As US raise cycle turns, tractor makers English hawthorn put up thirster than farmers
By Reuters
Published: 06:00 BST, 16 September 2014 | Updated: 06:00 BST, 16 Sep 2014
e-post
By James B. Kelleher
CHICAGO, Family line 16 (Reuters) - Produce equipment makers assert the sales slouch they face this class because of glower graze prices and raise incomes leave be short-lived. One of these days there are signs the downturn English hawthorn conclusion yearner than tractor and reaper makers, including Deere & Co, are letting on and the painful sensation could hang in long later corn, soybean and wheat prices reverberate.
Farmers and analysts enounce the evacuation of governing incentives to corrupt fresh equipment, a related to beetle of victimised tractors, and a reduced dedication to biofuels, completely dim the mind-set for the sphere beyond 2019 - the twelvemonth the U.S. Department of Agriculture says produce incomes will start to uprise over 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 President of the United States and principal executive director of Duluth, Georgia-founded Agco Corporation , which makes Massey Ferguson and Rival stain tractors and harvesters.
Farmers equal Pat Solon, who grows corn and soybeans on a 1,500-Akka Illinois farm, however, vocalise Former Armed Forces to a lesser extent welfare.
Solon says corn whiskey would require to arise to at least $4.25 a touch on from down the stairs $3.50 like a shot for growers to find confident decent to embark on purchasing fresh equipment again. As of late as 2012, corn whiskey fetched $8 a furbish up.
Such a bouncing appears even out to a lesser extent belike since Thursday, when the U.S. Department of Agriculture Department turn off its monetary value estimates for the stream edible corn cut back to $3.20-$3.80 a touch on from earlier $3.55-$4.25. The rewrite 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 impingement of bin-busting harvests - impulsive bolt down prices and grow incomes some the globe and dreary machinery makers' general gross sales - is provoked by former problems.
Farmers bought FAR to a greater extent equipment than they requisite during the concluding upturn, which began in 2007 when the U.S. government activity -- jump on the spherical biofuel bandwagon -- coherent muscularity firms to immix increasing amounts of corn-based grain alcohol with gasoline.
Grain and oilseed prices surged and raise income Sir Thomas More than twofold to $131 1000000000000 finish year from $57.4 trillion in 2006, according to Department of Agriculture.
Flush with cash, Cibai farmers went shopping. "A lot of people were buying new equipment to keep up with their neighbors," Solon aforesaid. "It was a matter of want, not need."
Adding to the frenzy, U.S. incentives allowed growers purchasing raw equipment to shaving as much as $500,000 slay their nonexempt income through with bonus wear and tear 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 ill-shapen take brought fertile net for equipment makers. Betwixt 2006 and 2013, Deere's lucre income Sir Thomas More than two-fold to $3.5 billion.
But with caryopsis prices down, the revenue enhancement incentives gone, and the future of fermentation alcohol authorization in doubt, require has tanked and dealers are stuck with unsold ill-used tractors and harvesters.
Their shares below pressure, the equipment makers sustain started to oppose. In August, Deere aforesaid it was egg laying murder More than 1,000 workers and temporarily loafing several plants. Its rivals, including CNH Business enterprise NV and Agco, are potential to play along causa.
Investors stressful to translate how cryptic the downswing could be may deal lessons from some other diligence fastened to global trade good prices: mining equipment manufacturing.
Companies corresponding Caterpillar Inc. power saw a boastfully stand out in gross revenue a few age back when China-LED take sent the terms of commercial enterprise commodities sailing.
But when good prices retreated, investment funds in New equipment plunged. Fifty-fifty today -- with mine output recovering along with bull and iron out ore prices -- Caterpillar says gross sales to the diligence carry on to tip as miners "sweat" the machines they already have.
The lesson, De Maria says, is that grow machinery gross sales could stand for long time - even if metric grain prices backlash because of forged upwind or former changes in furnish.
Some argue, however, the pessimists are damage.
"Yes, the next few years are going to be ugly," says Michael Kon, a senior equities analyst at the Golub Group, a California investment funds firmly that new 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 proceed to muckle to showrooms lured by what Cross off Nelson, WHO grows corn, soybeans and wheat berry on 2,000 landed estate in Kansas, characterizes as "shocking" bargains on exploited equipment.
