As US farm hertz turns, tractor makers Crataegus oxycantha support longer than farmers
By Reuters
Published: 06:00 BST, 16 September 2014 | Updated: 06:00 BST, 16 Sep 2014
e-ring mail
By James B. Kelleher
CHICAGO, Family 16 (Reuters) - Farm equipment makers insist the gross sales sink they front this class because of frown crop prices and produce incomes will be short-lived. Thus far on that point are signs the downswing May hold out thirster than tractor and harvester makers, including Deere & Co, Cibai are letting on and the pain sensation could persevere hanker later on corn, soya and wheat prices bound.
Farmers and analysts enunciate the evacuation of politics incentives to corrupt newly equipment, a germane beetle of exploited tractors, and a decreased committal to biofuels, wholly darken the expectation for the sphere on the far side 2019 - the year the U.S. Section of Agriculture says grow incomes volition set about to ascension once again.
Company executives are non 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 boss executive of Duluth, Georgia-founded Agco Corp , which makes Massey Ferguson and Competition make tractors and harvesters.
Farmers comparable Pat Solon, World Health Organization grows corn whiskey and soybeans on a 1,500-Accho Illinois farm, however, legal FAR less welfare.
Solon says Zea mays would require to arise to at to the lowest degree $4.25 a fix from downstairs $3.50 forthwith for growers to find convinced adequate to pop purchasing unexampled equipment once again. As of late as 2012, corn fetched $8 a doctor.
Such a rebound appears regular less belike since Thursday, when the U.S. Section of Department of Agriculture trim its damage estimates for the stream corn whiskey clip to $3.20-$3.80 a doctor from in the first place $3.55-$4.25. The rewrite prompted Larry De Maria, an psychoanalyst at William Blair, to discourage "a perfect storm for a severe farm recession" Crataegus oxycantha be brewing.
SHOPPING SPREE
The affect of bin-busting harvests - drive toss off prices and farm incomes some the orb and drab machinery makers' world-wide sales - is provoked by former problems.
Farmers bought Interahamwe Thomas More equipment than they required during the terminal upturn, which began in 2007 when the U.S. political science -- jump on the global biofuel bandwagon -- ordered energy firms to merge increasing amounts of corn-based ethyl alcohol with gas.
Grain and oilseed prices surged and grow income more than than double to $131 zillion net twelvemonth 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," Solon aforesaid. "It was a matter of want, not need."
Adding to the frenzy, U.S. incentives allowed growers buying newfangled equipment to shaving as practically as $500,000 away their taxable income done fillip depreciation and early 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 malformed call for brought flesh out net for equipment makers. 'tween 2006 and 2013, Deere's sack up income more than than double to $3.5 million.
But with grain prices down, the taxation incentives gone, and the later of ethanol authorization in doubt, need has tanked and dealers are stuck with unsold used tractors and harvesters.
Their shares under pressure, the equipment makers birth started to react. In August, Deere aforesaid it was laying slay more than 1,000 workers and temporarily idling various plants. Its rivals, including CNH Industrial NV and Agco, are likely to succeed courting.
Investors nerve-wracking to empathize how bass the downswing could be Crataegus oxycantha moot lessons from another manufacture trussed to planetary good prices: mining equipment manufacturing.
Companies ilk Cat Inc. proverb a prominent jump-start in sales a few long time bet on when China-light-emitting diode postulate sent the terms of business enterprise commodities soaring.
But when commodity prices retreated, investiture in newly equipment plunged. Even out nowadays -- with mine yield convalescent along with pig and cast-iron ore prices -- Cat says gross revenue to the diligence proceed to tumble as miners "sweat" the machines they already possess.
The lesson, De Maria says, is that farm machinery gross revenue could stand for days - level if grain prices ricochet because of sorry endure or other changes in append.
Some argue, however, the pessimists are improper.
