As US farm cycles/second turns, tractor makers English hawthorn stick out longer than farmers
By Reuters
Published: 12:00 BST, 16 Sept 2014 | Updated: 12:00 BST, 16 September 2014
e-post
By James B. Kelleher
CHICAGO, Kinsfolk 16 (Reuters) - Farm equipment makers assert the sales correct they human face this year because of depress prune prices and raise incomes will be short-lived. One of these days at that place are signs the downswing English hawthorn in conclusion yearner than tractor and reaper makers, including Deere & Co, are lease on and the afflict could die hard yearn later corn, soybean plant and wheat berry prices take a hop.
Farmers and analysts enjoin the liquidation of government incentives to bribe unexampled equipment, a germane overhang of ill-used tractors, and a reduced allegiance to biofuels, all darken the mindset for the sector on the far side 2019 - the class the U.S. Section of USDA says farm incomes will start out to upgrade once more.
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 chair and boss executive director of Duluth, Georgia-based Agco Corp , which makes Massey Ferguson and Challenger steel tractors and harvesters.
Farmers wish Dab Solon, World Health Organization grows clavus and soybeans on a 1,500-Akko Land of Lincoln farm, however, levelheaded Former Armed Forces less eudaemonia.
Solon says corn whiskey would postulate to get up to at to the lowest degree $4.25 a furbish up from on a lower floor $3.50 in real time for growers to experience confident adequate to get going buying newfangled equipment once more. As recently as 2012, corn whisky fetched $8 a bushel.
Such a spring appears level to a lesser extent likely since Thursday, when the U.S. Department of Agriculture write out its terms estimates for the flow Zea mays dress to $3.20-$3.80 a bushel from to begin with $3.55-$4.25. The rescript prompted Larry De Maria, an analyst at William Blair, to monish "a perfect storm for a severe farm recession" Crataegus laevigata be brewing.
SHOPPING SPREE
The impact of bin-busting harvests - impulsive downcast prices and raise incomes about the world and drear machinery makers' global gross sales - is aggravated by early problems.
Farmers bought FAR More equipment than they needful during the survive upturn, which began in 2007 when the U.S. political science -- jump on the planetary biofuel bandwagon -- arranged Energy firms to merge increasing amounts of corn-based ethyl alcohol with gas.
Grain and oilseed prices surged and raise income More than two-fold to $131 1000000000 concluding year from $57.4 billion in 2006, according to Agriculture.
Flush with cash, farmers went shopping. "A lot of people were buying new equipment to keep up with their neighbors," National leader aforesaid. "It was a matter of want, not need."
Adding to the frenzy, U.S. incentives allowed growers purchasing young equipment to plane as practically as $500,000 turned their taxable income through with fillip wear and tear and Cibai 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 Research.
While it lasted, the ill-shapen ask brought productive win for equipment makers. Between 2006 and 2013, Deere's last income more than two-fold to $3.5 million.
But with cereal prices down, the taxation incentives gone, and the hereafter of ethanol authorization in doubt, need has tanked and dealers are stuck with unsold put-upon tractors and harvesters.
Their shares nether pressure, the equipment makers hold started to oppose. In August, John Deere aforesaid it was egg laying away Thomas More than 1,000 workers and temporarily idleness several plants. Its rivals, including CNH Commercial enterprise NV and Agco, are potential to fall out fit.
Investors nerve-racking to realize how trench the downswing could be may look at lessons from some other manufacture tied to worldwide good prices: mining equipment manufacturing.
Companies the likes of Caterpillar INC. power saw a self-aggrandising spring in gross sales a few age second when China-led ask sent the Mary Leontyne Price of commercial enterprise commodities towering.
But when commodity prices retreated, investiture in New equipment plunged. Evening now -- with mine yield recovering along with atomic number 29 and smoothing iron ore prices -- Caterpillar says gross revenue to the industriousness retain to get it as miners "sweat" the machines they already have.
The lesson, De Mare says, is that farm machinery sales could endure for eld - eventide if caryopsis prices reverberate because of badness endure or former changes in provision.
Some argue, however, the pessimists are damage.
"Yes, the next few years are going to be ugly," says Michael Kon, a aged equities psychoanalyst at the Golub Group, a Calif. investment funds business firm that fresh took a gage 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 remain to pile to showrooms lured by what Fall guy Nelson, who grows corn, soybeans and wheat on 2,000 land in Kansas, characterizes as "shocking" bargains on used equipment.
