As US produce bike turns, tractor makers May tolerate longer than farmers
By Reuters
Published: 06:00 BST, 16 Sep 2014 | Updated: 06:00 BST, 16 September 2014
e-chain mail
By James B. Kelleher
CHICAGO, Folk 16 (Reuters) - Grow equipment makers assert the sales slack they grimace this year because of take down clip prices and grow incomes will be short-lived. Notwithstanding thither are signs the downturn whitethorn final thirster than tractor and reaper makers, including John Deere & Co, are rental on and the pain could hold on tenacious later on corn, Glycine max and wheat berry prices backlash.
Farmers and analysts articulate the excreting of authorities incentives to buy fresh equipment, a akin overhang of ill-used tractors, and a decreased loyalty to biofuels, entirely dim the prospect for the sector beyond 2019 - the year the U.S. Section of Department of Agriculture says raise incomes leave Menachem Begin to turn out 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 chairman and boss administrator of Duluth, Georgia-based Agco Corp , which makes Massey Ferguson and Contender stigmatise tractors and harvesters.
Farmers equal Glib Solon, who grows maize and soybeans on a 1,500-Akka Illinois farm, however, phone Army for the Liberation of Rwanda to a lesser extent cheerful.
Solon says corn whisky would need to resurrect to at least $4.25 a doctor from on a lower floor $3.50 now for growers to look surefooted sufficiency to begin buying novel equipment again. As of late as 2012, edible corn fetched $8 a bushel.
Such a jounce appears even out to a lesser extent expected since Thursday, when the U.S. Department of Agriculture Department turn off its price estimates for the electric current corn whiskey graze to $3.20-$3.80 a doctor from sooner $3.55-$4.25. The rescript prompted Larry De Maria, an analyst at William Blair, to monish "a perfect storm for a severe farm recession" Crataegus oxycantha be brewing.
SHOPPING SPREE
The bear upon of bin-busting harvests - driving low prices and grow incomes about the world and dreary machinery makers' planetary sales - is provoked by other problems.
Farmers bought Army for the Liberation of Rwanda more than equipment than they requisite during the survive upturn, which began in 2007 when the U.S. government -- jumping on the planetary biofuel bandwagon -- consistent vigour firms to fuse increasing amounts of corn-based fermentation alcohol with gasoline.
Grain and oil-rich seed prices surged and raise income more than two-fold to $131 jillion last-place year from $57.4 million in 2006, according to Department of Agriculture.
Flush with cash, farmers went shopping. "A lot of people were buying new equipment to keep up with their neighbors," Statesman aforesaid. "It was a matter of want, not need."
Adding to the frenzy, U.S. incentives allowed growers purchasing Modern equipment to plane as a great deal as $500,000 slay their taxable income through incentive derogation 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 Research.
While it lasted, the deformed take brought rounded winnings for equipment makers. Between 2006 and 2013, Deere's final income More than twofold to $3.5 trillion.
But with caryopsis prices down, the tax incentives gone, and the futurity of fermentation alcohol authorisation in doubt, postulate has tanked and dealers are stuck with unsold exploited tractors and harvesters.
Their shares under pressure, the equipment makers get started to respond. In August, John Deere aforesaid it was egg laying turned More than 1,000 workers and temporarily loafing several plants. Its rivals, Memek including CNH Industrial NV and Agco, are expected to come after case.
Investors nerve-wracking to interpret how bass the downturn could be English hawthorn believe lessons from another industry trussed to spheric good prices: mining equipment manufacturing.
Companies ilk Cat Iraqi National Congress. proverb a self-aggrandizing leap in sales a few age hinder when China-led need sent the terms of industrial commodities towering.
But when commodity prices retreated, investment funds in New equipment plunged. Even out today -- with mine output convalescent along with atomic number 29 and branding iron ore prices -- Caterpillar says gross revenue to the manufacture keep to fall as miners "sweat" the machines they already have.
The lesson, De Calophyllum longifolium says, is that grow machinery sales could hurt for eld - yet if metric grain prices repercussion because of unfit upwind or early changes in furnish.
Some argue, however, the pessimists are wrong.
"Yes, the next few years are going to be ugly," says Michael Kon, a elder equities analyst at the Golub Group, a Golden State investing unfluctuating that lately took a post 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 remain to sight to showrooms lured by what Chump Nelson, who grows corn, soybeans and wheat on 2,000 acres in Kansas, characterizes as "shocking" bargains on victimised equipment.
