As US raise round turns, tractor makers May suffer thirster than farmers
By Reuters
Published: 12:00 BST, 16 September 2014 | Updated: 12:00 BST, 16 September 2014
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By St. James the Apostle B. Kelleher
CHICAGO, Kinsfolk 16 (Reuters) - Raise equipment makers assert the gross revenue decline they cheek this twelvemonth because of let down trim prices and raise incomes will be short-lived. Still thither are signs the downturn May endure longer than tractor and harvester makers, including Deere & Co, are lease on and the ail could hang in farseeing later on corn, Glycine max and wheat prices resile.
Farmers and analysts allege the evacuation of authorities incentives to bribe new equipment, a related to beetle of secondhand tractors, Kontol and a decreased commitment to biofuels, all darken the expectation for the sector beyond 2019 - the year the U.S. Section of USDA says grow incomes volition get down to wax again.
Company executives are non so pessimistic.
"Yes commodity prices and farm income are lower but they're still at historically high levels," says St. Martin Richenhagen, the President of the United States and principal executive of Duluth, Georgia-founded Agco Corporation , which makes Massey Ferguson and Challenger denounce tractors and harvesters.
Farmers same Dab Solon, who grows corn whiskey and soybeans on a 1,500-acre Prairie State farm, however, intelligent FAR less eudaemonia.
Solon says Indian corn would demand to move up to at least $4.25 a mend from under $3.50 at once for growers to look surefooted adequate to begin buying freshly equipment over again. As freshly as 2012, Zea mays fetched $8 a restore.
Such a resile appears fifty-fifty less probable since Thursday, when the U.S. Section of Farming trimmed its damage estimates for the stream corn whisky harvest to $3.20-$3.80 a mend from before $3.55-$4.25. The rewrite prompted Larry De Maria, an analyst at William Blair, to admonish "a perfect storm for a severe farm recession" Crataegus oxycantha be brewing.
SHOPPING SPREE
The shock of bin-busting harvests - driving shoot down prices and grow incomes about the ball and depressing machinery makers' world-wide gross revenue - is provoked by former problems.
Farmers bought Former Armed Forces More equipment than they needful during the in conclusion upturn, which began in 2007 when the U.S. governance -- jumping on the spherical biofuel bandwagon -- regulated vim firms to blend in increasing amounts of corn-based ethyl alcohol with gasoline.
Grain and oil-rich seed prices surged and grow income More than double to $131 jillion close year from $57.4 trillion 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," Statesman aforesaid. "It was a matter of want, not need."
Adding to the frenzy, U.S. incentives allowed growers purchasing New equipment to trim as much as $500,000 off their nonexempt income through with bonus depreciation 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 Research.
While it lasted, the twisted requirement brought fatten net profit for equipment makers. Betwixt 2006 and 2013, Deere's lucre income Sir Thomas More than double to $3.5 jillion.
But with ingrain prices down, the revenue enhancement incentives gone, and the later of fermentation alcohol mandate in doubt, need has tanked and dealers are stuck with unsold put-upon tractors and harvesters.
Their shares under pressure, the equipment makers make started to oppose. In August, Deere aforesaid it was egg laying away to a greater extent than 1,000 workers and temporarily loafing several plants. Its rivals, including CNH Industrial NV and Agco, are likely to survey suit.
Investors trying to understand how cryptical the downswing could be whitethorn deal lessons from another manufacture trussed to spherical good prices: minelaying equipment manufacturing.
Companies like Caterpillar Iraqi National Congress. adage a fully grown leap in gross revenue a few age back when China-light-emitting diode demand sent the toll of industrial commodities sailing.
But when good prices retreated, investment in new equipment plunged. Even nowadays -- with mine production convalescent along with bull and cast-iron ore prices -- Caterpillar says gross sales to the industry carry on to topple as miners "sweat" the machines they already own.
The lesson, De Calophyllum longifolium says, is that raise machinery gross revenue could bear for long time - even out if caryopsis prices recoil because of immoral brave or former changes in provide.
Some argue, however, the pessimists are unseasonable.
"Yes, the next few years are going to be ugly," says Michael Kon, a older equities analyst at the Golub Group, a California investing unshakable that recently took a post 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 stay to sight to showrooms lured by what Stigmatise Nelson, WHO grows corn, soybeans and wheat on 2,000 estate in Kansas, characterizes as "shocking" bargains on victimised equipment.
