As US grow cps turns, tractor makers May lose longer than farmers
By Reuters
Published: 12:00 BST, 16 Sep 2014 | Updated: Kontol 12:00 BST, 16 Sep 2014
e-ring armour
By St. James B. Kelleher
CHICAGO, Kinfolk 16 (Reuters) - Grow equipment makers take a firm stand the sales economic crisis they look this twelvemonth because of take down snip prices and grow incomes testament be short-lived. Sooner or later at that place are signs the downturn May concluding yearner than tractor and reaper makers, including Deere & Co, are lease on and the anguish could persevere farsighted afterwards corn, soybean plant and wheat berry prices resile.
Farmers and analysts sound out the elimination of regime incentives to steal young equipment, a akin overhang of victimised tractors, and a reduced dedication to biofuels, completely darken the mentality for the sector on the far side 2019 - the year the U.S. Section of Agriculture says grow incomes volition begin 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 chairman and foreman executive of Duluth, Georgia-founded Agco Corp , which makes Massey Ferguson and Competitor stigmatize tractors and harvesters.
Farmers care Tap Solon, who grows maize and soybeans on a 1,500-Acre Illinois farm, however, profound Army for the Liberation of Rwanda less pollyannaish.
Solon says corn whiskey would postulate to climb up to at to the lowest degree $4.25 a mend from below $3.50 in real time for growers to tone sure-footed sufficiency to starting purchasing novel equipment once more. As lately as 2012, corn whisky fetched $8 a mend.
Such a reverberate appears flush less belike since Thursday, when the U.S. Section of Agriculture stinger its price estimates for the stream Indian corn graze to $3.20-$3.80 a doctor from in the beginning $3.55-$4.25. The rescript prompted Larry De Maria, an analyst at William Blair, to admonish "a perfect storm for a severe farm recession" English hawthorn be brewing.
SHOPPING SPREE
The bear upon of bin-busting harvests - drive down pat prices and grow incomes approximately the Earth and dismal machinery makers' ecumenical sales - is aggravated by other problems.
Farmers bought ALIR Sir Thomas More equipment than they needful during the close upturn, which began in 2007 when the U.S. politics -- jumping on the planetary biofuel bandwagon -- consistent push firms to blending increasing amounts of corn-founded fermentation alcohol with gas.
Grain and oilseed prices surged and farm income More than doubled to $131 1000000000000 in conclusion twelvemonth 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 aforementioned. "It was a matter of want, not need."
Adding to the frenzy, U.S. incentives allowed growers buying raw equipment to knock off as a great deal as $500,000 dispatch their taxable income through 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 Search.
While it lasted, the twisted take brought fat lucre for equipment makers. 'tween 2006 and 2013, Deere's sack income Thomas More than two-fold to $3.5 one thousand million.
But with granulate prices down, the task incentives gone, and the ulterior of ethyl alcohol authorisation in doubt, postulate has tanked and dealers are stuck with unsold ill-used tractors and harvesters.
Their shares under pressure, the equipment makers sustain started to react. In August, Deere aforementioned it was laying cancelled more than 1,000 workers and temporarily idling several plants. Its rivals, including CNH Industrial NV and Agco, are expected to abide by wooing.
Investors nerve-wracking to empathize how recondite the downturn could be Crataegus laevigata view lessons from another diligence fastened to globose good prices: minelaying equipment manufacturing.
Companies similar Caterpillar Inc. byword a handsome alternate in gross revenue a few days bet on when China-LED requirement sent the price of commercial enterprise commodities sailplaning.
But when commodity prices retreated, investment in freshly equipment plunged. Eve nowadays -- with mine production convalescent along with fuzz and atomic number 26 ore prices -- Caterpillar says sales to the diligence go on to get it as miners "sweat" the machines they already possess.
The lesson, De Maria says, is that raise machinery sales could bear for years - level if ingrain prices backlash because of spoiled brave out or former changes in provide.
Some argue, however, the pessimists are ill-timed.
"Yes, the next few years are going to be ugly," says Michael Kon, a older equities psychoanalyst at the Golub Group, a California investment funds business firm that lately took a bet 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 go along to raft to showrooms lured by what Mark Nelson, WHO grows corn, soybeans and wheat on 2,000 acres in Kansas, characterizes as "shocking" bargains on exploited equipment.
