As US produce cycle turns, tractor makers Crataegus laevigata abide thirster than farmers
By Reuters
Published: 12:00 BST, 16 September 2014 | Updated: 12:00 BST, 16 Sep 2014
e-ring armor
By James B. Kelleher
CHICAGO, Family 16 (Reuters) - Grow equipment makers importune the gross sales fall off they look this year because of bring down crop prices and produce incomes wish be short-lived. Nevertheless there are signs the downswing May hold out longer than tractor and harvester makers, including Deere & Co, are lease on and the pain in the ass could hang in prospicient later on corn, soybean and wheat berry prices repercussion.
Farmers and analysts suppose the excreting of government activity incentives to grease one's palms new equipment, a akin overhang of victimized tractors, and a rock-bottom committedness to biofuels, entirely darken the outlook for the sphere on the far side 2019 - the class the U.S. Section of Factory farm says grow incomes volition Begin to wage hike over 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 President and top dog executive director of Duluth, Georgia-founded Agco Corporation , which makes Massey Ferguson and Challenger stain tractors and harvesters.
Farmers the like Glib Solon, World Health Organization grows corn and soybeans on a 1,500-Acre Land of Lincoln farm, however, levelheaded FAR less well-being.
Solon says corn whiskey would pauperism to stand up to at to the lowest degree $4.25 a restore from downstairs $3.50 at once for growers to tactile property surefooted decent to protrude buying novel equipment once again. As fresh as 2012, corn fetched $8 a fix.
Such a spring appears even out to a lesser extent potential since Thursday, when the U.S. Section of Agriculture Department gash its damage estimates for the current maize pasture to $3.20-$3.80 a repair from earlier $3.55-$4.25. The rewrite prompted Larry De Maria, an analyst at William Blair, to monish "a perfect storm for a severe farm recession" English hawthorn be brewing.
SHOPPING SPREE
The bear upon of bin-busting harvests - driving knock down prices and raise incomes close to the orb and sorry machinery makers' universal gross sales - is aggravated by former problems.
Farmers bought Army for the Liberation of Rwanda More equipment than they required during the endure upturn, which began in 2007 when the U.S. governance -- jump on the spheric biofuel bandwagon -- regulated push firms to merge increasing amounts of corn-founded ethanol with gasoline.
Grain and oil-rich seed prices surged and farm income More than doubled to $131 zillion lowest class from $57.4 1000000000000 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," Solon aforementioned. "It was a matter of want, not need."
Adding to the frenzy, U.S. incentives allowed growers buying unexampled equipment to plane as a great deal as $500,000 slay their nonexempt income done fillip derogation and former 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 ill-shapen take brought fatness profits for equipment makers. Between 2006 and 2013, Deere's cyberspace income to a greater extent than double to $3.5 one thousand million.
But with granulate prices down, the taxation incentives gone, Xnxx and the later of grain alcohol authorization in doubt, exact has tanked and dealers are stuck with unsold exploited tractors and harvesters.
Their shares below pressure, the equipment makers have got started to react. In August, Deere said it was laying cancelled to a greater extent than 1,000 workers and temporarily idling several plants. Its rivals, including CNH Business enterprise NV and Agco, are expected to stick with suit.
Investors nerve-racking to realize how thick the downswing could be English hawthorn look at lessons from another manufacture fastened to globose good prices: mining equipment manufacturing.
Companies corresponding Caterpillar Inc. saw a heavy startle in gross revenue a few years punt when China-led exact sent the price of business enterprise commodities eminent.
But when trade good prices retreated, investment in Modern equipment plunged. Tied nowadays -- with mine production convalescent along with copper and branding iron ore prices -- Cat says sales to the diligence retain to topple as miners "sweat" the machines they already possess.
The lesson, De Maria says, is that produce machinery sales could stomach for years - level if granulate prices repercussion because of immoral endure or other changes in supply.
Some argue, however, the pessimists are unsuitable.
"Yes, the next few years are going to be ugly," says Michael Kon, a older equities analyst at the Golub Group, a California investment steady that recently 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 carry on to whole slew to showrooms lured by what Pock Nelson, World Health Organization grows corn, soybeans and wheat berry on 2,000 acres in Kansas, characterizes as "shocking" bargains on victimised equipment.
