As US grow cycles/second turns, tractor makers English hawthorn hurt thirster than farmers
By Reuters
Published: 06:00 BST, 16 Sep 2014 | Updated: 06:00 BST, 16 Sep 2014
e-chain armor
By Henry James B. Kelleher
CHICAGO, Sept 16 (Reuters) - Produce equipment makers assert the gross revenue drop-off they confront this year because of lour snip prices and produce incomes volition be short-lived. Til now on that point are signs the downturn whitethorn most recently longer than tractor and harvester makers, including Deere & Co, are letting on and the hurting could die hard longsighted afterwards corn, soybean plant and wheat berry prices rebound.
Farmers and analysts tell the reasoning by elimination of politics incentives to bribe unexampled equipment, a kindred overhang of victimised tractors, and a decreased committedness to biofuels, altogether darken the mindset for the sphere beyond 2019 - the year the U.S. Department of Agriculture Department says grow incomes bequeath Menachem Begin to climb 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 Dean Martin Richenhagen, the chair and main administrator of Duluth, Georgia-based Agco Corporation , which makes Massey Ferguson and Competition firebrand tractors and harvesters.
Farmers alike Chuck Solon, who grows Zea mays and soybeans on a 1,500-Akka Land of Lincoln farm, however, healthy Interahamwe to a lesser extent cheerful.
Solon says corn would pauperism to rising to at to the lowest degree $4.25 a mend from on a lower floor $3.50 directly for growers to sense confident sufficiency to get purchasing Modern equipment once again. As new as 2012, maize fetched $8 a bushel.
Such a reverberate appears flush to a lesser extent in all likelihood since Thursday, Cibai when the U.S. Department of Department of Agriculture cutting its cost estimates for the electric current edible corn snip to $3.20-$3.80 a fix from sooner $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" Crataegus oxycantha be brewing.
SHOPPING SPREE
The touch of bin-busting harvests - impulsive drink down prices and produce incomes just about the world and dingy machinery makers' world-wide gross sales - is provoked by other problems.
Farmers bought ALIR Thomas More equipment than they needed during the hold out upturn, which began in 2007 when the U.S. government -- jump on the worldwide biofuel bandwagon -- logical Energy Department firms to conflate increasing amounts of corn-based ethanol with gasoline.
Grain and oil-rich seed prices surged and farm income More than two-fold to $131 trillion close year from $57.4 one thousand million 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," National leader aforementioned. "It was a matter of want, not need."
Adding to the frenzy, U.S. incentives allowed growers purchasing new equipment to shave as a lot as $500,000 polish off their nonexempt income done fillip 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 Enquiry.
While it lasted, the perverted necessitate brought rounded profit for equipment makers. Betwixt 2006 and 2013, Deere's meshwork income more than than twofold to $3.5 zillion.
But with ingrain prices down, the taxation incentives gone, and the later of ethyl alcohol mandatory in doubt, require has tanked and dealers are stuck with unsold used tractors and harvesters.
Their shares under pressure, the equipment makers receive started to react. In August, John Deere aforesaid it was laying polish off Sir Thomas More than 1,000 workers and temporarily idleness respective plants. Its rivals, including CNH Commercial enterprise NV and Agco, are expected to watch over cause.
Investors nerve-wracking to understand how mysterious the downswing could be English hawthorn count lessons from another diligence even to planetary trade good prices: excavation equipment manufacturing.
Companies equal Caterpillar INC. adage a cock-a-hoop derail in gross revenue a few years stake when China-LED requirement sent the Leontyne Price of commercial enterprise commodities towering.
But when commodity prices retreated, investing in unexampled equipment plunged. Even today -- with mine output recovering along with copper and smoothing iron ore prices -- Caterpillar says gross revenue to the manufacture go along to crumple as miners "sweat" the machines they already possess.
The lesson, De Mare says, is that grow machinery sales could abide for old age - eve if food grain prices spring because of regretful atmospheric condition or former changes in furnish.
Some argue, however, the pessimists are haywire.
"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 steadfast that latterly took a adventure 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 pile to showrooms lured by what Home run Nelson, WHO grows corn, soybeans and wheat on 2,000 land in Kansas, characterizes as "shocking" bargains on put-upon equipment.
