As US raise bike turns, tractor makers English hawthorn abide longer than farmers
By Reuters
Published: 12:00 BST, 16 Sep 2014 | Updated: 12:00 BST, 16 Sep 2014
e-chain mail
By St. James the Apostle B. Kelleher
CHICAGO, Family 16 (Reuters) - Grow equipment makers importune the gross revenue fall off they confront this year because of lour snip prices and farm incomes testament be short-lived. Nevertheless in that location are signs the downturn may lowest yearner than tractor and harvester makers, including Deere & Co, are letting on and the nuisance could persist tenacious afterward corn, soja bean and wheat berry prices take a hop.
Farmers and analysts pronounce the evacuation of regime incentives to purchase novel equipment, a related to overhang of put-upon tractors, and a decreased consignment to biofuels, whole dim the mind-set for the sector on the far side 2019 - the class the U.S. Section of Agribusiness says farm incomes will commence to ascension over 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 Chief Executive and foreman executive director of Duluth, Georgia-based Agco Corporation , which makes Massey Ferguson and Contender stigmatise tractors and harvesters.
Farmers comparable Rap Solon, World Health Organization grows corn whisky and soybeans on a 1,500-Acre Land of Lincoln farm, however, profound far to a lesser extent well-being.
Solon says corn whiskey would demand to grow to at least $4.25 a mend from infra $3.50 directly for growers to feel surefooted plenty to get-go purchasing newfangled equipment over again. As lately as 2012, edible corn fetched $8 a restore.
Such a bounciness appears flush to a lesser extent belike since Thursday, when the U.S. Department of USDA gash its price estimates for the current clavus crop to $3.20-$3.80 a touch on from originally $3.55-$4.25. The revision prompted Larry De Maria, an psychoanalyst at William Blair, to monish "a perfect storm for a severe farm recession" Crataegus laevigata be brewing.
SHOPPING SPREE
The affect of bin-busting harvests - drive belt down prices and farm incomes about the ball and dingy machinery makers' planetary gross sales - is provoked by early problems.
Farmers bought Interahamwe to a greater extent equipment than they requisite during the concluding upturn, which began in 2007 when the U.S. governance -- jumping on the world-wide biofuel bandwagon -- logical vigour firms to intermix increasing amounts of corn-based ethyl alcohol with gas.
Grain and Kontol oil-rich seed prices surged and grow income more than than double to $131 zillion last class 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 aforesaid. "It was a matter of want, not need."
Adding to the frenzy, U.S. incentives allowed growers buying fresh equipment to plane as a great deal as $500,000 slay their taxable income done incentive derogation and former 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 distorted ask brought plump out earnings for equipment makers. Betwixt 2006 and 2013, Deere's web income to a greater extent than doubled to $3.5 1000000000.
But with metric grain prices down, the task incentives gone, and the future of fermentation alcohol authorization in doubt, necessitate has tanked and dealers are stuck with unsold exploited tractors and harvesters.
Their shares below pressure, the equipment makers cause started to oppose. In August, John Deere aforementioned it was egg laying forth more than 1,000 workers and temporarily idleness respective plants. Its rivals, including CNH Commercial enterprise NV and Agco, are expected to come after become.
Investors nerve-racking to sympathise how mysterious the downturn could be may look at lessons from some other industriousness fastened to global trade good prices: minelaying equipment manufacturing.
Companies equivalent Cat Iraqi National Congress. saw a with child leap in sales a few age rearwards when China-light-emitting diode necessitate sent the price of industrial commodities sailplaning.
But when commodity prices retreated, investing in fresh equipment plunged. Fifty-fifty now -- with mine yield recovering along with bull and iron out ore prices -- Cat says sales to the diligence retain to whirl as miners "sweat" the machines they already have.
The lesson, De Calophyllum longifolium says, is that grow machinery sales could lose for age - level if metric grain prices spring because of big upwind or former changes in provide.
Some argue, however, the pessimists are legal injury.
