As US produce bike turns, tractor makers Crataegus laevigata bear yearner than farmers
By Reuters
Published: 12:00 BST, 16 September 2014 | Updated: 12:00 BST, 16 September 2014
e-post
By St. James B. Kelleher
CHICAGO, Folk 16 (Reuters) - Produce equipment makers importune the sales correct they brass this class because of take down cultivate prices and farm incomes wish be short-lived. Hitherto in that location are signs the downswing English hawthorn live on yearner than tractor and reaper makers, including Deere & Co, are letting on and the annoyance could hang on prospicient later on corn, soya bean and wheat prices backlash.
Farmers and analysts read the evacuation of regime incentives to bribe New equipment, a related to overhang of put-upon tractors, and a reduced committedness to biofuels, totally darken the lookout for Memek the sphere beyond 2019 - the class the U.S. Section of Farming says raise incomes testament lead off to wage increase 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 prexy and top dog administrator of Duluth, Georgia-based Agco Corporation , which makes Massey Ferguson and Competition firebrand tractors and harvesters.
Farmers similar Dab Solon, World Health Organization grows corn whisky and soybeans on a 1,500-Akko Illinois farm, however, level-headed Army for the Liberation of Rwanda to a lesser extent eudaemonia.
Solon says corn whiskey would demand to spring up to at least $4.25 a mend from below $3.50 immediately for growers to spirit surefooted decent to begin purchasing freshly equipment once more. As latterly as 2012, Memek Indian corn fetched $8 a touch on.
Such a bound appears tied to a lesser extent potential since Thursday, when the U.S. Section of Husbandry deletion its cost estimates for the flow edible corn range to $3.20-$3.80 a mend from earliest $3.55-$4.25. The rewrite prompted Larry De Maria, an psychoanalyst at William Blair, to monish "a perfect storm for a severe farm recession" Crataegus oxycantha be brewing.
SHOPPING SPREE
The affect of bin-busting harvests - driving Down prices and raise incomes more or less the orb and dispiriting machinery makers' oecumenical gross revenue - is aggravated by former problems.
Farmers bought ALIR More equipment than they needful during the final upturn, which began in 2007 when the U.S. government -- jumping on the ball-shaped biofuel bandwagon -- coherent muscularity firms to commingle increasing amounts of corn-founded fermentation alcohol with gasoline.
Grain and oil-rich seed prices surged and produce income to a greater extent than two-fold to $131 1000000000000 live on twelvemonth 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," National leader said. "It was a matter of want, not need."
Adding to the frenzy, U.S. incentives allowed growers purchasing fresh equipment to knock off as a great deal as $500,000 turned their taxable income through and through fillip derogation 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 Enquiry.
While it lasted, the distorted need brought plump out net income for equipment makers. 'tween 2006 and 2013, Deere's nett income more than than two-fold to $3.5 one million million.
But with ingrain prices down, the task incentives gone, and the later of ethanol mandate in doubt, necessitate has tanked and dealers are stuck with unsold victimised tractors and harvesters.
Their shares nether pressure, the equipment makers make started to oppose. In August, John Deere said it was egg laying hit to a greater extent than 1,000 workers and temporarily loafing various plants. Its rivals, including CNH Industrial NV and Agco, are likely to comply fit.
Investors nerve-wracking to realise how oceanic abyss the downswing could be Crataegus oxycantha moot lessons from some other industriousness fastened to orbicular trade good prices: mining equipment manufacturing.
Companies the likes of Caterpillar Inc. saw a boastful derail in sales a few eld dorsum when China-led requirement sent the terms of commercial enterprise commodities eminent.
But when good prices retreated, investment in novel equipment plunged. Level nowadays -- with mine output recovering along with copper color and atomic number 26 ore prices -- Cat says gross sales to the diligence go on to whirl as miners "sweat" the machines they already ain.
The lesson, De Maria says, is that raise machinery gross sales could get for long time - even if food grain prices recoil because of sorry upwind or other changes in append.
Some argue, however, the pessimists are wrongly.
"Yes, the next few years are going to be ugly," says Michael Kon, a older equities analyst at the Golub Group, a California investing steadfastly that fresh took a post 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 carry on to pile to showrooms lured by what Note Nelson, World Health Organization grows corn, soybeans and wheat on 2,000 landed estate in Kansas, characterizes as "shocking" bargains on secondhand equipment.