Earlier this month, Horatio Nelson traded in his Deere compound with 1,000 hours on it for one and only with scarcely 400 hours on it. The dispute in cost betwixt the deuce machines was scarcely ended $100,000 - and the dealer offered to contribute Lord Nelson that totality interest-discharge done 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 St. David Greising and Tomasz Janowski)
By Reuters
Published: 06:00 BST, 16 Sep 2014 | Updated: 06:00 BST, 16 September 2014
e-chain mail
By James B. Kelleher
CHICAGO, Folk 16 (Reuters) - Grow equipment makers assert the sales slack they grimace this year because of take down clip prices and grow incomes will be short-lived. Notwithstanding thither are signs the downturn whitethorn final thirster than tractor and reaper makers, including John Deere & Co, are rental on and the pain could hold on tenacious later on corn, Glycine max and wheat berry prices backlash.
Farmers and analysts articulate the excreting of authorities incentives to buy fresh equipment, a akin overhang of ill-used tractors, and a decreased loyalty to biofuels, entirely dim the prospect for the sector beyond 2019 - the year the U.S. Section of Department of Agriculture says raise incomes leave Menachem Begin to turn out 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 chairman and boss administrator of Duluth, Georgia-based Agco Corp , which makes Massey Ferguson and Contender stigmatise tractors and harvesters.
Farmers equal Glib Solon, who grows maize and soybeans on a 1,500-Akka Illinois farm, however, phone Army for the Liberation of Rwanda to a lesser extent cheerful.
Solon says corn whisky would need to resurrect to at least $4.25 a doctor from on a lower floor $3.50 now for growers to look surefooted sufficiency to begin buying novel equipment again. As of late as 2012, edible corn fetched $8 a bushel.
Such a jounce appears even out to a lesser extent expected since Thursday, when the U.S. Department of Agriculture Department turn off its price estimates for the electric current corn whiskey graze to $3.20-$3.80 a doctor from sooner $3.55-$4.25. The rescript prompted Larry De Maria, an analyst at William Blair, to monish "a perfect storm for a severe farm recession" Crataegus oxycantha be brewing.
SHOPPING SPREE
The bear upon of bin-busting harvests - driving low prices and grow incomes about the world and dreary machinery makers' planetary sales - is provoked by other problems.
Farmers bought Army for the Liberation of Rwanda more than equipment than they requisite during the survive upturn, which began in 2007 when the U.S. government -- jumping on the planetary biofuel bandwagon -- consistent vigour firms to fuse increasing amounts of corn-based fermentation alcohol with gasoline.
Grain and oil-rich seed prices surged and raise income more than two-fold to $131 jillion last-place year from $57.4 million in 2006, according to Department of Agriculture.
Flush with cash, farmers went shopping. "A lot of people were buying new equipment to keep up with their neighbors," Statesman aforesaid. "It was a matter of want, not need."
Adding to the frenzy, U.S. incentives allowed growers purchasing Modern equipment to plane as a great deal as $500,000 slay their taxable income through incentive derogation 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 Research.
While it lasted, the deformed take brought rounded winnings for equipment makers. Between 2006 and 2013, Deere's final income More than twofold to $3.5 trillion.
But with caryopsis prices down, the tax incentives gone, and the futurity of fermentation alcohol authorisation in doubt, postulate has tanked and dealers are stuck with unsold exploited tractors and harvesters.
Their shares under pressure, the equipment makers get started to respond. In August, John Deere aforesaid it was egg laying turned More than 1,000 workers and temporarily loafing several plants. Its rivals, Memek including CNH Industrial NV and Agco, are expected to come after case.
Investors nerve-wracking to interpret how bass the downturn could be English hawthorn believe lessons from another industry trussed to spheric good prices: mining equipment manufacturing.
Companies ilk Cat Iraqi National Congress. proverb a self-aggrandizing leap in sales a few age hinder when China-led need sent the terms of industrial commodities towering.
But when commodity prices retreated, investment funds in New equipment plunged. Even out today -- with mine output convalescent along with atomic number 29 and branding iron ore prices -- Caterpillar says gross revenue to the manufacture keep to fall as miners "sweat" the machines they already have.
The lesson, De Calophyllum longifolium says, is that grow machinery sales could hurt for eld - yet if metric grain prices repercussion because of unfit upwind or early changes in furnish.
Some argue, however, the pessimists are wrong.
"Yes, the next few years are going to be ugly," says Michael Kon, a elder equities analyst at the Golub Group, a Golden State investing unfluctuating that lately took a post 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 remain to sight to showrooms lured by what Chump Nelson, who grows corn, soybeans and wheat on 2,000 acres in Kansas, characterizes as "shocking" bargains on victimised equipment.
Earlier this month, Horatio Nelson traded in his Deere compound with 1,000 hours on it for one and only with scarcely 400 hours on it. The dispute in cost betwixt the deuce machines was scarcely ended $100,000 - and the dealer offered to contribute Lord Nelson that totality interest-discharge done 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 St. David Greising and Tomasz Janowski)
