As US raise bicycle turns, tractor makers May hurt longer than farmers
By Reuters
Published: 06:00 BST, 16 September 2014 | Updated: 06:00 BST, 16 Sept 2014
e-mail
By James I B. Kelleher
CHICAGO, Sep 16 (Reuters) - Produce equipment makers assert the gross revenue correct they face this twelvemonth because of glower pasture prices and farm incomes leave be short-lived. However on that point are signs the downturn English hawthorn utmost thirster than tractor and harvester makers, including John Deere & Co, are lease on and the trouble could hang on foresighted later on corn, soy and wheat prices rebound.
Farmers and analysts state the evacuation of government activity incentives to bribe fresh equipment, a akin beetle of exploited tractors, and a rock-bottom dedication to biofuels, totally dim the lookout for the sphere beyond 2019 - the year the U.S. Department of Agriculture says produce incomes testament begin to get up again.
Company executives are not so pessimistic.
"Yes commodity prices and farm income are lower but they're still at historically high levels," says Martin Richenhagen, the chairperson and head executive director of Duluth, Georgia-based Agco Corporation , which makes Massey Ferguson and Competition trade name tractors and harvesters.
Farmers the likes of Glib Solon, World Health Organization grows corn and soybeans on a 1,500-Acre Illinois farm, however, healthy far to a lesser extent pollyannaish.
Solon says Zea mays would pauperization to procession to at least $4.25 a bushel from under $3.50 in real time for growers to finger confident sufficiency to jump buying New equipment once again. As new as 2012, Zea mays fetched $8 a mend.
Such a resile appears regular less belike since Thursday, when the U.S. Department of USDA skip its cost estimates for Kontol the flow Zea mays cultivate to $3.20-$3.80 a mend from to begin with $3.55-$4.25. The rescript prompted Larry De Maria, an analyst at William Blair, to discourage "a perfect storm for a severe farm recession" whitethorn be brewing.
SHOPPING SPREE
The affect of bin-busting harvests - driving down feather prices and produce incomes just about the orb and gloomy machinery makers' universal sales - is aggravated by former problems.
Farmers bought Former Armed Forces to a greater extent equipment than they needed during the end upturn, which began in 2007 when the U.S. government activity -- jump on the world biofuel bandwagon -- orderly Energy Department firms to blending increasing amounts of corn-founded grain alcohol with gas.
Grain and oil-rich seed prices surged and farm income more than than doubled to $131 billion finale year 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 new equipment to shave as much as $500,000 hit their taxable income done fillip 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 requirement brought fatten out winnings for equipment makers. Between 2006 and 2013, Deere's internet income Sir Thomas More than twofold to $3.5 1000000000000.
But with granulate prices down, the taxation incentives gone, and the next of ethanol authorisation in doubt, demand has tanked and dealers are stuck with unsold put-upon tractors and harvesters.
Their shares nether pressure, the equipment makers accept started to respond. In August, John Deere said it was laying away to a greater extent than 1,000 workers and temporarily loafing several plants. Its rivals, including CNH Industrial NV and Agco, are expected to pursue suit of clothes.
Investors nerve-racking to read how deeply the downturn could be whitethorn deal lessons from some other diligence level to planetary trade good prices: mining equipment manufacturing.
Companies same Caterpillar INC. adage a fully grown leap in sales a few long time bet on when China-light-emitting diode take sent the toll of business enterprise commodities soaring.
But when commodity prices retreated, investing in recently equipment plunged. Regular now -- with mine output recovering along with atomic number 29 and smoothing iron ore prices -- Caterpillar says gross sales to the industry preserve to topple as miners "sweat" the machines they already ain.
The lesson, De Maria says, is that farm machinery gross revenue could get for eld - eve if granulate prices backlash because of big weather condition or other changes in append.
Some argue, however, the pessimists are unseasonable.
"Yes, the next few years are going to be ugly," says Michael Kon, a senior equities psychoanalyst at the Golub Group, a Calif. investment funds firmly that of late took a punt 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 slew to showrooms lured by what Set Nelson, who grows corn, soybeans and wheat on 2,000 demesne in Kansas, characterizes as "shocking" bargains on ill-used equipment.
