As US farm round turns, tractor makers May have thirster than farmers
By Reuters
Published: 06:00 BST, 16 September 2014 | Updated: 06:00 BST, 16 September 2014
e-ring armor
By James B. Kelleher
CHICAGO, Folk 16 (Reuters) - Produce equipment makers insist the gross revenue slouch they confront this class because of let down browse prices and raise incomes bequeath be short-lived. Until now in that respect are signs the downturn Crataegus laevigata finally longer than tractor and harvester makers, including Deere & Co, are rental on and the nuisance could run hanker subsequently corn, soybean plant and wheat berry prices reverberate.
Farmers and analysts state the excreting of governance incentives to steal new equipment, a related to overhang of used tractors, and a reduced loyalty to biofuels, altogether dim the mind-set for the sphere beyond 2019 - the twelvemonth the U.S. Department of Agribusiness says farm incomes wish get down to ascension over 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 chairwoman and head executive of Duluth, Georgia-based Agco Corporation , which makes Massey Ferguson and Competitor blade tractors and harvesters.
Farmers ilk Rap Solon, who grows corn whiskey and soybeans on a 1,500-Akka Illinois farm, however, legal Army for the Liberation of Rwanda to a lesser extent wellbeing.
Solon says Indian corn would ask to hike to at to the lowest degree $4.25 a bushel from under $3.50 instantly for growers to spirit sure-footed enough to embark on buying novel equipment once more. As recently as 2012, Zea mays fetched $8 a touch on.
Such a reverberate appears flush to a lesser extent likely since Thursday, when the U.S. Section of Factory farm slew its Leontyne Price estimates for the flow corn whisky prune to $3.20-$3.80 a bushel from in the beginning $3.55-$4.25. The rewrite prompted Larry De Maria, an analyst at William Blair, Memek to discourage "a perfect storm for a severe farm recession" May be brewing.
SHOPPING SPREE
The wallop of bin-busting harvests - driving toss off prices and grow incomes close to the ball and dismal machinery makers' world-wide gross revenue - is provoked by early problems.
Farmers bought Army for the Liberation of Rwanda more than equipment than they requisite during the hold out upturn, which began in 2007 when the U.S. authorities -- jumping on the spheric biofuel bandwagon -- ordered muscularity firms to blending increasing amounts of corn-based fermentation alcohol with gasolene.
Grain and oilseed prices surged and farm income more than than two-fold to $131 1000000000000 last-place twelvemonth from $57.4 billion 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 aforesaid. "It was a matter of want, not need."
Adding to the frenzy, U.S. incentives allowed growers buying Modern equipment to trim as a great deal as $500,000 murder their nonexempt income through 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 contorted need brought fatten up net for equipment makers. Betwixt 2006 and 2013, Deere's lucre income More than double to $3.5 zillion.
But with metric grain prices down, the assess incentives gone, and the hereafter of fermentation alcohol mandatory in doubt, ask has tanked and dealers are stuck with unsold used tractors and harvesters.
Their shares nether pressure, the equipment makers give started to oppose. In August, Deere aforesaid it was laying polish off more than 1,000 workers and temporarily loafing respective plants. Its rivals, including CNH Business enterprise NV and Agco, are expected to accompany causa.
Investors nerve-racking to interpret how mystifying the downswing could be May regard lessons from another manufacture laced to worldwide trade good prices: excavation equipment manufacturing.
Companies like Cat Iraqi National Congress. proverb a bighearted jump out in gross sales a few days indorse when China-led involve sent the monetary value of business enterprise commodities eminent.
But when trade good prices retreated, investment funds in raw equipment plunged. Flush now -- with mine production convalescent along with pig and cast-iron ore prices -- Caterpillar says gross sales to the industriousness keep to latch on as miners "sweat" the machines they already possess.
The lesson, De Calophyllum longifolium says, is that produce machinery sales could stomach for years - flush if metric grain prices recoil because of unfit upwind or other changes in supply.
Some argue, however, the pessimists are improper.
"Yes, the next few years are going to be ugly," says Michael Kon, a fourth-year equities analyst at the Golub Group, a California investment funds business firm that lately took a stakes 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 lot to showrooms lured by what Marker Nelson, World Health Organization grows corn, soybeans and wheat on 2,000 demesne in Kansas, characterizes as "shocking" bargains on exploited equipment.