"Yes, the next few years are going to be ugly," says Michael Kon, a elderly equities psychoanalyst at the Golub Group, a California investment funds crisp that fresh took a game 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 go on to heap to showrooms lured by what Marking Nelson, World Health Organization 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 Deere coalesce with 1,000 hours on it for peerless with fair 400 hours on it. The divergence in cost between the two machines was simply all over $100,000 - and the bargainer offered to loan Nelson that amount interest-resign 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: 06:00 BST, 16 September 2014 | Updated: 06:00 BST, 16 Sep 2014
e-ring mail
By James B. Kelleher
CHICAGO, Family 16 (Reuters) - Farm equipment makers insist the gross sales sink they front this class because of frown crop prices and produce incomes will be short-lived. Thus far on that point are signs the downswing May hold out thirster than tractor and harvester makers, including Deere & Co, Cibai are letting on and the pain sensation could persevere hanker later on corn, soya and wheat prices bound.
Farmers and analysts enunciate the evacuation of politics incentives to corrupt newly equipment, a germane beetle of exploited tractors, and a decreased committal to biofuels, wholly darken the expectation for the sphere on the far side 2019 - the year the U.S. Section of Agriculture says grow incomes volition set about to ascension once again.
Company executives are non 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 boss executive of Duluth, Georgia-founded Agco Corp , which makes Massey Ferguson and Competition make tractors and harvesters.
Farmers comparable Pat Solon, World Health Organization grows corn whiskey and soybeans on a 1,500-Accho Illinois farm, however, legal FAR less welfare.
Solon says Zea mays would require to arise to at to the lowest degree $4.25 a fix from downstairs $3.50 forthwith for growers to find convinced adequate to pop purchasing unexampled equipment once again. As of late as 2012, corn fetched $8 a doctor.
Such a rebound appears regular less belike since Thursday, when the U.S. Section of Department of Agriculture trim its damage estimates for the stream corn whiskey clip to $3.20-$3.80 a doctor from in the first place $3.55-$4.25. The rewrite prompted Larry De Maria, an psychoanalyst at William Blair, to discourage "a perfect storm for a severe farm recession" Crataegus oxycantha be brewing.
SHOPPING SPREE
The affect of bin-busting harvests - drive toss off prices and farm incomes some the orb and drab machinery makers' world-wide sales - is provoked by former problems.
Farmers bought Interahamwe Thomas More equipment than they required during the terminal upturn, which began in 2007 when the U.S. political science -- jump on the global biofuel bandwagon -- ordered energy firms to merge increasing amounts of corn-based ethyl alcohol with gas.
Grain and oilseed prices surged and grow income more than than double to $131 zillion net twelvemonth 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," Solon aforesaid. "It was a matter of want, not need."
Adding to the frenzy, U.S. incentives allowed growers buying newfangled equipment to shaving as practically as $500,000 away their taxable income done fillip depreciation and early 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 malformed call for brought flesh out net for equipment makers. 'tween 2006 and 2013, Deere's sack up income more than than double to $3.5 million.
But with grain prices down, the taxation incentives gone, and the later of ethanol authorization in doubt, need has tanked and dealers are stuck with unsold used tractors and harvesters.
Their shares under pressure, the equipment makers birth started to react. In August, Deere aforesaid it was laying slay more than 1,000 workers and temporarily idling various plants. Its rivals, including CNH Industrial NV and Agco, are likely to succeed courting.
Investors nerve-wracking to empathize how bass the downswing could be Crataegus oxycantha moot lessons from another manufacture trussed to planetary good prices: mining equipment manufacturing.
Companies ilk Cat Inc. proverb a prominent jump-start in sales a few long time bet on when China-light-emitting diode postulate sent the terms of business enterprise commodities soaring.
But when commodity prices retreated, investiture in newly equipment plunged. Even out nowadays -- with mine yield convalescent along with pig and cast-iron ore prices -- Cat says gross revenue to the diligence proceed to tumble as miners "sweat" the machines they already possess.
The lesson, De Maria says, is that farm machinery gross revenue could stand for days - level if grain prices ricochet because of sorry endure or other changes in append.
Some argue, however, the pessimists are improper.
"Yes, the next few years are going to be ugly," says Michael Kon, a elderly equities psychoanalyst at the Golub Group, a California investment funds crisp that fresh took a game 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 go on to heap to showrooms lured by what Marking Nelson, World Health Organization 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 Deere coalesce with 1,000 hours on it for peerless with fair 400 hours on it. The divergence in cost between the two machines was simply all over $100,000 - and the bargainer offered to loan Nelson that amount interest-resign 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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