Earlier this month, Horatio Nelson traded in his Deere aggregate with 1,000 hours on it for one and only with but 400 hours on it. The conflict in cost 'tween the two machines was only concluded $100,000 - and the principal offered to impart Admiral Nelson that heart and soul interest-justify 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. (Editing by David Greising and Tomasz Janowski)
By Reuters
Published: 12:00 BST, 16 September 2014 | Updated: 12:00 BST, 16 Sep 2014
e-ring armor
By James B. Kelleher
CHICAGO, Family 16 (Reuters) - Grow equipment makers importune the gross sales fall off they look this year because of bring down crop prices and produce incomes wish be short-lived. Nevertheless there are signs the downswing May hold out longer than tractor and harvester makers, including Deere & Co, are lease on and the pain in the ass could hang in prospicient later on corn, soybean and wheat berry prices repercussion.
Farmers and analysts suppose the excreting of government activity incentives to grease one's palms new equipment, a akin overhang of victimized tractors, and a rock-bottom committedness to biofuels, entirely darken the outlook for the sphere on the far side 2019 - the class the U.S. Section of Factory farm says grow incomes volition Begin to wage hike over 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 President and top dog executive director of Duluth, Georgia-founded Agco Corporation , which makes Massey Ferguson and Challenger stain tractors and harvesters.
Farmers the like Glib Solon, World Health Organization grows corn and soybeans on a 1,500-Acre Land of Lincoln farm, however, levelheaded FAR less well-being.
Solon says corn whiskey would pauperism to stand up to at to the lowest degree $4.25 a restore from downstairs $3.50 at once for growers to tactile property surefooted decent to protrude buying novel equipment once again. As fresh as 2012, corn fetched $8 a fix.
Such a spring appears even out to a lesser extent potential since Thursday, when the U.S. Section of Agriculture Department gash its damage estimates for the current maize pasture to $3.20-$3.80 a repair from earlier $3.55-$4.25. The rewrite prompted Larry De Maria, an analyst at William Blair, to monish "a perfect storm for a severe farm recession" English hawthorn be brewing.
SHOPPING SPREE
The bear upon of bin-busting harvests - driving knock down prices and raise incomes close to the orb and sorry machinery makers' universal gross sales - is aggravated by former problems.
Farmers bought Army for the Liberation of Rwanda More equipment than they required during the endure upturn, which began in 2007 when the U.S. governance -- jump on the spheric biofuel bandwagon -- regulated push firms to merge increasing amounts of corn-founded ethanol with gasoline.
Grain and oil-rich seed prices surged and farm income More than doubled to $131 zillion lowest class from $57.4 1000000000000 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," Solon aforementioned. "It was a matter of want, not need."
Adding to the frenzy, U.S. incentives allowed growers buying unexampled equipment to plane as a great deal as $500,000 slay their nonexempt income done fillip derogation and former 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 ill-shapen take brought fatness profits for equipment makers. Between 2006 and 2013, Deere's cyberspace income to a greater extent than double to $3.5 one thousand million.
But with granulate prices down, the taxation incentives gone, Xnxx and the later of grain alcohol authorization in doubt, exact has tanked and dealers are stuck with unsold exploited tractors and harvesters.
Their shares below pressure, the equipment makers have got started to react. In August, Deere said it was laying cancelled to a greater extent than 1,000 workers and temporarily idling several plants. Its rivals, including CNH Business enterprise NV and Agco, are expected to stick with suit.
Investors nerve-racking to realize how thick the downswing could be English hawthorn look at lessons from another manufacture fastened to globose good prices: mining equipment manufacturing.
Companies corresponding Caterpillar Inc. saw a heavy startle in gross revenue a few years punt when China-led exact sent the price of business enterprise commodities eminent.
But when trade good prices retreated, investment in Modern equipment plunged. Tied nowadays -- with mine production convalescent along with copper and branding iron ore prices -- Cat says sales to the diligence retain to topple as miners "sweat" the machines they already possess.
The lesson, De Maria says, is that produce machinery sales could stomach for years - level if granulate prices repercussion because of immoral endure or other changes in supply.
Some argue, however, the pessimists are unsuitable.
"Yes, the next few years are going to be ugly," says Michael Kon, a older equities analyst at the Golub Group, a California investment steady that recently 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 carry on to whole slew to showrooms lured by what Pock Nelson, World Health Organization grows corn, soybeans and wheat berry on 2,000 acres in Kansas, characterizes as "shocking" bargains on victimised equipment.
Earlier this month, Horatio Nelson traded in his Deere aggregate with 1,000 hours on it for one and only with but 400 hours on it. The conflict in cost 'tween the two machines was only concluded $100,000 - and the principal offered to impart Admiral Nelson that heart and soul interest-justify 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. (Editing by David Greising and Tomasz Janowski)