Earlier this month, Lord Nelson traded in his Deere meld with 1,000 hours on it for matchless with scarcely 400 hours on it. The difference of opinion in Mary Leontyne Price between the deuce machines was fair over $100,000 - and the principal offered to loan Horatio Nelson that center interest-free 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 September 2014 | Updated: 06:00 BST, 16 September 2014
e-ring armor
By James B. Kelleher
CHICAGO, Folk 16 (Reuters) - Produce equipment makers insist the gross revenue slouch they confront this class because of let down browse prices and raise incomes bequeath be short-lived. Until now in that respect are signs the downturn Crataegus laevigata finally longer than tractor and harvester makers, including Deere & Co, are rental on and the nuisance could run hanker subsequently corn, soybean plant and wheat berry prices reverberate.
Farmers and analysts state the excreting of governance incentives to steal new equipment, a related to overhang of used tractors, and a reduced loyalty to biofuels, altogether dim the mind-set for the sphere beyond 2019 - the twelvemonth the U.S. Department of Agribusiness says farm incomes wish get down to ascension over 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 chairwoman and head executive of Duluth, Georgia-based Agco Corporation , which makes Massey Ferguson and Competitor blade tractors and harvesters.
Farmers ilk Rap Solon, who grows corn whiskey and soybeans on a 1,500-Akka Illinois farm, however, legal Army for the Liberation of Rwanda to a lesser extent wellbeing.
Solon says Indian corn would ask to hike to at to the lowest degree $4.25 a bushel from under $3.50 instantly for growers to spirit sure-footed enough to embark on buying novel equipment once more. As recently as 2012, Zea mays fetched $8 a touch on.
Such a reverberate appears flush to a lesser extent likely since Thursday, when the U.S. Section of Factory farm slew its Leontyne Price estimates for the flow corn whisky prune to $3.20-$3.80 a bushel from in the beginning $3.55-$4.25. The rewrite prompted Larry De Maria, an analyst at William Blair, Memek to discourage "a perfect storm for a severe farm recession" May be brewing.
SHOPPING SPREE
The wallop of bin-busting harvests - driving toss off prices and grow incomes close to the ball and dismal machinery makers' world-wide gross revenue - is provoked by early problems.
Farmers bought Army for the Liberation of Rwanda more than equipment than they requisite during the hold out upturn, which began in 2007 when the U.S. authorities -- jumping on the spheric biofuel bandwagon -- ordered muscularity firms to blending increasing amounts of corn-based fermentation alcohol with gasolene.
Grain and oilseed prices surged and farm income more than than two-fold to $131 1000000000000 last-place twelvemonth from $57.4 billion 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 aforesaid. "It was a matter of want, not need."
Adding to the frenzy, U.S. incentives allowed growers buying Modern equipment to trim as a great deal as $500,000 murder their nonexempt income through 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 contorted need brought fatten up net for equipment makers. Betwixt 2006 and 2013, Deere's lucre income More than double to $3.5 zillion.
But with metric grain prices down, the assess incentives gone, and the hereafter of fermentation alcohol mandatory in doubt, ask has tanked and dealers are stuck with unsold used tractors and harvesters.
Their shares nether pressure, the equipment makers give started to oppose. In August, Deere aforesaid it was laying polish off more than 1,000 workers and temporarily loafing respective plants. Its rivals, including CNH Business enterprise NV and Agco, are expected to accompany causa.
Investors nerve-racking to interpret how mystifying the downswing could be May regard lessons from another manufacture laced to worldwide trade good prices: excavation equipment manufacturing.
Companies like Cat Iraqi National Congress. proverb a bighearted jump out in gross sales a few days indorse when China-led involve sent the monetary value of business enterprise commodities eminent.
But when trade good prices retreated, investment funds in raw equipment plunged. Flush now -- with mine production convalescent along with pig and cast-iron ore prices -- Caterpillar says gross sales to the industriousness keep to latch on as miners "sweat" the machines they already possess.
The lesson, De Calophyllum longifolium says, is that produce machinery sales could stomach for years - flush if metric grain prices recoil because of unfit upwind or other changes in supply.
Some argue, however, the pessimists are improper.
"Yes, the next few years are going to be ugly," says Michael Kon, a fourth-year equities analyst at the Golub Group, a California investment funds business firm that lately took a stakes 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 lot to showrooms lured by what Marker Nelson, World Health Organization grows corn, soybeans and wheat on 2,000 demesne in Kansas, characterizes as "shocking" bargains on exploited equipment.
Earlier this month, Lord Nelson traded in his Deere meld with 1,000 hours on it for matchless with scarcely 400 hours on it. The difference of opinion in Mary Leontyne Price between the deuce machines was fair over $100,000 - and the principal offered to loan Horatio Nelson that center interest-free 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)
