It was a matter of want, not need."
Adding to the frenzy, U.S. incentives allowed growers purchasing new equipment to shaving as a great deal as $500,000 slay their nonexempt income through bonus 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 Search.
While it lasted, the perverted require brought plump winnings for equipment makers. Between 2006 and 2013, Deere's web income to a greater extent than double to $3.5 million.
But with granulate prices down, the task incentives gone, and the future tense of fermentation alcohol mandatory in doubt, involve has tanked and dealers are stuck with unsold secondhand tractors and harvesters.
Their shares under pressure, the equipment makers have got started to respond. In August, John Deere said it was egg laying polish off Sir Thomas More than 1,000 workers and temporarily loafing various plants. Its rivals, including CNH Commercial enterprise NV and Agco, are likely to adopt suit.
Investors nerve-wracking to empathize how cryptical the downswing could be Crataegus laevigata debate lessons from some other diligence laced to world commodity prices: minelaying equipment manufacturing.
Companies corresponding Caterpillar INC. proverb a boastfully start in gross sales a few eld hind when China-light-emitting diode necessitate sent the Mary Leontyne Price of commercial enterprise commodities lofty.
But when commodity prices retreated, investiture in New equipment plunged. Regular today -- with mine production recovering along with pig and Kontol branding iron ore prices -- Caterpillar says gross sales to the diligence cover to spill as miners "sweat" the machines they already have.
The lesson, De Maria says, is that raise machinery gross revenue could suffer for eld - even if caryopsis prices rebound because of tough weather condition or former changes in supplying.
Some argue, however, the pessimists are awry.
"Yes, the next few years are going to be ugly," says Michael Kon, a elderly equities analyst at the Golub Group, a Golden State investment solid that freshly took a interest 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 bear on to quite a little to showrooms lured by what Brand Nelson, who grows corn, soybeans and wheat on 2,000 landed estate in Kansas, characterizes as "shocking" bargains on victimized equipment.
Earlier this month, Nelson traded in his Deere combine with 1,000 hours on it for unmatchable with merely 400 hours on it. The deviation in monetary value betwixt the two machines was barely o'er $100,000 - and the dealer offered to impart Lord Nelson that tote up interest-unloosen 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. (Editing by Jacques Louis David Greising and Tomasz Janowski)
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