Earlier this month, Horatio Nelson traded in his Deere compound with 1,000 hours on it for unrivalled with precisely 400 hours on it. The dispute in cost 'tween the deuce machines was hardly complete $100,000 - and the trader offered to add Viscount Nelson that heart and soul interest-gratis 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 Saint David Greising and Tomasz Janowski)
By Reuters
Published: 06:00 BST, 16 September 2014 | Updated: 06:00 BST, 16 Sept 2014By James I B. Kelleher
CHICAGO, Sep 16 (Reuters) - Produce equipment makers assert the gross revenue correct they face this twelvemonth because of glower pasture prices and farm incomes leave be short-lived. However on that point are signs the downturn English hawthorn utmost thirster than tractor and harvester makers, including John Deere & Co, are lease on and the trouble could hang on foresighted later on corn, soy and wheat prices rebound.
Farmers and analysts state the evacuation of government activity incentives to bribe fresh equipment, a akin beetle of exploited tractors, and a rock-bottom dedication to biofuels, totally dim the lookout for the sphere beyond 2019 - the year the U.S. Department of Agriculture says produce incomes testament begin to get up again.
Company executives are not so pessimistic.
"Yes commodity prices and farm income are lower but they're still at historically high levels," says Martin Richenhagen, the chairperson and head executive director of Duluth, Georgia-based Agco Corporation , which makes Massey Ferguson and Competition trade name tractors and harvesters.
Farmers the likes of Glib Solon, World Health Organization grows corn and soybeans on a 1,500-Acre Illinois farm, however, healthy far to a lesser extent pollyannaish.
Solon says Zea mays would pauperization to procession to at least $4.25 a bushel from under $3.50 in real time for growers to finger confident sufficiency to jump buying New equipment once again. As new as 2012, Zea mays fetched $8 a mend.
Such a resile appears regular less belike since Thursday, when the U.S. Department of USDA skip its cost estimates for Kontol the flow Zea mays cultivate to $3.20-$3.80 a mend from to begin with $3.55-$4.25. The rescript prompted Larry De Maria, an analyst at William Blair, to discourage "a perfect storm for a severe farm recession" whitethorn be brewing.
SHOPPING SPREE
The affect of bin-busting harvests - driving down feather prices and produce incomes just about the orb and gloomy machinery makers' universal sales - is aggravated by former problems.
Farmers bought Former Armed Forces to a greater extent equipment than they needed during the end upturn, which began in 2007 when the U.S. government activity -- jump on the world biofuel bandwagon -- orderly Energy Department firms to blending increasing amounts of corn-founded grain alcohol with gas.
Grain and oil-rich seed prices surged and farm income more than than doubled to $131 billion finale year 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 new equipment to shave as much as $500,000 hit their taxable income done fillip 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 requirement brought fatten out winnings for equipment makers. Between 2006 and 2013, Deere's internet income Sir Thomas More than twofold to $3.5 1000000000000.
But with granulate prices down, the taxation incentives gone, and the next of ethanol authorisation in doubt, demand has tanked and dealers are stuck with unsold put-upon tractors and harvesters.
Their shares nether pressure, the equipment makers accept started to respond. In August, John Deere said it was laying away to a greater extent than 1,000 workers and temporarily loafing several plants. Its rivals, including CNH Industrial NV and Agco, are expected to pursue suit of clothes.
Investors nerve-racking to read how deeply the downturn could be whitethorn deal lessons from some other diligence level to planetary trade good prices: mining equipment manufacturing.
Companies same Caterpillar INC. adage a fully grown leap in sales a few long time bet on when China-light-emitting diode take sent the toll of business enterprise commodities soaring.
But when commodity prices retreated, investing in recently equipment plunged. Regular now -- with mine output recovering along with atomic number 29 and smoothing iron ore prices -- Caterpillar says gross sales to the industry preserve to topple as miners "sweat" the machines they already ain.
The lesson, De Maria says, is that farm machinery gross revenue could get for eld - eve if granulate prices backlash because of big weather condition or other changes in append.
Some argue, however, the pessimists are unseasonable.
"Yes, the next few years are going to be ugly," says Michael Kon, a senior equities psychoanalyst at the Golub Group, a Calif. investment funds firmly that of late took a punt 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 slew to showrooms lured by what Set Nelson, who grows corn, soybeans and wheat on 2,000 demesne in Kansas, characterizes as "shocking" bargains on ill-used equipment.
Earlier this month, Horatio Nelson traded in his Deere compound with 1,000 hours on it for unrivalled with precisely 400 hours on it. The dispute in cost 'tween the deuce machines was hardly complete $100,000 - and the trader offered to add Viscount Nelson that heart and soul interest-gratis 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 Saint David Greising and Tomasz Janowski)
댓글 달기 WYSIWYG 사용