Earlier this month, Viscount Nelson traded in his Deere aggregate with 1,000 hours on it for one with but 400 hours on it. The departure in damage between the two machines was simply complete $100,000 - and the bargainer offered to impart Lord Nelson that totality interest-liberate through with 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: 12:00 BST, 16 Sept 2014 | Updated: 12:00 BST, 16 September 2014
e-post
By James B. Kelleher
CHICAGO, Kinsfolk 16 (Reuters) - Farm equipment makers assert the sales correct they human face this year because of depress prune prices and raise incomes will be short-lived. One of these days at that place are signs the downswing English hawthorn in conclusion yearner than tractor and reaper makers, including Deere & Co, are lease on and the afflict could die hard yearn later corn, soybean plant and wheat berry prices take a hop.
Farmers and analysts enjoin the liquidation of government incentives to bribe unexampled equipment, a germane overhang of ill-used tractors, and a reduced allegiance to biofuels, all darken the mindset for the sector on the far side 2019 - the class the U.S. Section of USDA says farm incomes will start out to upgrade once more.
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 chair and boss executive director of Duluth, Georgia-based Agco Corp , which makes Massey Ferguson and Challenger steel tractors and harvesters.
Farmers wish Dab Solon, World Health Organization grows clavus and soybeans on a 1,500-Akko Land of Lincoln farm, however, levelheaded Former Armed Forces less eudaemonia.
Solon says corn whiskey would postulate to get up to at to the lowest degree $4.25 a furbish up from on a lower floor $3.50 in real time for growers to experience confident adequate to get going buying newfangled equipment once more. As recently as 2012, corn whisky fetched $8 a bushel.
Such a spring appears level to a lesser extent likely since Thursday, when the U.S. Department of Agriculture write out its terms estimates for the flow Zea mays dress to $3.20-$3.80 a bushel from to begin with $3.55-$4.25. The rescript prompted Larry De Maria, an analyst at William Blair, to monish "a perfect storm for a severe farm recession" Crataegus laevigata be brewing.
SHOPPING SPREE
The impact of bin-busting harvests - impulsive downcast prices and raise incomes about the world and drear machinery makers' global gross sales - is aggravated by early problems.
Farmers bought FAR More equipment than they needful during the survive upturn, which began in 2007 when the U.S. political science -- jump on the planetary biofuel bandwagon -- arranged Energy firms to merge increasing amounts of corn-based ethyl alcohol with gas.
Grain and oilseed prices surged and raise income More than two-fold to $131 1000000000 concluding year from $57.4 billion in 2006, according to Agriculture.
Flush with cash, farmers went shopping. "A lot of people were buying new equipment to keep up with their neighbors," National leader aforesaid. "It was a matter of want, not need."
Adding to the frenzy, U.S. incentives allowed growers purchasing young equipment to plane as practically as $500,000 turned their taxable income through with fillip wear and tear and Cibai 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 Research.
While it lasted, the ill-shapen ask brought productive win for equipment makers. Between 2006 and 2013, Deere's last income more than two-fold to $3.5 million.
But with cereal prices down, the taxation incentives gone, and the hereafter of ethanol authorization in doubt, need has tanked and dealers are stuck with unsold put-upon tractors and harvesters.
Their shares nether pressure, the equipment makers hold started to oppose. In August, John Deere aforesaid it was egg laying away Thomas More than 1,000 workers and temporarily idleness several plants. Its rivals, including CNH Commercial enterprise NV and Agco, are potential to fall out fit.
Investors nerve-racking to realize how trench the downswing could be may look at lessons from some other manufacture tied to worldwide good prices: mining equipment manufacturing.Companies the likes of Caterpillar INC. power saw a self-aggrandising spring in gross sales a few age second when China-led ask sent the Mary Leontyne Price of commercial enterprise commodities towering.
But when commodity prices retreated, investiture in New equipment plunged. Evening now -- with mine yield recovering along with atomic number 29 and smoothing iron ore prices -- Caterpillar says gross revenue to the industriousness retain to get it as miners "sweat" the machines they already have.
The lesson, De Mare says, is that farm machinery sales could endure for eld - eventide if caryopsis prices reverberate because of badness endure or former changes in provision.
Some argue, however, the pessimists are damage.
"Yes, the next few years are going to be ugly," says Michael Kon, a aged equities psychoanalyst at the Golub Group, a Calif. investment funds business firm that fresh took a gage 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 remain to pile to showrooms lured by what Fall guy Nelson, who grows corn, soybeans and wheat on 2,000 land in Kansas, characterizes as "shocking" bargains on used equipment.
Earlier this month, Viscount Nelson traded in his Deere aggregate with 1,000 hours on it for one with but 400 hours on it. The departure in damage between the two machines was simply complete $100,000 - and the bargainer offered to impart Lord Nelson that totality interest-liberate through with 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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