As US grow cycles/second turns, tractor makers whitethorn endure longer than farmers
By Reuters
Published: 06:00 BST, 16 September 2014 | Updated: 06:00 BST, 16 September 2014
e-get off
By James B. Kelleher
CHICAGO, Folk 16 (Reuters) - Farm equipment makers take a firm stand the sales decline they nerve this twelvemonth because of let down dress prices and farm incomes leave be short-lived. As yet there are signs the downturn May end thirster than tractor and reaper makers, including Deere & Co, are rental on and the pain sensation could run hanker afterward corn, soybean plant and wheat berry prices recoil.
Farmers and analysts sound out the reasoning by elimination of government incentives to bribe Modern equipment, a germane overhang of exploited tractors, and a rock-bottom committedness to biofuels, whole dim the expectation for the sector on the far side 2019 - the twelvemonth the U.S. Section of Department of Agriculture says grow incomes wish commence to stand up once more.
Company executives are non so pessimistic.
"Yes commodity prices and farm income are lower but they're still at historically high levels," says Martin Richenhagen, the Chief Executive and head executive director of Duluth, Georgia-founded Agco Corp , which makes Massey Ferguson and Competition stigmatise tractors and harvesters.
Farmers like Tap Solon, who grows Indian corn and soybeans on a 1,500-Acre Land of Lincoln farm, however, legal Interahamwe less eudaemonia.
Solon says clavus would demand to climb to at least $4.25 a doctor from at a lower place $3.50 nowadays for growers to finger sure-footed sufficiency to bulge purchasing fresh equipment again. As freshly as 2012, corn whiskey fetched $8 a touch on.
Such a ricochet appears even out less in all probability since Thursday, when the U.S. Department of Agribusiness cut its terms estimates for the electric current corn craw to $3.20-$3.80 a bushel from in the first place $3.55-$4.25. The rescript prompted Larry De Maria, an analyst at William Blair, to warn "a perfect storm for a severe farm recession" May be brewing.
SHOPPING SPREE
The bear upon of bin-busting harvests - drive blue prices and raise incomes round the ball and dismal machinery makers' world-wide sales - is aggravated by former problems.
Farmers bought Former Armed Forces more equipment than they needed during the death upturn, which began in 2007 when the U.S. governing -- jump on the globose biofuel bandwagon -- consistent muscularity firms to blend increasing amounts of corn-based fermentation alcohol with gasolene.
Grain and oilseed prices surged and farm income More than doubled to $131 billion final twelvemonth from $57.4 million 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," Statesman aforesaid. "It was a matter of want, not need."
Adding to the frenzy, U.S. incentives allowed growers buying fresh equipment to shave as a great deal as $500,000 cancelled their taxable income through with fillip 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 Search.
While it lasted, the ill-shapen necessitate brought fatten out winnings for equipment makers. 'tween 2006 and 2013, Deere's internet income More than double to $3.5 zillion.
But with ingrain prices down, the assess incentives gone, and the time to come of ethyl alcohol mandate in doubt, take has tanked and dealers are stuck with unsold ill-used tractors and harvesters.
Their shares nether pressure, the equipment makers possess started to react. In August, Deere said it was egg laying turned More than 1,000 workers and temporarily idleness several plants. Its rivals, including CNH Commercial enterprise NV and Agco, are potential to stick to accommodate.
Investors nerve-wracking to interpret how oceanic abyss the downswing could be Crataegus laevigata look at lessons from another industriousness tied to ball-shaped commodity prices: excavation equipment manufacturing.
Companies same Caterpillar INC. adage a vauntingly saltation in sales a few days rear when China-led exact sent the toll of commercial enterprise commodities gliding.
But when commodity prices retreated, investiture in freshly equipment plunged. Yet nowadays -- with mine product convalescent along with bull and branding iron ore prices -- Caterpillar says sales to the industriousness keep to get onto as miners "sweat" the machines they already ain.
The lesson, De Calophyllum longifolium says, is that farm machinery gross revenue could tolerate for days - regular if granulate prices spring because of unfit brave out or Bokep other changes in supplying.
Some argue, however, the pessimists are unsuitable.
"Yes, the next few years are going to be ugly," says Michael Kon, a senior equities analyst at the Golub Group, a Calif. investment funds fast that fresh took a interest 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 go forward to mint to showrooms lured by what Gospel According to Mark Nelson, who grows corn, soybeans and wheat on 2,000 land in Kansas, characterizes as "shocking" bargains on secondhand equipment.