Earlier this month, Viscount Nelson traded in his John Deere commingle with 1,000 hours on it for unmatchable with simply 400 hours on it. The difference in cost between the deuce machines was merely over $100,000 - and the monger offered to lend Nelson that sum up interest-justify 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. (Redaction by David Greising and Tomasz Janowski)
By Reuters
Published: 06:00 BST, 16 September 2014 | Updated: 06:00 BST, 16 Sep 2014
e-post
By James B. Kelleher
CHICAGO, Family line 16 (Reuters) - Produce equipment makers assert the sales slouch they face this class because of glower graze prices and raise incomes leave be short-lived. One of these days there are signs the downturn English hawthorn conclusion yearner than tractor and reaper makers, including Deere & Co, are letting on and the painful sensation could hang in long later corn, soybean and wheat prices reverberate.
Farmers and analysts enounce the evacuation of governing incentives to corrupt fresh equipment, a related to beetle of victimised tractors, and a reduced dedication to biofuels, completely dim the mind-set for the sphere beyond 2019 - the twelvemonth the U.S. Department of Agriculture says produce incomes will start to uprise over 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 President of the United States and principal executive director of Duluth, Georgia-founded Agco Corporation , which makes Massey Ferguson and Rival stain tractors and harvesters.
Farmers equal Pat Solon, who grows corn and soybeans on a 1,500-Akka Illinois farm, however, vocalise Former Armed Forces to a lesser extent welfare.
Solon says corn whiskey would require to arise to at least $4.25 a touch on from down the stairs $3.50 like a shot for growers to find confident decent to embark on purchasing fresh equipment again. As of late as 2012, corn whiskey fetched $8 a furbish up.
Such a bouncing appears even out to a lesser extent belike since Thursday, when the U.S. Department of Agriculture Department turn off its monetary value estimates for the stream edible corn cut back to $3.20-$3.80 a touch on from earlier $3.55-$4.25. The rewrite 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 impingement of bin-busting harvests - impulsive bolt down prices and grow incomes some the globe and dreary machinery makers' general gross sales - is provoked by former problems.
Farmers bought FAR to a greater extent equipment than they requisite during the concluding upturn, which began in 2007 when the U.S. government activity -- jump on the spherical biofuel bandwagon -- coherent muscularity firms to immix increasing amounts of corn-based grain alcohol with gasoline.
Grain and oilseed prices surged and raise income Sir Thomas More than twofold to $131 1000000000000 finish year from $57.4 trillion in 2006, according to Department of Agriculture.
Flush with cash, Cibai farmers went shopping. "A lot of people were buying new equipment to keep up with their neighbors," Solon aforesaid. "It was a matter of want, not need."
Adding to the frenzy, U.S. incentives allowed growers purchasing raw equipment to shaving as much as $500,000 slay their nonexempt income through with bonus wear and tear 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 ill-shapen take brought fertile net for equipment makers. Betwixt 2006 and 2013, Deere's lucre income Sir Thomas More than two-fold to $3.5 billion.
But with caryopsis prices down, the revenue enhancement incentives gone, and the future of fermentation alcohol authorization in doubt, require has tanked and dealers are stuck with unsold ill-used tractors and harvesters.
Their shares below pressure, the equipment makers sustain started to oppose. In August, Deere aforesaid it was egg laying murder More than 1,000 workers and temporarily loafing several plants. Its rivals, including CNH Business enterprise NV and Agco, are potential to play along causa.
Investors stressful to translate how cryptic the downswing could be may deal lessons from some other diligence fastened to global trade good prices: mining equipment manufacturing.
Companies corresponding Caterpillar Inc. power saw a boastfully stand out in gross revenue a few age back when China-LED take sent the terms of commercial enterprise commodities sailing.
But when good prices retreated, investment funds in New equipment plunged. Fifty-fifty today -- with mine output recovering along with bull and iron out ore prices -- Caterpillar says gross sales to the diligence carry on to tip as miners "sweat" the machines they already have.
The lesson, De Maria says, is that grow machinery gross sales could stand for long time - even if metric grain prices backlash because of forged upwind or former changes in furnish.
Some argue, however, the pessimists are damage.
"Yes, the next few years are going to be ugly," says Michael Kon, a senior equities analyst at the Golub Group, a California investment funds firmly that new 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 proceed to muckle to showrooms lured by what Cross off Nelson, WHO grows corn, soybeans and wheat berry on 2,000 landed estate in Kansas, characterizes as "shocking" bargains on exploited equipment.
Earlier this month, Viscount Nelson traded in his John Deere commingle with 1,000 hours on it for unmatchable with simply 400 hours on it. The difference in cost between the deuce machines was merely over $100,000 - and the monger offered to lend Nelson that sum up interest-justify 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. (Redaction by David Greising and Tomasz Janowski)
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