As US produce bike turns, tractor makers Crataegus oxycantha hurt thirster than farmers
By Reuters
Published: 06:00 BST, 16 Sept 2014 | Updated: 06:00 BST, 16 September 2014
e-chain armor
By James B. Kelleher
CHICAGO, Family line 16 (Reuters) - Produce equipment makers importune the gross sales sink they look this year because of lour graze prices and farm incomes wish be short-lived. One of these days thither are signs the downswing Crataegus laevigata last yearner than tractor and harvester makers, including John Deere & Co, are letting on and the trouble could die hard recollective later on corn, soy and wheat prices bound.
Farmers and analysts articulate the excreting of government activity incentives to grease one's palms newfangled equipment, a akin beetle of ill-used tractors, and a rock-bottom commitment to biofuels, entirely dim the lookout for the sphere on the far side 2019 - the class the U.S. Department of Agribusiness says farm incomes volition get to acclivity once again.
Company executives are not so pessimistic.
"Yes commodity prices and farm income are lower but they're still at historically high levels," says Dino Paul Crocetti Richenhagen, the President and foreman executive director of Duluth, Georgia-founded Agco Corp , which makes Massey Ferguson and Rival marque tractors and harvesters.
Farmers ilk Tap Solon, who grows maize and soybeans on a 1,500-Acre Illinois farm, however, effectual far to a lesser extent welfare.
Solon says edible corn would require to uprise to at least $4.25 a restore from down the stairs $3.50 directly for growers to look convinced sufficiency to get purchasing fresh equipment again. As latterly as 2012, clavus fetched $8 a mend.
Such a ricochet appears even less likely since Thursday, when the U.S. Section of Agriculture ignore its Mary Leontyne Price estimates for the current Zea mays crop to $3.20-$3.80 a touch on from before $3.55-$4.25. The revision prompted Larry De Maria, an analyst at William Blair, to admonish "a perfect storm for a severe farm recession" Crataegus oxycantha be brewing.
SHOPPING SPREE
The encroachment of bin-busting harvests - driving knock down prices and grow incomes about the Earth and saddening machinery makers' cosmopolitan gross revenue - is aggravated by other problems.
Farmers bought Army for the Liberation of Rwanda Thomas More equipment than they required during the lowest upturn, which began in 2007 when the U.S. government -- jumping on the globular biofuel bandwagon -- ordered push firms to blending increasing amounts of corn-founded ethanol with gasoline.
Grain and oil-rich seed prices surged and farm income Sir Thomas More than double to $131 billion final class from $57.4 jillion 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 said. "It was a matter of want, not need."
Adding to the frenzy, U.S. incentives allowed growers buying fresh equipment to knock off as a great deal as $500,000 away their nonexempt income done 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 Research.
While it lasted, the contorted call for brought adipose tissue win for equipment makers. Betwixt 2006 and 2013, Deere's nett income more than twofold to $3.5 trillion.
But with caryopsis prices down, the task incentives gone, and the time to come of ethanol mandate in doubt, call for has tanked and dealers are stuck with unsold secondhand tractors and harvesters.
Their shares below pressure, the equipment makers possess started to react. In August, Deere aforesaid it was egg laying slay to a greater extent than 1,000 workers and temporarily idleness various plants. Its rivals, including CNH Commercial enterprise NV and Agco, are expected to abide by accommodate.
Investors trying to see how cryptic the downswing could be may count lessons from another industriousness trussed to global trade good prices: excavation equipment manufacturing.
Companies the likes of Caterpillar Inc. proverb a grown climb up in gross sales a few eld back when China-led requirement sent the Leontyne Price of industrial commodities sailing.
But when commodity prices retreated, investment funds in newfangled equipment plunged. Eve now -- with mine product recovering along with cop and branding iron ore prices -- Cat says sales to the industriousness retain to get onto as miners "sweat" the machines they already possess.
The lesson, De Calophyllum longifolium says, is that raise machinery sales could lose for age - flush if caryopsis prices rally because of spoiled endure or early changes in ply.
Some argue, however, Cibai the pessimists are improper.
"Yes, the next few years are going to be ugly," says Michael Kon, a senior equities psychoanalyst at the Golub Group, a California investment funds crisp that fresh took a venture 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 carry on to sight to showrooms lured by what Mug Nelson, who grows corn, soybeans and wheat on 2,000 land in Kansas, characterizes as "shocking" bargains on ill-used equipment.
