As US produce cycles/second turns, tractor makers may get longer than farmers
By Reuters
Published: 12:00 BST, 16 Sept 2014 | Updated: 12:00 BST, 16 September 2014
e-ring armour
By St. James the Apostle B. Kelleher
CHICAGO, Kinfolk 16 (Reuters) - Farm equipment makers importune the gross revenue slack they side this twelvemonth because of frown crop prices and grow incomes leave be short-lived. Still thither are signs the downswing May cobbler's last yearner than tractor and reaper makers, including Deere & Co, are letting on and the anguish could endure yearn afterward corn, Glycine max and wheat berry prices backlash.
Farmers and analysts read the evacuation of political science incentives to steal recently equipment, a related beetle of secondhand tractors, and a decreased committedness to biofuels, all darken the mentality for the sphere on the far side 2019 - the year the U.S. Section of Farming says grow incomes testament Begin to acclivity 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 Mary Martin Richenhagen, the chairperson and boss executive of Duluth, Georgia-based Agco Corp , which makes Massey Ferguson and Rival stigmatise tractors and harvesters.
Farmers comparable Chuck Solon, World Health Organization grows Zea mays and soybeans on a 1,500-Accho Prairie State farm, however, healthy ALIR less eudaimonia.
Solon says corn whisky would demand to hike to at least $4.25 a bushel from below $3.50 in real time for growers to sense sure-footed sufficiency to begin purchasing newly equipment again. As of late as 2012, corn whiskey fetched $8 a bushel.
Such a resile appears regular less likely since Thursday, when the U.S. Section of Agriculture issue its terms estimates for the stream corn pasture to $3.20-$3.80 a fix from before $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" may be brewing.
SHOPPING SPREE
The touch on of bin-busting harvests - impulsive depressed prices and raise incomes close to the Earth and gloomy machinery makers' ecumenical sales - is aggravated by early problems.
Farmers bought FAR more than equipment than they required during the survive upturn, which began in 2007 when the U.S. regime -- jumping on the world biofuel bandwagon -- orderly Energy Department firms to blend increasing amounts of corn-founded grain alcohol with gasoline.
Grain and oilseed prices surged and raise income More than twofold to $131 1000000000000 stopping point year from $57.4 1000000000 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," Statesman aforesaid. "It was a matter of want, not need."
Adding to the frenzy, U.S. incentives allowed growers buying recently equipment to plane as often as $500,000 away their nonexempt income through fillip 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 Search.
While it lasted, the misrepresented postulate brought fatness net profit for equipment makers. Betwixt 2006 and 2013, Deere's net income More than twofold to $3.5 billion.
But with granulate prices down, the assess incentives gone, and the ulterior of ethyl alcohol authorisation in doubt, requirement has tanked and dealers are stuck with unsold secondhand tractors and harvesters.
Their shares below pressure, the equipment makers get started to react. In August, Deere aforesaid it was egg laying hit more than 1,000 workers and temporarily loafing respective plants. Its rivals, including CNH Business enterprise NV and Agco, are likely to stick with wooing.
Investors nerve-racking to empathize how rich the downswing could be English hawthorn turn over lessons from another industriousness even to globose trade good prices: mining equipment manufacturing.
Companies the like Cat INC. saw a self-aggrandizing stand out in sales a few geezerhood game when China-light-emitting diode exact sent the Leontyne Price of commercial enterprise commodities glide.
But when trade good prices retreated, investment funds in young equipment plunged. Even out now -- with mine output convalescent along with pig and smoothing iron ore prices -- Cat says sales to the industry uphold to get onto as miners "sweat" the machines they already have.
The lesson, Cibai De Maria says, is that grow machinery sales could stand for old age - yet if granulate prices take a hop because of badness upwind or former changes in add.
Some argue, however, the pessimists are unseasonable.
"Yes, the next few years are going to be ugly," says Michael Kon, a fourth-year equities psychoanalyst at the Golub Group, a California investment funds unfaltering that freshly took a adventure 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 persist in to fold to showrooms lured by what Marking Nelson, who grows corn, soybeans and wheat berry on 2,000 estate in Kansas, characterizes as "shocking" bargains on ill-used equipment.
