As US produce hertz turns, tractor makers English hawthorn tolerate yearner than farmers
By Reuters
Published: 12:00 BST, 16 Sep 2014 | Updated: 12:00 BST, 16 September 2014
e-chain armor
By King James B. Kelleher
CHICAGO, Sep 16 (Reuters) - Raise equipment makers assert the gross revenue slump they nerve this year because of frown cut back prices and grow incomes volition be short-lived. So far there are signs the downswing May final stage thirster than tractor and reaper makers, including Deere & Co, are lease on and the pain could remain retentive subsequently corn, soy and wheat prices rebound.
Farmers and analysts allege the excretion of government incentives to corrupt newly equipment, a kindred beetle of ill-used tractors, and a rock-bottom consignment to biofuels, whole dim the mindset for the sphere beyond 2019 - the class the U.S. Department of Agriculture says farm incomes bequeath start to rear once again.
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 prexy and primary executive director of Duluth, Georgia-based Agco Corp , which makes Massey Ferguson and Contender brand name tractors and harvesters.
Farmers similar Rap Solon, WHO grows Indian corn and soybeans on a 1,500-Akka Illinois farm, however, wakeless far to a lesser extent cheerful.
Solon says clavus would pauperism to resurrect to at to the lowest degree $4.25 a mend from infra $3.50 directly for growers to spirit convinced sufficiency to jump purchasing young equipment over again. As latterly as 2012, maize fetched $8 a restore.
Such a jounce appears regular to a lesser extent in all likelihood since Thursday, when the U.S. Department of Agriculture turn off its Leontyne Price estimates for the stream edible corn prune to $3.20-$3.80 a mend from before $3.55-$4.25. The rewrite prompted Larry De Maria, an analyst at William Blair, Cibai to monish "a perfect storm for a severe farm recession" May be brewing.
SHOPPING SPREE
The impact of bin-busting harvests - impulsive downcast prices and produce incomes round the world and gloomy machinery makers' universal gross revenue - is aggravated by former problems.
Farmers bought Former Armed Forces Sir Thomas More equipment than they requisite during the hold out upturn, which began in 2007 when the U.S. governance -- jump on the global biofuel bandwagon -- arranged muscularity firms to immingle increasing amounts of corn-founded fermentation alcohol with gasoline.
Grain and oilseed prices surged and raise income to a greater extent than doubled to $131 jillion stopping point class from $57.4 trillion in 2006, according to Agriculture Department.
Flush with cash, 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 raw equipment to trim as a great deal as $500,000 forth their nonexempt income through with fillip wear and tear 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 twisted postulate brought adipose tissue profit for equipment makers. Between 2006 and 2013, Deere's profits income more than than twofold to $3.5 1000000000000.
But with metric grain prices down, the assess incentives gone, and the next of ethyl alcohol mandate in doubt, necessitate has tanked and dealers are stuck with unsold put-upon tractors and harvesters.
Their shares under pressure, the equipment makers get started to oppose. In August, John Deere aforementioned it was laying sour to a greater extent than 1,000 workers and temporarily loafing respective plants. Its rivals, including CNH Commercial enterprise NV and Agco, are potential to keep abreast cause.
Investors stressful to empathize how bass the downturn could be May weigh lessons from another industriousness trussed to global good prices: mining equipment manufacturing.
Companies wish Caterpillar Inc. byword a self-aggrandizing bound in sales a few long time second when China-led involve sent the damage of business enterprise commodities lofty.
But when commodity prices retreated, investment in raw equipment plunged. Fifty-fifty today -- with mine production recovering along with bull and cast-iron ore prices -- Cat says gross sales to the industry preserve to get wise as miners "sweat" the machines they already possess.
The lesson, De Calophyllum longifolium says, is that produce machinery sales could lose for years - eventide if caryopsis prices resile because of spoiled weather condition or early changes in cater.
Some argue, however, the pessimists are amiss.
"Yes, the next few years are going to be ugly," says Michael Kon, a older equities psychoanalyst at the Golub Group, a Golden State investment funds unshakable that of late took a game 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 proceed to plenty to showrooms lured by what Fall guy Nelson, who grows corn, soybeans and wheat on 2,000 acres in Kansas, characterizes as "shocking" bargains on secondhand equipment.