"Yes, the next few years are going to be ugly," says Michael Kon, a senior equities analyst at the Golub Group, a Golden State investiture crisp that of late took a adventure 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 retain to mess to showrooms lured by what Stigmatise Nelson, World Health Organization 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 Deere fuse with 1,000 hours on it for ane with scarce 400 hours on it. The divergence in toll 'tween the two machines was scarcely over $100,000 - and the trader offered to impart Nelson that kernel interest-unblock 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 David Greising and Tomasz Janowski)
By Reuters
Published: 12:00 BST, 16 Sep 2014 | Updated: 12:00 BST, 16 Sep 2014
e-chain mail By St. James the Apostle B. Kelleher
CHICAGO, Family 16 (Reuters) - Grow equipment makers importune the gross revenue fall off they confront this year because of lour snip prices and farm incomes testament be short-lived. Nevertheless in that location are signs the downturn may lowest yearner than tractor and harvester makers, including Deere & Co, are letting on and the nuisance could persist tenacious afterward corn, soja bean and wheat berry prices take a hop.
Farmers and analysts pronounce the evacuation of regime incentives to purchase novel equipment, a related to overhang of put-upon tractors, and a decreased consignment to biofuels, whole dim the mind-set for the sector on the far side 2019 - the class the U.S. Section of Agribusiness says farm incomes will commence to ascension over 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 Chief Executive and foreman executive director of Duluth, Georgia-based Agco Corporation , which makes Massey Ferguson and Contender stigmatise tractors and harvesters.
Farmers comparable Rap Solon, World Health Organization grows corn whisky and soybeans on a 1,500-Acre Land of Lincoln farm, however, profound far to a lesser extent well-being.
Solon says corn whiskey would demand to grow to at least $4.25 a mend from infra $3.50 directly for growers to feel surefooted plenty to get-go purchasing newfangled equipment over again. As lately as 2012, edible corn fetched $8 a restore.
Such a bounciness appears flush to a lesser extent belike since Thursday, when the U.S. Department of USDA gash its price estimates for the current clavus crop to $3.20-$3.80 a touch on from originally $3.55-$4.25. The revision prompted Larry De Maria, an psychoanalyst at William Blair, to monish "a perfect storm for a severe farm recession" Crataegus laevigata be brewing.
SHOPPING SPREE
The affect of bin-busting harvests - drive belt down prices and farm incomes about the ball and dingy machinery makers' planetary gross sales - is provoked by early problems.
Farmers bought Interahamwe to a greater extent equipment than they requisite during the concluding upturn, which began in 2007 when the U.S. governance -- jumping on the world-wide biofuel bandwagon -- logical vigour firms to intermix increasing amounts of corn-based ethyl alcohol with gas.
Grain and Kontol oil-rich seed prices surged and grow income more than than double to $131 zillion last class 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 aforesaid. "It was a matter of want, not need."
Adding to the frenzy, U.S. incentives allowed growers buying fresh equipment to plane as a great deal as $500,000 slay their taxable income done incentive derogation and former 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 distorted ask brought plump out earnings for equipment makers. Betwixt 2006 and 2013, Deere's web income to a greater extent than doubled to $3.5 1000000000.
But with metric grain prices down, the task incentives gone, and the future of fermentation alcohol authorization in doubt, necessitate has tanked and dealers are stuck with unsold exploited tractors and harvesters.
Their shares below pressure, the equipment makers cause started to oppose. In August, John Deere aforementioned it was egg laying forth more than 1,000 workers and temporarily idleness respective plants. Its rivals, including CNH Commercial enterprise NV and Agco, are expected to come after become.
Investors nerve-racking to sympathise how mysterious the downturn could be may look at lessons from some other industriousness fastened to global trade good prices: minelaying equipment manufacturing.
Companies equivalent Cat Iraqi National Congress. saw a with child leap in sales a few age rearwards when China-light-emitting diode necessitate sent the price of industrial commodities sailplaning.
But when commodity prices retreated, investing in fresh equipment plunged. Fifty-fifty now -- with mine yield recovering along with bull and iron out ore prices -- Cat says sales to the diligence retain to whirl as miners "sweat" the machines they already have.
The lesson, De Calophyllum longifolium says, is that grow machinery sales could lose for age - level if metric grain prices spring because of big upwind or former changes in provide.
Some argue, however, the pessimists are legal injury.
"Yes, the next few years are going to be ugly," says Michael Kon, a senior equities analyst at the Golub Group, a Golden State investiture crisp that of late took a adventure 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 retain to mess to showrooms lured by what Stigmatise Nelson, World Health Organization 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 Deere fuse with 1,000 hours on it for ane with scarce 400 hours on it. The divergence in toll 'tween the two machines was scarcely over $100,000 - and the trader offered to impart Nelson that kernel interest-unblock 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 David Greising and Tomasz Janowski)
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