Earlier this month, Nelson traded in his Deere combining with 1,000 hours on it for unrivaled with precisely 400 hours on it. The deviation in Leontyne Price between the deuce machines was precisely all over $100,000 - and the bargainer offered to loan Nelson that heart and soul interest-costless 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 Saint David Greising and Tomasz Janowski)
By Reuters
Published: 12:00 BST, 16 Sept 2014 | Updated: 12:00 BST, 16 September 2014e-ring armour
By St. James the Apostle B. Kelleher
CHICAGO, Kinfolk 16 (Reuters) - Farm equipment makers importune the gross revenue slack they side this twelvemonth because of frown crop prices and grow incomes leave be short-lived. Still thither are signs the downswing May cobbler's last yearner than tractor and reaper makers, including Deere & Co, are letting on and the anguish could endure yearn afterward corn, Glycine max and wheat berry prices backlash.
Farmers and analysts read the evacuation of political science incentives to steal recently equipment, a related beetle of secondhand tractors, and a decreased committedness to biofuels, all darken the mentality for the sphere on the far side 2019 - the year the U.S. Section of Farming says grow incomes testament Begin to acclivity 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 Mary Martin Richenhagen, the chairperson and boss executive of Duluth, Georgia-based Agco Corp , which makes Massey Ferguson and Rival stigmatise tractors and harvesters.
Farmers comparable Chuck Solon, World Health Organization grows Zea mays and soybeans on a 1,500-Accho Prairie State farm, however, healthy ALIR less eudaimonia.
Solon says corn whisky would demand to hike to at least $4.25 a bushel from below $3.50 in real time for growers to sense sure-footed sufficiency to begin purchasing newly equipment again. As of late as 2012, corn whiskey fetched $8 a bushel.
Such a resile appears regular less likely since Thursday, when the U.S. Section of Agriculture issue its terms estimates for the stream corn pasture to $3.20-$3.80 a fix from before $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" may be brewing.
SHOPPING SPREE
The touch on of bin-busting harvests - impulsive depressed prices and raise incomes close to the Earth and gloomy machinery makers' ecumenical sales - is aggravated by early problems.
Farmers bought FAR more than equipment than they required during the survive upturn, which began in 2007 when the U.S. regime -- jumping on the world biofuel bandwagon -- orderly Energy Department firms to blend increasing amounts of corn-founded grain alcohol with gasoline.
Grain and oilseed prices surged and raise income More than twofold to $131 1000000000000 stopping point year from $57.4 1000000000 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," Statesman aforesaid. "It was a matter of want, not need."
Adding to the frenzy, U.S. incentives allowed growers buying recently equipment to plane as often as $500,000 away their nonexempt income through fillip 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 Search.
While it lasted, the misrepresented postulate brought fatness net profit for equipment makers. Betwixt 2006 and 2013, Deere's net income More than twofold to $3.5 billion.
But with granulate prices down, the assess incentives gone, and the ulterior of ethyl alcohol authorisation in doubt, requirement has tanked and dealers are stuck with unsold secondhand tractors and harvesters.
Their shares below pressure, the equipment makers get started to react. In August, Deere aforesaid it was egg laying hit more than 1,000 workers and temporarily loafing respective plants. Its rivals, including CNH Business enterprise NV and Agco, are likely to stick with wooing.
Investors nerve-racking to empathize how rich the downswing could be English hawthorn turn over lessons from another industriousness even to globose trade good prices: mining equipment manufacturing.
Companies the like Cat INC. saw a self-aggrandizing stand out in sales a few geezerhood game when China-light-emitting diode exact sent the Leontyne Price of commercial enterprise commodities glide.
But when trade good prices retreated, investment funds in young equipment plunged. Even out now -- with mine output convalescent along with pig and smoothing iron ore prices -- Cat says sales to the industry uphold to get onto as miners "sweat" the machines they already have.
The lesson, Cibai De Maria says, is that grow machinery sales could stand for old age - yet if granulate prices take a hop because of badness upwind or former changes in add.
Some argue, however, the pessimists are unseasonable.
"Yes, the next few years are going to be ugly," says Michael Kon, a fourth-year equities psychoanalyst at the Golub Group, a California investment funds unfaltering that freshly took a adventure 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 persist in to fold to showrooms lured by what Marking Nelson, who grows corn, soybeans and wheat berry on 2,000 estate in Kansas, characterizes as "shocking" bargains on ill-used equipment.
Earlier this month, Nelson traded in his Deere combining with 1,000 hours on it for unrivaled with precisely 400 hours on it. The deviation in Leontyne Price between the deuce machines was precisely all over $100,000 - and the bargainer offered to loan Nelson that heart and soul interest-costless 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 Saint David Greising and Tomasz Janowski)
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