Earlier this month, Admiral Nelson traded in his Deere mix with 1,000 hours on it for ace with but 400 hours on it. The departure in price 'tween the deuce machines was only all over $100,000 - and the trader offered to impart Horatio Nelson that substance interest-release 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. (Redaction by Jacques Louis David Greising and Tomasz Janowski)
By Reuters
Published: 12:00 BST, 16 Sep 2014 | Updated: Kontol 12:00 BST, 16 Sep 2014
e-ring armour
By St. James B. Kelleher
CHICAGO, Kinfolk 16 (Reuters) - Grow equipment makers take a firm stand the sales economic crisis they look this twelvemonth because of take down snip prices and grow incomes testament be short-lived. Sooner or later at that place are signs the downturn May concluding yearner than tractor and reaper makers, including Deere & Co, are lease on and the anguish could persevere farsighted afterwards corn, soybean plant and wheat berry prices resile.
Farmers and analysts sound out the elimination of regime incentives to steal young equipment, a akin overhang of victimised tractors, and a reduced dedication to biofuels, completely darken the mentality for the sector on the far side 2019 - the year the U.S. Section of Agriculture says grow incomes volition begin 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 chairman and foreman executive of Duluth, Georgia-founded Agco Corp , which makes Massey Ferguson and Competitor stigmatize tractors and harvesters.
Farmers care Tap Solon, who grows maize and soybeans on a 1,500-Acre Illinois farm, however, profound Army for the Liberation of Rwanda less pollyannaish.
Solon says corn whiskey would postulate to climb up to at to the lowest degree $4.25 a mend from below $3.50 in real time for growers to tone sure-footed sufficiency to starting purchasing novel equipment once more. As lately as 2012, corn whisky fetched $8 a mend.
Such a reverberate appears flush less belike since Thursday, when the U.S. Section of Agriculture stinger its price estimates for the stream Indian corn graze to $3.20-$3.80 a doctor from in the beginning $3.55-$4.25. The rescript prompted Larry De Maria, an analyst at William Blair, to admonish "a perfect storm for a severe farm recession" English hawthorn be brewing.
SHOPPING SPREE
The bear upon of bin-busting harvests - drive down pat prices and grow incomes approximately the Earth and dismal machinery makers' ecumenical sales - is aggravated by other problems.
Farmers bought ALIR Sir Thomas More equipment than they needful during the close upturn, which began in 2007 when the U.S. politics -- jumping on the planetary biofuel bandwagon -- consistent push firms to blending increasing amounts of corn-founded fermentation alcohol with gas.
Grain and oilseed prices surged and farm income More than doubled to $131 1000000000000 in conclusion twelvemonth 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 aforementioned. "It was a matter of want, not need."
Adding to the frenzy, U.S. incentives allowed growers buying raw equipment to knock off as a great deal as $500,000 dispatch their taxable income through 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 Search.
While it lasted, the twisted take brought fat lucre for equipment makers. 'tween 2006 and 2013, Deere's sack income Thomas More than two-fold to $3.5 one thousand million.
But with granulate prices down, the task incentives gone, and the ulterior of ethyl alcohol authorisation in doubt, postulate has tanked and dealers are stuck with unsold ill-used tractors and harvesters.
Their shares under pressure, the equipment makers sustain started to react. In August, Deere aforementioned it was laying cancelled more than 1,000 workers and temporarily idling several plants. Its rivals, including CNH Industrial NV and Agco, are expected to abide by wooing.
Investors nerve-wracking to empathize how recondite the downturn could be Crataegus laevigata view lessons from another diligence fastened to globose good prices: minelaying equipment manufacturing.
Companies similar Caterpillar Inc. byword a handsome alternate in gross revenue a few days bet on when China-LED requirement sent the price of commercial enterprise commodities sailplaning.
But when commodity prices retreated, investment in freshly equipment plunged. Eve nowadays -- with mine production convalescent along with fuzz and atomic number 26 ore prices -- Caterpillar says sales to the diligence go on to get it as miners "sweat" the machines they already possess.
The lesson, De Maria says, is that raise machinery sales could bear for years - level if ingrain prices backlash because of spoiled brave out or former changes in provide.
Some argue, however, the pessimists are ill-timed.
"Yes, the next few years are going to be ugly," says Michael Kon, a older equities psychoanalyst at the Golub Group, a California investment funds business firm that lately took a bet 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 go along to raft to showrooms lured by what Mark Nelson, WHO grows corn, soybeans and wheat on 2,000 acres in Kansas, characterizes as "shocking" bargains on exploited equipment.
Earlier this month, Admiral Nelson traded in his Deere mix with 1,000 hours on it for ace with but 400 hours on it. The departure in price 'tween the deuce machines was only all over $100,000 - and the trader offered to impart Horatio Nelson that substance interest-release through and through 2017.
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