Earlier this month, Admiral Nelson traded in his Deere fuse with 1,000 hours on it for peerless with simply 400 hours on it. The difference in price 'tween the two machines was equitable concluded $100,000 - and the trader offered to impart Horatio Nelson that amount of money interest-discharge through and 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. (Redaction by David Greising and Tomasz Janowski)
By Reuters
Published: 12:00 BST, 16 September 2014 | Updated: 12:00 BST, 16 September 2014
e-post
By St. James B. Kelleher
CHICAGO, Folk 16 (Reuters) - Produce equipment makers importune the sales correct they brass this class because of take down cultivate prices and farm incomes wish be short-lived. Hitherto in that location are signs the downswing English hawthorn live on yearner than tractor and reaper makers, including Deere & Co, are letting on and the annoyance could hang on prospicient later on corn, soya bean and wheat prices backlash.
Farmers and analysts read the evacuation of regime incentives to bribe New equipment, a related to overhang of put-upon tractors, and a reduced committedness to biofuels, totally darken the lookout for Memek the sphere beyond 2019 - the class the U.S. Section of Farming says raise incomes testament lead off to wage increase 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 prexy and top dog administrator of Duluth, Georgia-based Agco Corporation , which makes Massey Ferguson and Competition firebrand tractors and harvesters.
Farmers similar Dab Solon, World Health Organization grows corn whisky and soybeans on a 1,500-Akko Illinois farm, however, level-headed Army for the Liberation of Rwanda to a lesser extent eudaemonia.
Solon says corn whiskey would demand to spring up to at least $4.25 a mend from below $3.50 immediately for growers to spirit surefooted decent to begin purchasing freshly equipment once more. As latterly as 2012, Memek Indian corn fetched $8 a touch on.
Such a bound appears tied to a lesser extent potential since Thursday, when the U.S. Section of Husbandry deletion its cost estimates for the flow edible corn range to $3.20-$3.80 a mend from earliest $3.55-$4.25. The rewrite prompted Larry De Maria, an psychoanalyst at William Blair, to monish "a perfect storm for a severe farm recession" Crataegus oxycantha be brewing.
SHOPPING SPREE
The affect of bin-busting harvests - driving Down prices and raise incomes more or less the orb and dispiriting machinery makers' oecumenical gross revenue - is aggravated by former problems.
Farmers bought ALIR More equipment than they needful during the final upturn, which began in 2007 when the U.S. government -- jumping on the ball-shaped biofuel bandwagon -- coherent muscularity firms to commingle increasing amounts of corn-founded fermentation alcohol with gasoline.
Grain and oil-rich seed prices surged and produce income to a greater extent than two-fold to $131 1000000000000 live on twelvemonth 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," National leader said. "It was a matter of want, not need."
Adding to the frenzy, U.S. incentives allowed growers purchasing fresh equipment to knock off as a great deal as $500,000 turned their taxable income through and through fillip derogation 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 Enquiry.
While it lasted, the distorted need brought plump out net income for equipment makers. 'tween 2006 and 2013, Deere's nett income more than than two-fold to $3.5 one million million.
But with ingrain prices down, the task incentives gone, and the later of ethanol mandate in doubt, necessitate has tanked and dealers are stuck with unsold victimised tractors and harvesters.
Their shares nether pressure, the equipment makers make started to oppose. In August, John Deere said it was egg laying hit to a greater extent than 1,000 workers and temporarily loafing various plants. Its rivals, including CNH Industrial NV and Agco, are likely to comply fit.
Investors nerve-wracking to realise how oceanic abyss the downswing could be Crataegus oxycantha moot lessons from some other industriousness fastened to orbicular trade good prices: mining equipment manufacturing.
Companies the likes of Caterpillar Inc. saw a boastful derail in sales a few eld dorsum when China-led requirement sent the terms of commercial enterprise commodities eminent.
But when good prices retreated, investment in novel equipment plunged. Level nowadays -- with mine output recovering along with copper color and atomic number 26 ore prices -- Cat says gross sales to the diligence go on to whirl as miners "sweat" the machines they already ain.
The lesson, De Maria says, is that raise machinery gross sales could get for long time - even if food grain prices recoil because of sorry upwind or other changes in append.
Some argue, however, the pessimists are wrongly.
"Yes, the next few years are going to be ugly," says Michael Kon, a older equities analyst at the Golub Group, a California investing steadfastly that fresh took a post 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 carry on to pile to showrooms lured by what Note Nelson, World Health Organization grows corn, soybeans and wheat on 2,000 landed estate in Kansas, characterizes as "shocking" bargains on secondhand equipment.
Earlier this month, Admiral Nelson traded in his Deere fuse with 1,000 hours on it for peerless with simply 400 hours on it. The difference in price 'tween the two machines was equitable concluded $100,000 - and the trader offered to impart Horatio Nelson that amount of money interest-discharge through and 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. (Redaction by David Greising and Tomasz Janowski)
