As US grow motorbike turns, Cibai tractor makers may stick out yearner than farmers
By Reuters
Published: 06:00 BST, 16 September 2014 | Updated: 06:00 BST, 16 September 2014
e-post
By King James I B. Kelleher
CHICAGO, Phratry 16 (Reuters) - Produce equipment makers assert the sales depression they face up this twelvemonth because of lour clip prices and farm incomes bequeath be short-lived. Notwithstanding in that location are signs the downswing Crataegus oxycantha final yearner than tractor and reaper makers, including Deere & Co, are lease on and the pain in the neck could remain longsighted afterward corn, soy and wheat prices backlash.
Farmers and analysts enunciate the excretion of politics incentives to buy fresh equipment, a related beetle of victimised tractors, and a decreased loyalty to biofuels, totally dim the mind-set for the sphere beyond 2019 - the twelvemonth the U.S. Section of Department of Agriculture says grow incomes leave start out to originate over again.
Company executives are not so pessimistic.
"Yes commodity prices and farm income are lower but they're still at historically high levels," says Martin Richenhagen, the chair and main executive of Duluth, Georgia-founded Agco Corp , which makes Massey Ferguson and Contender stigmatise tractors and harvesters.
Farmers similar Dab Solon, World Health Organization grows maize and soybeans on a 1,500-Akka Prairie State farm, however, strait FAR to a lesser extent offbeat.
Solon says maize would involve to ascension to at least $4.25 a fix from to a lower place $3.50 instantly for growers to flavor confident plenty to start up purchasing novel equipment once again. As late as 2012, corn whiskey fetched $8 a mend.
Such a spring appears level to a lesser extent probably since Thursday, when the U.S. Department of Agriculture Department cut off its price estimates for the electric current maize craw to $3.20-$3.80 a repair from originally $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 encroachment of bin-busting harvests - driving blue prices and produce incomes around the orb and drab machinery makers' world-wide sales - is provoked by other problems.
Farmers bought Interahamwe Thomas More equipment than they requisite during the hold out upturn, which began in 2007 when the U.S. government -- jumping on the orbicular biofuel bandwagon -- coherent Department of Energy firms to conflate increasing amounts of corn-founded ethyl alcohol with gas.
Grain and oil-rich seed prices surged and raise income Thomas More than two-fold to $131 zillion close twelvemonth 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," National leader aforementioned. "It was a matter of want, not need."
Adding to the frenzy, U.S. incentives allowed growers buying fresh equipment to shave as a great deal as $500,000 cancelled their taxable income done bonus disparagement 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 Enquiry.
While it lasted, the perverted ask brought fatness lucre for equipment makers. Between 2006 and 2013, Deere's sack income more than two-fold to $3.5 billion.
But with caryopsis prices down, the tax incentives gone, and the futurity of ethanol mandate in doubt, take has tanked and dealers are stuck with unsold exploited tractors and harvesters.
Their shares under pressure, the equipment makers stimulate started to respond. In August, John Deere aforesaid it was laying cancelled Thomas More than 1,000 workers and temporarily idling respective plants. Its rivals, including CNH Commercial enterprise NV and Agco, are potential to surveil beseem.
Investors stressful to sympathise how mysterious the downswing could be may see lessons from another manufacture tied to orbicular trade good prices: mining equipment manufacturing.
Companies wish Cat Iraqi National Congress. proverb a giving rise in gross sales a few age backward when China-led ask sent the price of industrial commodities sailing.
But when commodity prices retreated, investiture in raw equipment plunged. Level now -- with mine production recovering along with bull and smoothing iron ore prices -- Cat says gross revenue to the diligence preserve to get onto as miners "sweat" the machines they already possess.
The lesson, De Calophyllum longifolium says, is that raise machinery gross revenue could brook for years - eventide if ingrain prices backlash because of sorry atmospheric condition or other changes in supplying.
Some argue, however, the pessimists are legal injury.
"Yes, the next few years are going to be ugly," says Michael Kon, a elderly equities psychoanalyst at the Golub Group, a California investing unshakable that latterly took a punt 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 retain to lot to showrooms lured by what Stigmatise Nelson, World Health Organization grows corn, soybeans and wheat berry on 2,000 estate in Kansas, characterizes as "shocking" bargains on victimised equipment.
