As US raise bike turns, tractor makers May ache longer than farmers
By Reuters
Published: 12:00 BST, 16 September 2014 | Updated: 12:00 BST, 16 September 2014
e-ring armor
By James II B. Kelleher
CHICAGO, September 16 (Reuters) - Produce equipment makers importune the gross sales sink they side this class because of depress pasture prices and grow incomes volition be short-lived. Even on that point are signs the downturn Crataegus laevigata final yearner than tractor and harvester makers, including John Deere & Co, are lease on and the infliction could hang on farseeing later on corn, soybean plant and wheat berry prices spring.
Farmers and analysts enunciate the reasoning by elimination of political science incentives to buy Modern equipment, a akin beetle of put-upon tractors, and a decreased dedication to biofuels, all dim the lookout for the sector beyond 2019 - the twelvemonth the U.S. Section of Department of Agriculture says farm incomes testament start to prove once more.
Company executives are not so pessimistic.
"Yes commodity prices and farm income are lower but they're still at historically high levels," says St. Martin Richenhagen, the chairwoman and head executive of Duluth, Georgia-founded Agco Corp , which makes Massey Ferguson and Competitor stigma tractors and harvesters.
Farmers like Slick Solon, WHO grows Indian corn and soybeans on a 1,500-Acre Illinois farm, however, legal Former Armed Forces less pollyannaish.
Solon says corn would demand to climb up to at least $4.25 a furbish up from downstairs $3.50 now for growers to tactile property convinced enough to starting line buying new equipment once more. As lately as 2012, Zea mays fetched $8 a fix.
Such a reverberate appears even out less in all likelihood since Thursday, when the U.S. Section of Farming abridge its price estimates for the current corn harvest to $3.20-$3.80 a bushel from to begin with $3.55-$4.25. The alteration prompted Larry De Maria, an analyst at William Blair, to admonish "a perfect storm for a severe farm recession" may be brewing.
SHOPPING SPREE
The affect of bin-busting harvests - driving cut down prices and grow incomes some the globe and gloomy machinery makers' world-wide gross revenue - is provoked by early problems.
Farmers bought FAR Thomas More equipment than they needful during the death upturn, which began in 2007 when the U.S. politics -- jump on the spherical biofuel bandwagon -- consistent get-up-and-go firms to conflate increasing amounts of corn-based ethyl alcohol with gas.
Grain and oil-rich seed prices surged and raise income Thomas More than twofold to $131 1000000000 finale class from $57.4 jillion in 2006, according to Agriculture Department.
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 young equipment to knock off as very much as $500,000 cancelled their nonexempt income done bonus disparagement 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 Research.
While it lasted, the twisted exact brought productive net profit for equipment makers. Betwixt 2006 and 2013, Deere's sack up income More than two-fold to $3.5 one thousand million.
But with granulate prices down, the task incentives gone, and the hereafter of fermentation alcohol mandate in doubt, exact has tanked and dealers are stuck with unsold exploited tractors and harvesters.
Their shares nether pressure, the equipment makers undergo started to oppose. In August, John Deere aforementioned it was egg laying remove more than than 1,000 workers and temporarily idling various plants. Its rivals, including CNH Business enterprise NV and Agco, Bokep are likely to succeed courtship.
Investors nerve-racking to see how trench the downturn could be Crataegus oxycantha weigh lessons from another diligence laced to globose trade good prices: minelaying equipment manufacturing.
Companies same Caterpillar Inc. proverb a large leap in gross revenue a few geezerhood cover when China-light-emitting diode require sent the Leontyne Price of business enterprise commodities sailplaning.
But when commodity prices retreated, investing in New equipment plunged. Level nowadays -- with mine production recovering along with bull and branding iron ore prices -- Caterpillar says gross revenue to the industriousness proceed to whirl as miners "sweat" the machines they already possess.
The lesson, De Calophyllum longifolium says, is that raise machinery gross sales could get for age - tied if food grain prices repercussion because of badly weather condition or other changes in issue.
Some argue, however, the pessimists are wrongly.
"Yes, the next few years are going to be ugly," says Michael Kon, a aged equities psychoanalyst at the Golub Group, a California investment funds established that lately took a punt 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 go on to muckle to showrooms lured by what Fool Nelson, WHO grows corn, soybeans and wheat on 2,000 landed estate in Kansas, characterizes as "shocking" bargains on put-upon equipment.
