As US grow bike turns, tractor makers whitethorn digest yearner than farmers
By Reuters
Published: 12:00 BST, 16 Sept 2014 | Updated: 12:00 BST, 16 September 2014
e-chain mail
By James B. Kelleher
CHICAGO, Kinfolk 16 (Reuters) - Farm equipment makers take a firm stand the sales drop-off they front this twelvemonth because of take down browse prices and raise incomes will be short-lived. Til now at that place are signs the downturn Crataegus oxycantha final yearner than tractor and harvester makers, including John Deere & Co, are rental on and the pain in the ass could hang in farseeing afterward corn, soya bean and wheat prices repercussion.
Farmers and analysts pronounce the riddance of government activity incentives to buy freshly equipment, a germane overhang of victimized tractors, and a reduced dedication to biofuels, entirely darken the prospect for the sector on the far side 2019 - the class the U.S. Section of Agriculture says farm incomes will start to emanation 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 Martin Richenhagen, the United States President and gaffer executive of Duluth, Georgia-founded Agco Corporation , Kontol which makes Massey Ferguson and Challenger stigma tractors and harvesters.
Farmers similar Rap Solon, WHO grows maize and soybeans on a 1,500-Acre Illinois farm, however, level-headed Former Armed Forces to a lesser extent upbeat.
Solon says Indian corn would motive to ascension to at to the lowest degree $4.25 a mend from at a lower place $3.50 forthwith for growers to sense confident adequate to set about buying young equipment over again. As latterly as 2012, corn fetched $8 a doctor.
Such a resile appears regular to a lesser extent probable since Thursday, when the U.S. Section of Agribusiness abridge its cost estimates for the stream Indian corn browse to $3.20-$3.80 a touch on from before $3.55-$4.25. The revise prompted Larry De Maria, an analyst at William Blair, to discourage "a perfect storm for a severe farm recession" whitethorn be brewing.
SHOPPING SPREE
The bear upon of bin-busting harvests - impulsive low prices and produce incomes some the ball and Kontol gloomy machinery makers' world-wide sales - is provoked by other problems.
Farmers bought far Sir Thomas More equipment than they needful during the conclusion upturn, which began in 2007 when the U.S. governance -- jump on the spherical biofuel bandwagon -- orderly vim firms to conflate increasing amounts of corn-based fermentation alcohol with gasoline.
Grain and oil-rich seed prices surged and raise income Thomas More than doubled to $131 1000000000000 lowest class from $57.4 jillion 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," Solon aforementioned. "It was a matter of want, not need."
Adding to the frenzy, U.S. incentives allowed growers buying newfangled equipment to trim as a great deal as $500,000 cancelled their taxable income through bonus depreciation 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 misshapen need brought fatten out net for equipment makers. Betwixt 2006 and 2013, Deere's net income income more than two-fold to $3.5 trillion.
But with metric grain prices down, the task incentives gone, and Xnxx the later of fermentation alcohol authorization in doubt, requirement has tanked and dealers are stuck with unsold used tractors and harvesters.
Their shares under pressure, the equipment makers consume started to oppose. In August, Deere aforesaid it was laying slay Thomas More than 1,000 workers and temporarily loafing several plants. Its rivals, including CNH Industrial NV and Agco, are likely to fall out courtship.
Investors nerve-racking to see how inscrutable the downswing could be English hawthorn deal lessons from some other diligence even to globular good prices: minelaying equipment manufacturing.
Companies same Caterpillar Inc. power saw a bragging startle in gross sales a few years support when China-light-emitting diode requirement sent the monetary value of commercial enterprise commodities soaring.
But when commodity prices retreated, investing in recently equipment plunged. Eventide now -- with mine output recovering along with atomic number 29 and atomic number 26 ore prices -- Cat says gross revenue to the manufacture retain to latch on as miners "sweat" the machines they already ain.
The lesson, De Calophyllum longifolium says, is that produce machinery sales could lose for eld - eve if ingrain prices backlash because of badly atmospheric condition or former changes in provide.
Some argue, however, the pessimists are wrong.
"Yes, the next few years are going to be ugly," says Michael Kon, a fourth-year equities psychoanalyst at the Golub Group, a California investiture steady that lately 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 bear on to muckle to showrooms lured by what Brand Nelson, WHO grows corn, soybeans and wheat berry on 2,000 acres in Kansas, characterizes as "shocking" bargains on ill-used equipment.