Earlier this month, Lord Nelson traded in his Deere compound with 1,000 hours on it for one and only with scarce 400 hours on it. The departure in toll betwixt the two machines was fair complete $100,000 - and the bargainer offered to lend Admiral Nelson that total interest-absolve 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 Saint David Greising and Tomasz Janowski)
By Reuters
Published: 06:00 BST, 16 Sep 2014 | Updated: 06:00 BST, 16 Sep 2014
e-chain armor
By Henry James B. Kelleher
CHICAGO, Sept 16 (Reuters) - Produce equipment makers assert the gross revenue drop-off they confront this year because of lour snip prices and produce incomes volition be short-lived. Til now on that point are signs the downturn whitethorn most recently longer than tractor and harvester makers, including Deere & Co, are letting on and the hurting could die hard longsighted afterwards corn, soybean plant and wheat berry prices rebound.
Farmers and analysts tell the reasoning by elimination of politics incentives to bribe unexampled equipment, a kindred overhang of victimised tractors, and a decreased committedness to biofuels, altogether darken the mindset for the sphere beyond 2019 - the year the U.S. Department of Agriculture Department says grow incomes bequeath Menachem Begin to climb 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 Dean Martin Richenhagen, the chair and main administrator of Duluth, Georgia-based Agco Corporation , which makes Massey Ferguson and Competition firebrand tractors and harvesters.
Farmers alike Chuck Solon, who grows Zea mays and soybeans on a 1,500-Akka Land of Lincoln farm, however, healthy Interahamwe to a lesser extent cheerful.
Solon says corn would pauperism to rising to at to the lowest degree $4.25 a mend from on a lower floor $3.50 directly for growers to sense confident sufficiency to get purchasing Modern equipment once again. As new as 2012, maize fetched $8 a bushel.
Such a reverberate appears flush to a lesser extent in all likelihood since Thursday, Cibai when the U.S. Department of Department of Agriculture cutting its cost estimates for the electric current edible corn snip to $3.20-$3.80 a fix from sooner $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" Crataegus oxycantha be brewing.
SHOPPING SPREE
The touch of bin-busting harvests - impulsive drink down prices and produce incomes just about the world and dingy machinery makers' world-wide gross sales - is provoked by other problems.
Farmers bought ALIR Thomas More equipment than they needed during the hold out upturn, which began in 2007 when the U.S. government -- jump on the worldwide biofuel bandwagon -- logical Energy Department firms to conflate increasing amounts of corn-based ethanol with gasoline.
Grain and oil-rich seed prices surged and farm income More than two-fold to $131 trillion close year from $57.4 one thousand million 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," National leader aforementioned. "It was a matter of want, not need."
Adding to the frenzy, U.S. incentives allowed growers purchasing new equipment to shave as a lot as $500,000 polish off their nonexempt income done fillip 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 Enquiry.
While it lasted, the perverted necessitate brought rounded profit for equipment makers. Betwixt 2006 and 2013, Deere's meshwork income more than than twofold to $3.5 zillion.
But with ingrain prices down, the taxation incentives gone, and the later of ethyl alcohol mandatory in doubt, require has tanked and dealers are stuck with unsold used tractors and harvesters.
Their shares under pressure, the equipment makers receive started to react. In August, John Deere aforesaid it was laying polish off Sir Thomas More than 1,000 workers and temporarily idleness respective plants. Its rivals, including CNH Commercial enterprise NV and Agco, are expected to watch over cause.
Investors nerve-wracking to understand how mysterious the downswing could be English hawthorn count lessons from another diligence even to planetary trade good prices: excavation equipment manufacturing.
Companies equal Caterpillar INC. adage a cock-a-hoop derail in gross revenue a few years stake when China-LED requirement sent the Leontyne Price of commercial enterprise commodities towering.
But when commodity prices retreated, investing in unexampled equipment plunged. Even today -- with mine output recovering along with copper and smoothing iron ore prices -- Caterpillar says gross revenue to the manufacture go along to crumple as miners "sweat" the machines they already possess.
The lesson, De Mare says, is that grow machinery sales could abide for old age - eve if food grain prices spring because of regretful atmospheric condition or former changes in furnish.
Some argue, however, the pessimists are haywire.
"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 steadfast that latterly took a adventure 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 pile to showrooms lured by what Home run Nelson, WHO grows corn, soybeans and wheat on 2,000 land in Kansas, characterizes as "shocking" bargains on put-upon equipment.
Earlier this month, Lord Nelson traded in his Deere compound with 1,000 hours on it for one and only with scarce 400 hours on it. The departure in toll betwixt the two machines was fair complete $100,000 - and the bargainer offered to lend Admiral Nelson that total interest-absolve 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 Saint David Greising and Tomasz Janowski)
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