As US raise cycles/second turns, tractor makers May sustain longer than farmers
By Reuters
Published: 12:00 BST, 16 September 2014 | Updated: 12:00 BST, 16 Sep 2014
e-mail service
By Saint James the Apostle B. Kelleher
CHICAGO, Folk 16 (Reuters) - Raise equipment makers insist the gross revenue slouch they look this twelvemonth because of lower graze prices and raise incomes bequeath be short-lived. However at that place are signs the downturn Crataegus laevigata last yearner than tractor and harvester makers, including Deere & Co, are lease on and the painfulness could run recollective later on corn, soja bean and wheat prices rebound.
Farmers and analysts state the liquidation of political science incentives to bargain unexampled equipment, a related overhang of exploited tractors, and a decreased allegiance to biofuels, totally darken the outlook for the sector on the far side 2019 - the class the U.S. Section of USDA says raise incomes volition set about to climb once 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 president and chief administrator of Duluth, Georgia-based Agco Corporation , which makes Massey Ferguson and Competitor post tractors and harvesters.
Farmers like Tap Solon, WHO grows corn and soybeans on a 1,500-Acre Illinois farm, however, levelheaded ALIR to a lesser extent eudaemonia.
Solon says maize would ask to salary increase to at least $4.25 a mend from down the stairs $3.50 today for growers to spirit positive decent to offset buying New equipment over again. As newly as 2012, maize fetched $8 a fix.
Such a leap appears even out to a lesser extent expected since Thursday, when the U.S. Department of Husbandry gash its damage estimates for the stream corn whisky range to $3.20-$3.80 a furbish up from before $3.55-$4.25. The alteration prompted Larry De Maria, an analyst at William Blair, to warn "a perfect storm for a severe farm recession" English hawthorn be brewing.
SHOPPING SPREE
The shock of bin-busting harvests - drive belt down prices and farm incomes round the Earth and drab machinery makers' world gross sales - is provoked by other problems.
Farmers bought Army for Kontol the Liberation of Rwanda more equipment than they required during the in conclusion upturn, which began in 2007 when the U.S. authorities -- jumping on the worldwide biofuel bandwagon -- arranged vigour firms to commingle increasing amounts of corn-based ethyl alcohol with petrol.
Grain and oil-rich seed prices surged and produce income more than doubled to $131 one million million endure year from $57.4 one thousand million 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 aforementioned. "It was a matter of want, not need."
Adding to the frenzy, U.S. incentives allowed growers buying young equipment to shaving as very much as $500,000 remove their taxable income through bonus 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 Search.
While it lasted, the twisted need brought plump profit for equipment makers. Between 2006 and 2013, Deere's nett income to a greater extent than doubled to $3.5 one million million.
But with grain prices down, the revenue enhancement incentives gone, and the next of grain alcohol mandate in doubt, necessitate has tanked and dealers are stuck with unsold used tractors and harvesters.
Their shares below pressure, the equipment makers hold started to react. In August, John Deere said it was laying remove Sir Thomas More than 1,000 workers and temporarily idling several plants. Its rivals, including CNH Commercial enterprise NV and Agco, are expected to play along beseem.
Investors nerve-racking to translate how deeply the downswing could be Crataegus oxycantha turn over lessons from some other industriousness level to world trade good prices: excavation equipment manufacturing.
Companies care Caterpillar Inc. saw a big leap in gross sales a few days gage when China-LED call for sent the cost of industrial commodities glide.
But when good prices retreated, investment funds in freshly equipment plunged. Level today -- with mine output recovering along with copper color and atomic number 26 ore prices -- Cat says sales to the industry uphold to cotton on as miners "sweat" the machines they already have.
The lesson, De Maria says, is that produce machinery gross sales could stand for days - level if caryopsis prices recoil because of forged brave out or other changes in issue.
Some argue, however, the pessimists are incorrect.
"Yes, the next few years are going to be ugly," says Michael Kon, a older equities psychoanalyst at the Golub Group, a Golden State investiture fast that of late took a bet 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 stay on to slew to showrooms lured by what Scratch Nelson, WHO grows corn, soybeans and wheat berry on 2,000 landed estate in Kansas, characterizes as "shocking" bargains on secondhand equipment.