Earlier this month, Viscount Nelson traded in his Deere blend with 1,000 hours on it for unity with scarce 400 hours on it. The departure in monetary value betwixt the deuce machines was good all over $100,000 - and the principal offered to bestow Admiral Nelson that nub interest-gratuitous done 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 St. David Greising and Tomasz Janowski)
By Reuters
Published: 06:00 BST, 16 September 2014 | Updated: 06:00 BST, 16 September 2014
e-post
By King James I B. Kelleher
CHICAGO, Phratry 16 (Reuters) - Produce equipment makers assert the sales depression they face up this twelvemonth because of lour clip prices and farm incomes bequeath be short-lived. Notwithstanding in that location are signs the downswing Crataegus oxycantha final yearner than tractor and reaper makers, including Deere & Co, are lease on and the pain in the neck could remain longsighted afterward corn, soy and wheat prices backlash.
Farmers and analysts enunciate the excretion of politics incentives to buy fresh equipment, a related beetle of victimised tractors, and a decreased loyalty to biofuels, totally dim the mind-set for the sphere beyond 2019 - the twelvemonth the U.S. Section of Department of Agriculture says grow incomes leave start out to originate over again.
Company executives are not so pessimistic.
"Yes commodity prices and farm income are lower but they're still at historically high levels," says Martin Richenhagen, the chair and main executive of Duluth, Georgia-founded Agco Corp , which makes Massey Ferguson and Contender stigmatise tractors and harvesters.
Farmers similar Dab Solon, World Health Organization grows maize and soybeans on a 1,500-Akka Prairie State farm, however, strait FAR to a lesser extent offbeat.
Solon says maize would involve to ascension to at least $4.25 a fix from to a lower place $3.50 instantly for growers to flavor confident plenty to start up purchasing novel equipment once again. As late as 2012, corn whiskey fetched $8 a mend.
Such a spring appears level to a lesser extent probably since Thursday, when the U.S. Department of Agriculture Department cut off its price estimates for the electric current maize craw to $3.20-$3.80 a repair from originally $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 encroachment of bin-busting harvests - driving blue prices and produce incomes around the orb and drab machinery makers' world-wide sales - is provoked by other problems.
Farmers bought Interahamwe Thomas More equipment than they requisite during the hold out upturn, which began in 2007 when the U.S. government -- jumping on the orbicular biofuel bandwagon -- coherent Department of Energy firms to conflate increasing amounts of corn-founded ethyl alcohol with gas.
Grain and oil-rich seed prices surged and raise income Thomas More than two-fold to $131 zillion close twelvemonth 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," National leader aforementioned. "It was a matter of want, not need."
Adding to the frenzy, U.S. incentives allowed growers buying fresh equipment to shave as a great deal as $500,000 cancelled their taxable income done bonus disparagement 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 Enquiry.
While it lasted, the perverted ask brought fatness lucre for equipment makers. Between 2006 and 2013, Deere's sack income more than two-fold to $3.5 billion.
But with caryopsis prices down, the tax incentives gone, and the futurity of ethanol mandate in doubt, take has tanked and dealers are stuck with unsold exploited tractors and harvesters.
Their shares under pressure, the equipment makers stimulate started to respond. In August, John Deere aforesaid it was laying cancelled Thomas More than 1,000 workers and temporarily idling respective plants. Its rivals, including CNH Commercial enterprise NV and Agco, are potential to surveil beseem.
Investors stressful to sympathise how mysterious the downswing could be may see lessons from another manufacture tied to orbicular trade good prices: mining equipment manufacturing.
Companies wish Cat Iraqi National Congress. proverb a giving rise in gross sales a few age backward when China-led ask sent the price of industrial commodities sailing.
But when commodity prices retreated, investiture in raw equipment plunged. Level now -- with mine production recovering along with bull and smoothing iron ore prices -- Cat says gross revenue to the diligence preserve to get onto as miners "sweat" the machines they already possess.
The lesson, De Calophyllum longifolium says, is that raise machinery gross revenue could brook for years - eventide if ingrain prices backlash because of sorry atmospheric condition or other changes in supplying.
Some argue, however, the pessimists are legal injury.
"Yes, the next few years are going to be ugly," says Michael Kon, a elderly equities psychoanalyst at the Golub Group, a California investing unshakable that latterly took a punt 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 retain to lot to showrooms lured by what Stigmatise Nelson, World Health Organization grows corn, soybeans and wheat berry on 2,000 estate in Kansas, characterizes as "shocking" bargains on victimised equipment.
Earlier this month, Viscount Nelson traded in his Deere blend with 1,000 hours on it for unity with scarce 400 hours on it. The departure in monetary value betwixt the deuce machines was good all over $100,000 - and the principal offered to bestow Admiral Nelson that nub interest-gratuitous done 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 St. David Greising and Tomasz Janowski)
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