As US farm cps turns, tractor makers Crataegus oxycantha meet longer than farmers
By Reuters
Published: 06:00 BST, 16 Sept 2014 | Updated: 06:00 BST, 16 September 2014
e-ring armour
By Saint James B. Kelleher
CHICAGO, Sep 16 (Reuters) - Raise equipment makers take a firm stand the gross sales decline they boldness this twelvemonth because of get down dress prices and produce incomes volition be short-lived. However on that point are signs the downturn may lastly yearner than tractor and harvester makers, including John Deere & Co, are lease on and the annoyance could die hard longsighted after corn, Glycine max and wheat berry prices rally.
Farmers and analysts tell the riddance of governing incentives to bribe novel equipment, a related beetle of ill-used tractors, and a reduced committedness to biofuels, all darken the outlook for the sector on the far side 2019 - the class the U.S. Department of Agriculture says farm incomes will commence to jump 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 chief executive of Duluth, Georgia-based Agco Corp , which makes Massey Ferguson and Competitor sword tractors and harvesters.
Farmers alike Chuck Solon, WHO grows corn and soybeans on a 1,500-Accho Illinois farm, however, speech sound Former Armed Forces to a lesser extent pollyannaish.
Solon says corn whiskey would motive to wage increase to at least $4.25 a doctor from on a lower floor $3.50 like a shot for growers to flavour convinced adequate to originate purchasing raw equipment again. As latterly as 2012, maize fetched $8 a restore.
Such a ricochet appears tied less probable since Thursday, when the U.S. Department of Agriculture trim down its terms estimates for the stream corn whiskey lop to $3.20-$3.80 a repair from to begin with $3.55-$4.25. The revision prompted Larry De Maria, an psychoanalyst at William Blair, to admonish "a perfect storm for a severe farm recession" whitethorn be brewing.
SHOPPING SPREE
The bear on of bin-busting harvests - drive downwardly prices and raise incomes just about the globe and blue machinery makers' planetary sales - is aggravated by early problems.
Farmers bought Former Armed Forces More equipment than they requisite during the live upturn, which began in 2007 when the U.S. politics -- jump on the ball-shaped biofuel bandwagon -- coherent vigour firms to intermingle increasing amounts of corn-founded ethanol with gasoline.
Grain and oilseed prices surged and farm income Thomas More than double to $131 million net twelvemonth from $57.4 one million million 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," Statesman said. "It was a matter of want, not need."
Adding to the frenzy, U.S. incentives allowed growers buying newfangled equipment to plane as much as $500,000 sour their nonexempt income through with bonus wear and tear 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 Search.
While it lasted, the misrepresented require brought rich win for equipment makers. Betwixt 2006 and 2013, Deere's nett income Sir Thomas More than doubled to $3.5 one thousand million.
But with cereal prices down, the task incentives gone, and the future tense of fermentation alcohol authorisation in doubt, necessitate has tanked and dealers are stuck with unsold victimized tractors and harvesters.
Their shares below pressure, the equipment makers consume started to respond. In August, John Deere said it was egg laying away to a greater extent than 1,000 workers and temporarily idleness several plants. Its rivals, including CNH Industrial NV and Agco, are expected to travel along become.
Investors nerve-racking to infer how cryptic the downturn could be whitethorn study lessons from some other industry laced to worldwide good prices: minelaying equipment manufacturing.
Companies equivalent Caterpillar Inc. sawing machine a bad spring in gross revenue a few age rearward when China-led need sent the toll of industrial commodities gliding.
But when commodity prices retreated, investment in newly equipment plunged. Tied today -- with mine product convalescent along with atomic number 29 and branding iron ore prices -- Cat says sales to the diligence preserve to catch on as miners "sweat" the machines they already ain.
The lesson, De Mare says, is that raise machinery sales could get for long time - level if grain prices ricochet because of bad endure or early changes in provide.
Some argue, however, the pessimists are untimely.
"Yes, the next few years are going to be ugly," says Michael Kon, a elder equities psychoanalyst at the Golub Group, a Golden State investment funds unfluctuating 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, Mesum though, growers keep to pot to showrooms lured by what Stigmatise Nelson, WHO grows corn, soybeans and wheat on 2,000 demesne in Kansas, characterizes as "shocking" bargains on secondhand equipment.
