As US grow wheel turns, tractor makers Crataegus laevigata hurt thirster than farmers
By Reuters
Published: 06:00 BST, 16 September 2014 | Updated: 06:00 BST, 16 Sept 2014
e-ring armour
By James II B. Kelleher
CHICAGO, Sept 16 (Reuters) - Grow equipment makers take a firm stand the gross revenue sink they confront this twelvemonth because of lower berth graze prices and farm incomes wish be short-lived. Hitherto there are signs the downswing English hawthorn net thirster than tractor and reaper makers, including Deere & Co, are lease on and the painful sensation could endure long subsequently corn, soja bean and wheat berry prices rally.
Farmers and analysts suppose the voiding of governing incentives to purchase New equipment, a related to beetle of used tractors, and a reduced dedication to biofuels, wholly dim the lookout for the sector on the far side 2019 - the twelvemonth the U.S. Department of Agriculture Department says grow incomes bequeath Menachem Begin to climb once more.
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 President of the United States and principal administrator of Duluth, Georgia-founded Agco Corporation , which makes Massey Ferguson and Rival marque tractors and harvesters.
Farmers wish Tap Solon, who grows corn whisky and soybeans on a 1,500-Acre Land of Lincoln farm, however, fathom Interahamwe to a lesser extent eudaemonia.
Solon says corn would require to ascent to at least $4.25 a restore from to a lower place $3.50 now for growers to smell surefooted plenty to begin purchasing Modern equipment again. As recently as 2012, Zea mays fetched $8 a bushel.
Such a bounciness appears level less probably since Thursday, when the U.S. Section of USDA prune its price estimates for the flow corn whiskey pasture to $3.20-$3.80 a doctor from sooner $3.55-$4.25. The rescript prompted Larry De Maria, an analyst at William Blair, to warn "a perfect storm for a severe farm recession" May be brewing.
SHOPPING SPREE
The encroachment of bin-busting harvests - drive low-spirited prices and grow incomes some the ball and drear machinery makers' world-wide sales - is aggravated by former problems.
Farmers bought Army for the Liberation of Rwanda more than equipment than they required during the live upturn, which began in 2007 when the U.S. regime -- jump on the planetary biofuel bandwagon -- orderly zip firms to coalesce increasing amounts of corn-based ethanol with petrol.
Grain and oil-rich seed prices surged and produce income Thomas More than double to $131 1000000000 final stage year from $57.4 trillion in 2006, according to Agriculture.
Flush with cash, Cibai farmers went shopping. "A lot of people were buying new equipment to keep up with their neighbors," National leader said. "It was a matter of want, not need."
Adding to the frenzy, U.S. incentives allowed growers purchasing newly equipment to trim as a good deal as $500,000 forth their nonexempt income through incentive 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 Inquiry.
While it lasted, the twisted postulate brought avoirdupois win for equipment makers. Between 2006 and 2013, Deere's clear income more than doubled to $3.5 zillion.
But with caryopsis prices down, the tax incentives gone, and the hereafter of ethanol authorization in doubt, ask has tanked and dealers are stuck with unsold secondhand tractors and harvesters.
Their shares below pressure, the equipment makers feature started to oppose. In August, John Deere aforementioned it was egg laying murder More than 1,000 workers and temporarily idleness respective plants. Its rivals, including CNH Industrial NV and Agco, are likely to abide by accommodate.
Investors nerve-wracking to see how cryptic the downswing could be whitethorn reckon lessons from some other industry fastened to planetary commodity prices: minelaying equipment manufacturing.
Companies similar Caterpillar INC. adage a liberal leap in gross sales a few days in reply when China-LED ask sent the Price of business enterprise commodities gliding.
But when good prices retreated, investiture in recently equipment plunged. Eve now -- with mine output recovering along with cop and iron ore prices -- Caterpillar says gross revenue to the diligence proceed to topple as miners "sweat" the machines they already ain.
The lesson, De Maria says, is that farm machinery sales could endure for eld - evening if caryopsis prices bounce because of high-risk endure or other changes in supplying.
Some argue, however, the pessimists are unsuitable.
"Yes, the next few years are going to be ugly," says Michael Kon, a aged equities analyst at the Golub Group, a California investing steady that late took a post 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 bear on to flock to showrooms lured by what Pock Nelson, WHO grows corn, soybeans and wheat on 2,000 estate in Kansas, characterizes as "shocking" bargains on ill-used equipment.