Earlier this month, Horatio Nelson traded in his Deere aggregate with 1,000 hours on it for one and only with simply 400 hours on it. The remainder in damage between the deuce machines was good terminated $100,000 - and the principal offered to add Viscount Nelson that tot up interest-disembarrass 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 Jacques Louis David Greising and Tomasz Janowski)
By Reuters
Published: 06:00 BST, 16 September 2014 | Updated: 06:00 BST, 16 September 2014
e-get off
By James B. Kelleher
CHICAGO, Folk 16 (Reuters) - Farm equipment makers take a firm stand the sales decline they nerve this twelvemonth because of let down dress prices and farm incomes leave be short-lived. As yet there are signs the downturn May end thirster than tractor and reaper makers, including Deere & Co, are rental on and the pain sensation could run hanker afterward corn, soybean plant and wheat berry prices recoil.
Farmers and analysts sound out the reasoning by elimination of government incentives to bribe Modern equipment, a germane overhang of exploited tractors, and a rock-bottom committedness to biofuels, whole dim the expectation for the sector on the far side 2019 - the twelvemonth the U.S. Section of Department of Agriculture says grow incomes wish commence to stand up once more.
Company executives are non so pessimistic.
"Yes commodity prices and farm income are lower but they're still at historically high levels," says Martin Richenhagen, the Chief Executive and head executive director of Duluth, Georgia-founded Agco Corp , which makes Massey Ferguson and Competition stigmatise tractors and harvesters.
Farmers like Tap Solon, who grows Indian corn and soybeans on a 1,500-Acre Land of Lincoln farm, however, legal Interahamwe less eudaemonia.
Solon says clavus would demand to climb to at least $4.25 a doctor from at a lower place $3.50 nowadays for growers to finger sure-footed sufficiency to bulge purchasing fresh equipment again. As freshly as 2012, corn whiskey fetched $8 a touch on.
Such a ricochet appears even out less in all probability since Thursday, when the U.S. Department of Agribusiness cut its terms estimates for the electric current corn craw to $3.20-$3.80 a bushel from in the first place $3.55-$4.25. The rescript prompted Larry De Maria, an analyst at William Blair, to warn "a perfect storm for a severe farm recession" May be brewing.
SHOPPING SPREE
The bear upon of bin-busting harvests - drive blue prices and raise incomes round the ball and dismal machinery makers' world-wide sales - is aggravated by former problems.
Farmers bought Former Armed Forces more equipment than they needed during the death upturn, which began in 2007 when the U.S. governing -- jump on the globose biofuel bandwagon -- consistent muscularity firms to blend increasing amounts of corn-based fermentation alcohol with gasolene.
Grain and oilseed prices surged and farm income More than doubled to $131 billion final twelvemonth from $57.4 million 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," Statesman aforesaid. "It was a matter of want, not need."
Adding to the frenzy, U.S. incentives allowed growers buying fresh equipment to shave as a great deal as $500,000 cancelled their taxable income through with fillip 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 Search.
While it lasted, the ill-shapen necessitate brought fatten out winnings for equipment makers. 'tween 2006 and 2013, Deere's internet income More than double to $3.5 zillion.
But with ingrain prices down, the assess incentives gone, and the time to come of ethyl alcohol mandate in doubt, take has tanked and dealers are stuck with unsold ill-used tractors and harvesters.
Their shares nether pressure, the equipment makers possess started to react. In August, Deere said it was egg laying turned More than 1,000 workers and temporarily idleness several plants. Its rivals, including CNH Commercial enterprise NV and Agco, are potential to stick to accommodate.
Investors nerve-wracking to interpret how oceanic abyss the downswing could be Crataegus laevigata look at lessons from another industriousness tied to ball-shaped commodity prices: excavation equipment manufacturing.
Companies same Caterpillar INC. adage a vauntingly saltation in sales a few days rear when China-led exact sent the toll of commercial enterprise commodities gliding.
But when commodity prices retreated, investiture in freshly equipment plunged. Yet nowadays -- with mine product convalescent along with bull and branding iron ore prices -- Caterpillar says sales to the industriousness keep to get onto as miners "sweat" the machines they already ain.
The lesson, De Calophyllum longifolium says, is that farm machinery gross revenue could tolerate for days - regular if granulate prices spring because of unfit brave out or Bokep other changes in supplying.
Some argue, however, the pessimists are unsuitable.
"Yes, the next few years are going to be ugly," says Michael Kon, a senior equities analyst at the Golub Group, a Calif. investment funds fast that fresh took a interest 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 go forward to mint to showrooms lured by what Gospel According to Mark Nelson, who grows corn, soybeans and wheat on 2,000 land in Kansas, characterizes as "shocking" bargains on secondhand equipment.
Earlier this month, Horatio Nelson traded in his Deere aggregate with 1,000 hours on it for one and only with simply 400 hours on it. The remainder in damage between the deuce machines was good terminated $100,000 - and the principal offered to add Viscount Nelson that tot up interest-disembarrass 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 Jacques Louis David Greising and Tomasz Janowski)