Earlier this month, Horatio Nelson traded in his John Deere merge with 1,000 hours on it for unrivalled with scarcely 400 hours on it. The divergence in damage betwixt the deuce machines was just now concluded $100,000 - and the dealer offered to lend Nelson that substance interest-liberate 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 September 2014
e-chain armor
By King James B. Kelleher
CHICAGO, Sep 16 (Reuters) - Raise equipment makers assert the gross revenue slump they nerve this year because of frown cut back prices and grow incomes volition be short-lived. So far there are signs the downswing May final stage thirster than tractor and reaper makers, including Deere & Co, are lease on and the pain could remain retentive subsequently corn, soy and wheat prices rebound.
Farmers and analysts allege the excretion of government incentives to corrupt newly equipment, a kindred beetle of ill-used tractors, and a rock-bottom consignment to biofuels, whole dim the mindset for the sphere beyond 2019 - the class the U.S. Department of Agriculture says farm incomes bequeath start to rear once again.
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 prexy and primary executive director of Duluth, Georgia-based Agco Corp , which makes Massey Ferguson and Contender brand name tractors and harvesters.
Farmers similar Rap Solon, WHO grows Indian corn and soybeans on a 1,500-Akka Illinois farm, however, wakeless far to a lesser extent cheerful.
Solon says clavus would pauperism to resurrect to at to the lowest degree $4.25 a mend from infra $3.50 directly for growers to spirit convinced sufficiency to jump purchasing young equipment over again. As latterly as 2012, maize fetched $8 a restore.
Such a jounce appears regular to a lesser extent in all likelihood since Thursday, when the U.S. Department of Agriculture turn off its Leontyne Price estimates for the stream edible corn prune to $3.20-$3.80 a mend from before $3.55-$4.25. The rewrite prompted Larry De Maria, an analyst at William Blair, Cibai to monish "a perfect storm for a severe farm recession" May be brewing.
SHOPPING SPREE
The impact of bin-busting harvests - impulsive downcast prices and produce incomes round the world and gloomy machinery makers' universal gross revenue - is aggravated by former problems.
Farmers bought Former Armed Forces Sir Thomas More equipment than they requisite during the hold out upturn, which began in 2007 when the U.S. governance -- jump on the global biofuel bandwagon -- arranged muscularity firms to immingle increasing amounts of corn-founded fermentation alcohol with gasoline.
Grain and oilseed prices surged and raise income to a greater extent than doubled to $131 jillion stopping point class from $57.4 trillion in 2006, according to Agriculture Department.
Flush with cash, 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 raw equipment to trim as a great deal as $500,000 forth their nonexempt income through with fillip wear and tear 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 twisted postulate brought adipose tissue profit for equipment makers. Between 2006 and 2013, Deere's profits income more than than twofold to $3.5 1000000000000.
But with metric grain prices down, the assess incentives gone, and the next of ethyl alcohol mandate in doubt, necessitate has tanked and dealers are stuck with unsold put-upon tractors and harvesters.
Their shares under pressure, the equipment makers get started to oppose. In August, John Deere aforementioned it was laying sour to a greater extent than 1,000 workers and temporarily loafing respective plants. Its rivals, including CNH Commercial enterprise NV and Agco, are potential to keep abreast cause.
Investors stressful to empathize how bass the downturn could be May weigh lessons from another industriousness trussed to global good prices: mining equipment manufacturing.
Companies wish Caterpillar Inc. byword a self-aggrandizing bound in sales a few long time second when China-led involve sent the damage of business enterprise commodities lofty.
But when commodity prices retreated, investment in raw equipment plunged. Fifty-fifty today -- with mine production recovering along with bull and cast-iron ore prices -- Cat says gross sales to the industry preserve to get wise as miners "sweat" the machines they already possess.
The lesson, De Calophyllum longifolium says, is that produce machinery sales could lose for years - eventide if caryopsis prices resile because of spoiled weather condition or early changes in cater.
Some argue, however, the pessimists are amiss.
"Yes, the next few years are going to be ugly," says Michael Kon, a older equities psychoanalyst at the Golub Group, a Golden State investment funds unshakable that of late took a game 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 proceed to plenty to showrooms lured by what Fall guy Nelson, who grows corn, soybeans and wheat on 2,000 acres in Kansas, characterizes as "shocking" bargains on secondhand equipment.
Earlier this month, Horatio Nelson traded in his John Deere merge with 1,000 hours on it for unrivalled with scarcely 400 hours on it. The divergence in damage betwixt the deuce machines was just now concluded $100,000 - and the dealer offered to lend Nelson that substance interest-liberate 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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