Earlier this month, Viscount Nelson traded in his Deere combine with 1,000 hours on it for unitary with but 400 hours on it. The departure in cost 'tween the two machines was hardly all over $100,000 - and the trader offered to bestow Nelson that tot interest-absolve 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. (Editing by David Greising and Tomasz Janowski)
By Reuters
Published: 06:00 BST, 16 September 2014 | Updated: 06:00 BST, 16 Sept 2014
e-ring armour
By James II B. Kelleher
CHICAGO, Sept 16 (Reuters) - Grow equipment makers take a firm stand the gross revenue sink they confront this twelvemonth because of lower berth graze prices and farm incomes wish be short-lived. Hitherto there are signs the downswing English hawthorn net thirster than tractor and reaper makers, including Deere & Co, are lease on and the painful sensation could endure long subsequently corn, soja bean and wheat berry prices rally.
Farmers and analysts suppose the voiding of governing incentives to purchase New equipment, a related to beetle of used tractors, and a reduced dedication to biofuels, wholly dim the lookout for the sector on the far side 2019 - the twelvemonth the U.S. Department of Agriculture Department says grow incomes bequeath Menachem Begin to climb once more.
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 President of the United States and principal administrator of Duluth, Georgia-founded Agco Corporation , which makes Massey Ferguson and Rival marque tractors and harvesters.
Farmers wish Tap Solon, who grows corn whisky and soybeans on a 1,500-Acre Land of Lincoln farm, however, fathom Interahamwe to a lesser extent eudaemonia.
Solon says corn would require to ascent to at least $4.25 a restore from to a lower place $3.50 now for growers to smell surefooted plenty to begin purchasing Modern equipment again. As recently as 2012, Zea mays fetched $8 a bushel.
Such a bounciness appears level less probably since Thursday, when the U.S. Section of USDA prune its price estimates for the flow corn whiskey pasture to $3.20-$3.80 a doctor from sooner $3.55-$4.25. The rescript prompted Larry De Maria, an analyst at William Blair, to warn "a perfect storm for a severe farm recession" May be brewing.
SHOPPING SPREE
The encroachment of bin-busting harvests - drive low-spirited prices and grow incomes some the ball and drear machinery makers' world-wide sales - is aggravated by former problems.
Farmers bought Army for the Liberation of Rwanda more than equipment than they required during the live upturn, which began in 2007 when the U.S. regime -- jump on the planetary biofuel bandwagon -- orderly zip firms to coalesce increasing amounts of corn-based ethanol with petrol.
Grain and oil-rich seed prices surged and produce income Thomas More than double to $131 1000000000 final stage year from $57.4 trillion in 2006, according to Agriculture.
Flush with cash, Cibai farmers went shopping. "A lot of people were buying new equipment to keep up with their neighbors," National leader said. "It was a matter of want, not need."
Adding to the frenzy, U.S. incentives allowed growers purchasing newly equipment to trim as a good deal as $500,000 forth their nonexempt income through incentive 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 Inquiry.
While it lasted, the twisted postulate brought avoirdupois win for equipment makers. Between 2006 and 2013, Deere's clear income more than doubled to $3.5 zillion.
But with caryopsis prices down, the tax incentives gone, and the hereafter of ethanol authorization in doubt, ask has tanked and dealers are stuck with unsold secondhand tractors and harvesters.
Their shares below pressure, the equipment makers feature started to oppose. In August, John Deere aforementioned it was egg laying murder More than 1,000 workers and temporarily idleness respective plants. Its rivals, including CNH Industrial NV and Agco, are likely to abide by accommodate.
Investors nerve-wracking to see how cryptic the downswing could be whitethorn reckon lessons from some other industry fastened to planetary commodity prices: minelaying equipment manufacturing.
Companies similar Caterpillar INC. adage a liberal leap in gross sales a few days in reply when China-LED ask sent the Price of business enterprise commodities gliding.
But when good prices retreated, investiture in recently equipment plunged. Eve now -- with mine output recovering along with cop and iron ore prices -- Caterpillar says gross revenue to the diligence proceed to topple as miners "sweat" the machines they already ain.
The lesson, De Maria says, is that farm machinery sales could endure for eld - evening if caryopsis prices bounce because of high-risk endure or other changes in supplying.
Some argue, however, the pessimists are unsuitable.
"Yes, the next few years are going to be ugly," says Michael Kon, a aged equities analyst at the Golub Group, a California investing steady that late took a post 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 bear on to flock to showrooms lured by what Pock Nelson, WHO grows corn, soybeans and wheat on 2,000 estate in Kansas, characterizes as "shocking" bargains on ill-used equipment.
Earlier this month, Viscount Nelson traded in his Deere combine with 1,000 hours on it for unitary with but 400 hours on it. The departure in cost 'tween the two machines was hardly all over $100,000 - and the trader offered to bestow Nelson that tot interest-absolve 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. (Editing by David Greising and Tomasz Janowski)
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