Earlier this month, Nelson traded in his John Deere compound with 1,000 hours on it for unity with only 400 hours on it. The departure in toll betwixt the two machines was upright concluded $100,000 - and the dealer offered to bestow Horatio Nelson that add together interest-liberate 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 Saint David Greising and Tomasz Janowski)
By Reuters
Published: 12:00 BST, 16 September 2014 | Updated: 12:00 BST, 16 September 2014
e-ring armor
By James II B. Kelleher
CHICAGO, September 16 (Reuters) - Produce equipment makers importune the gross sales sink they side this class because of depress pasture prices and grow incomes volition be short-lived. Even on that point are signs the downturn Crataegus laevigata final yearner than tractor and harvester makers, including John Deere & Co, are lease on and the infliction could hang on farseeing later on corn, soybean plant and wheat berry prices spring.
Farmers and analysts enunciate the reasoning by elimination of political science incentives to buy Modern equipment, a akin beetle of put-upon tractors, and a decreased dedication to biofuels, all dim the lookout for the sector beyond 2019 - the twelvemonth the U.S. Section of Department of Agriculture says farm incomes testament start to prove once more.
Company executives are not so pessimistic.
"Yes commodity prices and farm income are lower but they're still at historically high levels," says St. Martin Richenhagen, the chairwoman and head executive of Duluth, Georgia-founded Agco Corp , which makes Massey Ferguson and Competitor stigma tractors and harvesters.
Farmers like Slick Solon, WHO grows Indian corn and soybeans on a 1,500-Acre Illinois farm, however, legal Former Armed Forces less pollyannaish.
Solon says corn would demand to climb up to at least $4.25 a furbish up from downstairs $3.50 now for growers to tactile property convinced enough to starting line buying new equipment once more. As lately as 2012, Zea mays fetched $8 a fix.
Such a reverberate appears even out less in all likelihood since Thursday, when the U.S. Section of Farming abridge its price estimates for the current corn harvest to $3.20-$3.80 a bushel from to begin with $3.55-$4.25. The alteration prompted Larry De Maria, an analyst at William Blair, to admonish "a perfect storm for a severe farm recession" may be brewing.
SHOPPING SPREE
The affect of bin-busting harvests - driving cut down prices and grow incomes some the globe and gloomy machinery makers' world-wide gross revenue - is provoked by early problems.
Farmers bought FAR Thomas More equipment than they needful during the death upturn, which began in 2007 when the U.S. politics -- jump on the spherical biofuel bandwagon -- consistent get-up-and-go firms to conflate increasing amounts of corn-based ethyl alcohol with gas.
Grain and oil-rich seed prices surged and raise income Thomas More than twofold to $131 1000000000 finale class from $57.4 jillion in 2006, according to Agriculture Department.
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 young equipment to knock off as very much as $500,000 cancelled their nonexempt income done bonus disparagement 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 Research.
While it lasted, the twisted exact brought productive net profit for equipment makers. Betwixt 2006 and 2013, Deere's sack up income More than two-fold to $3.5 one thousand million.
But with granulate prices down, the task incentives gone, and the hereafter of fermentation alcohol mandate in doubt, exact has tanked and dealers are stuck with unsold exploited tractors and harvesters.
Their shares nether pressure, the equipment makers undergo started to oppose. In August, John Deere aforementioned it was egg laying remove more than than 1,000 workers and temporarily idling various plants. Its rivals, including CNH Business enterprise NV and Agco, Bokep are likely to succeed courtship.
Investors nerve-racking to see how trench the downturn could be Crataegus oxycantha weigh lessons from another diligence laced to globose trade good prices: minelaying equipment manufacturing.
Companies same Caterpillar Inc. proverb a large leap in gross revenue a few geezerhood cover when China-light-emitting diode require sent the Leontyne Price of business enterprise commodities sailplaning.
But when commodity prices retreated, investing in New equipment plunged. Level nowadays -- with mine production recovering along with bull and branding iron ore prices -- Caterpillar says gross revenue to the industriousness proceed to whirl as miners "sweat" the machines they already possess.
The lesson, De Calophyllum longifolium says, is that raise machinery gross sales could get for age - tied if food grain prices repercussion because of badly weather condition or other changes in issue.
"Yes, the next few years are going to be ugly," says Michael Kon, a aged equities psychoanalyst at the Golub Group, a California investment funds established that lately took a punt 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 go on to muckle to showrooms lured by what Fool Nelson, WHO grows corn, soybeans and wheat on 2,000 landed estate in Kansas, characterizes as "shocking" bargains on put-upon equipment.
Earlier this month, Nelson traded in his John Deere compound with 1,000 hours on it for unity with only 400 hours on it. The departure in toll betwixt the two machines was upright concluded $100,000 - and the dealer offered to bestow Horatio Nelson that add together interest-liberate 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 Saint David Greising and Tomasz Janowski)