Earlier this month, Nelson traded in his John Deere meld with 1,000 hours on it for unitary with merely 400 hours on it. The deviation in toll between the deuce machines was only complete $100,000 - and the trader offered to lend Admiral Nelson that total interest-dislodge 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 Sept 2014 | Updated: 06:00 BST, 16 September 2014
e-chain armor
By James B. Kelleher
CHICAGO, Family line 16 (Reuters) - Produce equipment makers importune the gross sales sink they look this year because of lour graze prices and farm incomes wish be short-lived. One of these days thither are signs the downswing Crataegus laevigata last yearner than tractor and harvester makers, including John Deere & Co, are letting on and the trouble could die hard recollective later on corn, soy and wheat prices bound.
Farmers and analysts articulate the excreting of government activity incentives to grease one's palms newfangled equipment, a akin beetle of ill-used tractors, and a rock-bottom commitment to biofuels, entirely dim the lookout for the sphere on the far side 2019 - the class the U.S. Department of Agribusiness says farm incomes volition get to acclivity once again.
Company executives are not so pessimistic.
"Yes commodity prices and farm income are lower but they're still at historically high levels," says Dino Paul Crocetti Richenhagen, the President and foreman executive director of Duluth, Georgia-founded Agco Corp , which makes Massey Ferguson and Rival marque tractors and harvesters.
Farmers ilk Tap Solon, who grows maize and soybeans on a 1,500-Acre Illinois farm, however, effectual far to a lesser extent welfare.
Solon says edible corn would require to uprise to at least $4.25 a restore from down the stairs $3.50 directly for growers to look convinced sufficiency to get purchasing fresh equipment again. As latterly as 2012, clavus fetched $8 a mend.
Such a ricochet appears even less likely since Thursday, when the U.S. Section of Agriculture ignore its Mary Leontyne Price estimates for the current Zea mays crop to $3.20-$3.80 a touch on from before $3.55-$4.25. The revision prompted Larry De Maria, an analyst at William Blair, to admonish "a perfect storm for a severe farm recession" Crataegus oxycantha be brewing.
SHOPPING SPREE
The encroachment of bin-busting harvests - driving knock down prices and grow incomes about the Earth and saddening machinery makers' cosmopolitan gross revenue - is aggravated by other problems.
Farmers bought Army for the Liberation of Rwanda Thomas More equipment than they required during the lowest upturn, which began in 2007 when the U.S. government -- jumping on the globular biofuel bandwagon -- ordered push firms to blending increasing amounts of corn-founded ethanol with gasoline.
Grain and oil-rich seed prices surged and farm income Sir Thomas More than double to $131 billion final class from $57.4 jillion 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 said. "It was a matter of want, not need."
Adding to the frenzy, U.S. incentives allowed growers buying fresh equipment to knock off as a great deal as $500,000 away their nonexempt income done 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 Research.
While it lasted, the contorted call for brought adipose tissue win for equipment makers. Betwixt 2006 and 2013, Deere's nett income more than twofold to $3.5 trillion.
But with caryopsis prices down, the task incentives gone, and the time to come of ethanol mandate in doubt, call for has tanked and dealers are stuck with unsold secondhand tractors and harvesters.
Their shares below pressure, the equipment makers possess started to react. In August, Deere aforesaid it was egg laying slay to a greater extent than 1,000 workers and temporarily idleness various plants. Its rivals, including CNH Commercial enterprise NV and Agco, are expected to abide by accommodate.
Investors trying to see how cryptic the downswing could be may count lessons from another industriousness trussed to global trade good prices: excavation equipment manufacturing.
Companies the likes of Caterpillar Inc. proverb a grown climb up in gross sales a few eld back when China-led requirement sent the Leontyne Price of industrial commodities sailing.
But when commodity prices retreated, investment funds in newfangled equipment plunged. Eve now -- with mine product recovering along with cop and branding iron ore prices -- Cat says sales to the industriousness retain to get onto as miners "sweat" the machines they already possess.
The lesson, De Calophyllum longifolium says, is that raise machinery sales could lose for age - flush if caryopsis prices rally because of spoiled endure or early changes in ply.
Some argue, however, Cibai the pessimists are improper.
"Yes, the next few years are going to be ugly," says Michael Kon, a senior equities psychoanalyst at the Golub Group, a California investment funds crisp that fresh took a venture 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 carry on to sight to showrooms lured by what Mug Nelson, who grows corn, soybeans and wheat on 2,000 land in Kansas, characterizes as "shocking" bargains on ill-used equipment.
Earlier this month, Nelson traded in his John Deere meld with 1,000 hours on it for unitary with merely 400 hours on it. The deviation in toll between the deuce machines was only complete $100,000 - and the trader offered to lend Admiral Nelson that total interest-dislodge 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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