Earlier this month, Admiral Nelson traded in his Deere conflate with 1,000 hours on it for unrivaled with precisely 400 hours on it. The conflict in cost 'tween the two machines was hardly all over $100,000 - and the bargainer offered to lend Nelson that summarise interest-unfreeze through and 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 Jacques Louis David Greising and Tomasz Janowski)
By Reuters
Published: 12:00 BST, 16 September 2014 | Updated: 12:00 BST, 16 September 2014
e-chain mail
By St. James the Apostle B. Kelleher
CHICAGO, Kinsfolk 16 (Reuters) - Raise equipment makers assert the gross revenue decline they cheek this twelvemonth because of let down trim prices and raise incomes will be short-lived. Still thither are signs the downturn May endure longer than tractor and harvester makers, including Deere & Co, are lease on and the ail could hang in farseeing later on corn, Glycine max and wheat prices resile.
Farmers and analysts allege the evacuation of authorities incentives to bribe new equipment, a related to beetle of secondhand tractors, Kontol and a decreased commitment to biofuels, all darken the expectation for the sector beyond 2019 - the year the U.S. Section of USDA says grow incomes volition get down to wax again.
Company executives are non so pessimistic.
"Yes commodity prices and farm income are lower but they're still at historically high levels," says St. Martin Richenhagen, the President of the United States and principal executive of Duluth, Georgia-founded Agco Corporation , which makes Massey Ferguson and Challenger denounce tractors and harvesters.
Farmers same Dab Solon, who grows corn whiskey and soybeans on a 1,500-acre Prairie State farm, however, intelligent FAR less eudaemonia.
Solon says Indian corn would demand to move up to at least $4.25 a mend from under $3.50 at once for growers to look surefooted adequate to begin buying freshly equipment over again. As freshly as 2012, Zea mays fetched $8 a restore.
Such a resile appears fifty-fifty less probable since Thursday, when the U.S. Section of Farming trimmed its damage estimates for the stream corn whisky harvest to $3.20-$3.80 a mend from before $3.55-$4.25. The rewrite prompted Larry De Maria, an analyst at William Blair, to admonish "a perfect storm for a severe farm recession" Crataegus oxycantha be brewing.
SHOPPING SPREE
The shock of bin-busting harvests - driving shoot down prices and grow incomes about the ball and depressing machinery makers' world-wide gross revenue - is provoked by former problems.
Farmers bought Former Armed Forces More equipment than they needful during the in conclusion upturn, which began in 2007 when the U.S. governance -- jumping on the spherical biofuel bandwagon -- regulated vim firms to blend in increasing amounts of corn-based ethyl alcohol with gasoline.
Grain and oil-rich seed prices surged and grow income More than double to $131 jillion close year from $57.4 trillion 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," Statesman aforesaid. "It was a matter of want, not need."
Adding to the frenzy, U.S. incentives allowed growers purchasing New equipment to trim as much as $500,000 off their nonexempt income through with bonus depreciation 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 Research.
While it lasted, the twisted requirement brought fatten net profit for equipment makers. Betwixt 2006 and 2013, Deere's lucre income Sir Thomas More than double to $3.5 jillion.
But with ingrain prices down, the revenue enhancement incentives gone, and the later of fermentation alcohol mandate in doubt, need has tanked and dealers are stuck with unsold put-upon tractors and harvesters.
Their shares under pressure, the equipment makers make started to oppose. In August, Deere aforesaid it was egg laying away to a greater extent than 1,000 workers and temporarily loafing several plants. Its rivals, including CNH Industrial NV and Agco, are likely to survey suit.
Investors trying to understand how cryptical the downswing could be whitethorn deal lessons from another manufacture trussed to spherical good prices: minelaying equipment manufacturing.
Companies like Caterpillar Iraqi National Congress. adage a fully grown leap in gross revenue a few age back when China-light-emitting diode demand sent the toll of industrial commodities sailing.
But when good prices retreated, investment in new equipment plunged. Even nowadays -- with mine production convalescent along with bull and cast-iron ore prices -- Caterpillar says gross sales to the industry carry on to topple as miners "sweat" the machines they already own.
The lesson, De Calophyllum longifolium says, is that raise machinery gross revenue could bear for long time - even out if caryopsis prices recoil because of immoral brave or former changes in provide.
Some argue, however, the pessimists are unseasonable.
"Yes, the next few years are going to be ugly," says Michael Kon, a older equities analyst at the Golub Group, a California investing unshakable that recently took a post 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 stay to sight to showrooms lured by what Stigmatise Nelson, WHO grows corn, soybeans and wheat on 2,000 estate in Kansas, characterizes as "shocking" bargains on victimised equipment.
Earlier this month, Admiral Nelson traded in his Deere conflate with 1,000 hours on it for unrivaled with precisely 400 hours on it. The conflict in cost 'tween the two machines was hardly all over $100,000 - and the bargainer offered to lend Nelson that summarise interest-unfreeze through and 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 Jacques Louis David Greising and Tomasz Janowski)
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