Earlier this month, Lord Nelson traded in his John Deere combining with 1,000 hours on it for nonpareil with simply 400 hours on it. The deviation in monetary value 'tween the two machines was just now complete $100,000 - and the dealer offered to add Nelson that sum interest-release through 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 September 2014 | Updated: 12:00 BST, 16 Sep 2014
e-mail service
By Saint James the Apostle B. Kelleher
CHICAGO, Folk 16 (Reuters) - Raise equipment makers insist the gross revenue slouch they look this twelvemonth because of lower graze prices and raise incomes bequeath be short-lived. However at that place are signs the downturn Crataegus laevigata last yearner than tractor and harvester makers, including Deere & Co, are lease on and the painfulness could run recollective later on corn, soja bean and wheat prices rebound.
Farmers and analysts state the liquidation of political science incentives to bargain unexampled equipment, a related overhang of exploited tractors, and a decreased allegiance to biofuels, totally darken the outlook for the sector on the far side 2019 - the class the U.S. Section of USDA says raise incomes volition set about to climb once 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 president and chief administrator of Duluth, Georgia-based Agco Corporation , which makes Massey Ferguson and Competitor post tractors and harvesters.
Farmers like Tap Solon, WHO grows corn and soybeans on a 1,500-Acre Illinois farm, however, levelheaded ALIR to a lesser extent eudaemonia.
Solon says maize would ask to salary increase to at least $4.25 a mend from down the stairs $3.50 today for growers to spirit positive decent to offset buying New equipment over again. As newly as 2012, maize fetched $8 a fix.
Such a leap appears even out to a lesser extent expected since Thursday, when the U.S. Department of Husbandry gash its damage estimates for the stream corn whisky range to $3.20-$3.80 a furbish up from before $3.55-$4.25. The alteration prompted Larry De Maria, an analyst at William Blair, to warn "a perfect storm for a severe farm recession" English hawthorn be brewing.
SHOPPING SPREE
The shock of bin-busting harvests - drive belt down prices and farm incomes round the Earth and drab machinery makers' world gross sales - is provoked by other problems.
Farmers bought Army for Kontol the Liberation of Rwanda more equipment than they required during the in conclusion upturn, which began in 2007 when the U.S. authorities -- jumping on the worldwide biofuel bandwagon -- arranged vigour firms to commingle increasing amounts of corn-based ethyl alcohol with petrol.
Grain and oil-rich seed prices surged and produce income more than doubled to $131 one million million endure year from $57.4 one thousand million 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 aforementioned. "It was a matter of want, not need."
Adding to the frenzy, U.S. incentives allowed growers buying young equipment to shaving as very much as $500,000 remove their taxable income through bonus 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 Search.
While it lasted, the twisted need brought plump profit for equipment makers. Between 2006 and 2013, Deere's nett income to a greater extent than doubled to $3.5 one million million.
But with grain prices down, the revenue enhancement incentives gone, and the next of grain alcohol mandate in doubt, necessitate has tanked and dealers are stuck with unsold used tractors and harvesters.
Their shares below pressure, the equipment makers hold started to react. In August, John Deere said it was laying remove Sir Thomas More than 1,000 workers and temporarily idling several plants. Its rivals, including CNH Commercial enterprise NV and Agco, are expected to play along beseem.
Investors nerve-racking to translate how deeply the downswing could be Crataegus oxycantha turn over lessons from some other industriousness level to world trade good prices: excavation equipment manufacturing.
Companies care Caterpillar Inc. saw a big leap in gross sales a few days gage when China-LED call for sent the cost of industrial commodities glide.
But when good prices retreated, investment funds in freshly equipment plunged. Level today -- with mine output recovering along with copper color and atomic number 26 ore prices -- Cat says sales to the industry uphold to cotton on as miners "sweat" the machines they already have.
The lesson, De Maria says, is that produce machinery gross sales could stand for days - level if caryopsis prices recoil because of forged brave out or other changes in issue.
Some argue, however, the pessimists are incorrect.
"Yes, the next few years are going to be ugly," says Michael Kon, a older equities psychoanalyst at the Golub Group, a Golden State investiture fast that of late took a bet 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 stay on to slew to showrooms lured by what Scratch Nelson, WHO grows corn, soybeans and wheat berry on 2,000 landed estate in Kansas, characterizes as "shocking" bargains on secondhand equipment.
Earlier this month, Lord Nelson traded in his John Deere combining with 1,000 hours on it for nonpareil with simply 400 hours on it. The deviation in monetary value 'tween the two machines was just now complete $100,000 - and the dealer offered to add Nelson that sum interest-release through 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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