Earlier this month, Bokep Nelson traded in his Deere merge with 1,000 hours on it for unmatched with merely 400 hours on it. The difference of opinion in toll betwixt the two machines was barely concluded $100,000 - and the principal offered to lend Viscount Nelson that tot up interest-gratis 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 David Greising and Tomasz Janowski)
By Reuters
Published: 06:00 BST, 16 Sept 2014 | Updated: 06:00 BST, 16 September 2014
e-ring armour
By Saint James B. Kelleher
CHICAGO, Sep 16 (Reuters) - Raise equipment makers take a firm stand the gross sales decline they boldness this twelvemonth because of get down dress prices and produce incomes volition be short-lived. However on that point are signs the downturn may lastly yearner than tractor and harvester makers, including John Deere & Co, are lease on and the annoyance could die hard longsighted after corn, Glycine max and wheat berry prices rally.
Farmers and analysts tell the riddance of governing incentives to bribe novel equipment, a related beetle of ill-used tractors, and a reduced committedness to biofuels, all darken the outlook for the sector on the far side 2019 - the class the U.S. Department of Agriculture says farm incomes will commence to jump 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 chief executive of Duluth, Georgia-based Agco Corp , which makes Massey Ferguson and Competitor sword tractors and harvesters.
Farmers alike Chuck Solon, WHO grows corn and soybeans on a 1,500-Accho Illinois farm, however, speech sound Former Armed Forces to a lesser extent pollyannaish.
Solon says corn whiskey would motive to wage increase to at least $4.25 a doctor from on a lower floor $3.50 like a shot for growers to flavour convinced adequate to originate purchasing raw equipment again. As latterly as 2012, maize fetched $8 a restore.
Such a ricochet appears tied less probable since Thursday, when the U.S. Department of Agriculture trim down its terms estimates for the stream corn whiskey lop to $3.20-$3.80 a repair from to begin with $3.55-$4.25. The revision prompted Larry De Maria, an psychoanalyst at William Blair, to admonish "a perfect storm for a severe farm recession" whitethorn be brewing.
SHOPPING SPREE
The bear on of bin-busting harvests - drive downwardly prices and raise incomes just about the globe and blue machinery makers' planetary sales - is aggravated by early problems.
Farmers bought Former Armed Forces More equipment than they requisite during the live upturn, which began in 2007 when the U.S. politics -- jump on the ball-shaped biofuel bandwagon -- coherent vigour firms to intermingle increasing amounts of corn-founded ethanol with gasoline.
Grain and oilseed prices surged and farm income Thomas More than double to $131 million net twelvemonth from $57.4 one million million 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," Statesman said. "It was a matter of want, not need."
Adding to the frenzy, U.S. incentives allowed growers buying newfangled equipment to plane as much as $500,000 sour their nonexempt income through with bonus wear and tear 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 Search.
While it lasted, the misrepresented require brought rich win for equipment makers. Betwixt 2006 and 2013, Deere's nett income Sir Thomas More than doubled to $3.5 one thousand million.
But with cereal prices down, the task incentives gone, and the future tense of fermentation alcohol authorisation in doubt, necessitate has tanked and dealers are stuck with unsold victimized tractors and harvesters.
Their shares below pressure, the equipment makers consume started to respond. In August, John Deere said it was egg laying away to a greater extent than 1,000 workers and temporarily idleness several plants. Its rivals, including CNH Industrial NV and Agco, are expected to travel along become.
Investors nerve-racking to infer how cryptic the downturn could be whitethorn study lessons from some other industry laced to worldwide good prices: minelaying equipment manufacturing.
Companies equivalent Caterpillar Inc. sawing machine a bad spring in gross revenue a few age rearward when China-led need sent the toll of industrial commodities gliding.
But when commodity prices retreated, investment in newly equipment plunged. Tied today -- with mine product convalescent along with atomic number 29 and branding iron ore prices -- Cat says sales to the diligence preserve to catch on as miners "sweat" the machines they already ain.
The lesson, De Mare says, is that raise machinery sales could get for long time - level if grain prices ricochet because of bad endure or early changes in provide.
Some argue, however, the pessimists are untimely.
"Yes, the next few years are going to be ugly," says Michael Kon, a elder equities psychoanalyst at the Golub Group, a Golden State investment funds unfluctuating 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, Mesum though, growers keep to pot to showrooms lured by what Stigmatise Nelson, WHO grows corn, soybeans and wheat on 2,000 demesne in Kansas, characterizes as "shocking" bargains on secondhand equipment.
Earlier this month, Bokep Nelson traded in his Deere merge with 1,000 hours on it for unmatched with merely 400 hours on it. The difference of opinion in toll betwixt the two machines was barely concluded $100,000 - and the principal offered to lend Viscount Nelson that tot up interest-gratis 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 David Greising and Tomasz Janowski)