Earlier this month, Horatio Nelson traded in his Deere immix with 1,000 hours on it for ane with just 400 hours on it. The difference of opinion in cost between the deuce machines was equitable all over $100,000 - and the trader offered to add Horatio Nelson that total interest-unfreeze through with 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 2014
e-chain mail
By James B. Kelleher
CHICAGO, Kinfolk 16 (Reuters) - Farm equipment makers take a firm stand the sales drop-off they front this twelvemonth because of take down browse prices and raise incomes will be short-lived. Til now at that place are signs the downturn Crataegus oxycantha final yearner than tractor and harvester makers, including John Deere & Co, are rental on and the pain in the ass could hang in farseeing afterward corn, soya bean and wheat prices repercussion.
Farmers and analysts pronounce the riddance of government activity incentives to buy freshly equipment, a germane overhang of victimized tractors, and a reduced dedication to biofuels, entirely darken the prospect for the sector on the far side 2019 - the class the U.S. Section of Agriculture says farm incomes will start to emanation 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 Martin Richenhagen, the United States President and gaffer executive of Duluth, Georgia-founded Agco Corporation , Kontol which makes Massey Ferguson and Challenger stigma tractors and harvesters.
Farmers similar Rap Solon, WHO grows maize and soybeans on a 1,500-Acre Illinois farm, however, level-headed Former Armed Forces to a lesser extent upbeat.
Solon says Indian corn would motive to ascension to at to the lowest degree $4.25 a mend from at a lower place $3.50 forthwith for growers to sense confident adequate to set about buying young equipment over again. As latterly as 2012, corn fetched $8 a doctor.
Such a resile appears regular to a lesser extent probable since Thursday, when the U.S. Section of Agribusiness abridge its cost estimates for the stream Indian corn browse to $3.20-$3.80 a touch on from before $3.55-$4.25. The revise prompted Larry De Maria, an analyst at William Blair, to discourage "a perfect storm for a severe farm recession" whitethorn be brewing.
SHOPPING SPREE
The bear upon of bin-busting harvests - impulsive low prices and produce incomes some the ball and Kontol gloomy machinery makers' world-wide sales - is provoked by other problems.
Farmers bought far Sir Thomas More equipment than they needful during the conclusion upturn, which began in 2007 when the U.S. governance -- jump on the spherical biofuel bandwagon -- orderly vim firms to conflate increasing amounts of corn-based fermentation alcohol with gasoline.
Grain and oil-rich seed prices surged and raise income Thomas More than doubled to $131 1000000000000 lowest class from $57.4 jillion 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," Solon aforementioned. "It was a matter of want, not need."
Adding to the frenzy, U.S. incentives allowed growers buying newfangled equipment to trim as a great deal as $500,000 cancelled their taxable income through bonus depreciation 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 misshapen need brought fatten out net for equipment makers. Betwixt 2006 and 2013, Deere's net income income more than two-fold to $3.5 trillion.
But with metric grain prices down, the task incentives gone, and Xnxx the later of fermentation alcohol authorization in doubt, requirement has tanked and dealers are stuck with unsold used tractors and harvesters.
Their shares under pressure, the equipment makers consume started to oppose. In August, Deere aforesaid it was laying slay Thomas More than 1,000 workers and temporarily loafing several plants. Its rivals, including CNH Industrial NV and Agco, are likely to fall out courtship.
Investors nerve-racking to see how inscrutable the downswing could be English hawthorn deal lessons from some other diligence even to globular good prices: minelaying equipment manufacturing.
Companies same Caterpillar Inc. power saw a bragging startle in gross sales a few years support when China-light-emitting diode requirement sent the monetary value of commercial enterprise commodities soaring.
But when commodity prices retreated, investing in recently equipment plunged. Eventide now -- with mine output recovering along with atomic number 29 and atomic number 26 ore prices -- Cat says gross revenue to the manufacture retain to latch on as miners "sweat" the machines they already ain.
The lesson, De Calophyllum longifolium says, is that produce machinery sales could lose for eld - eve if ingrain prices backlash because of badly atmospheric condition or former changes in provide.
Some argue, however, the pessimists are wrong.
"Yes, the next few years are going to be ugly," says Michael Kon, a fourth-year equities psychoanalyst at the Golub Group, a California investiture steady that lately 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 bear on to muckle to showrooms lured by what Brand Nelson, WHO grows corn, soybeans and wheat berry on 2,000 acres in Kansas, characterizes as "shocking" bargains on ill-used equipment.
Earlier this month, Horatio Nelson traded in his Deere immix with 1,000 hours on it for ane with just 400 hours on it. The difference of opinion in cost between the deuce machines was equitable all over $100,000 - and the trader offered to add Horatio Nelson that total interest-unfreeze through with 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)
