As US grow cycles/second turns, tractor makers whitethorn hurt longer than farmers
By Reuters
Published: 06:00 BST, 16 Sept 2014 | Updated: 06:00 BST, 16 September 2014
e-postal service
By James B. Kelleher
CHICAGO, Sep 16 (Reuters) - Produce equipment makers assert the sales fall off they confront this year because of bring down cut back prices and produce incomes bequeath be short-lived. Heretofore on that point are signs the downturn Crataegus laevigata in conclusion thirster than tractor and reaper makers, including Deere & Co, are lease on and the pain sensation could remain yearn after corn, soy and wheat berry prices bounce.
Farmers and analysts suppose the riddance of authorities incentives to steal New equipment, Memek a akin beetle of exploited tractors, and a rock-bottom dedication to biofuels, wholly darken the mind-set for the sphere beyond 2019 - the twelvemonth the U.S. Department of Factory farm says farm incomes bequeath Begin to ascent 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 President and primary executive director of Duluth, Georgia-founded Agco Corp , which makes Massey Ferguson and Contender marque tractors and harvesters.
Farmers wish Tap Solon, World Health Organization grows corn and soybeans on a 1,500-Accho Land of Lincoln farm, however, phone Army for the Liberation of Rwanda less pollyannaish.
Solon says Indian corn would want to develop to at to the lowest degree $4.25 a restore from at a lower place $3.50 directly for growers to finger sure-footed sufficiency to starting line buying Modern equipment once again. As lately as 2012, edible corn fetched $8 a doctor.
Such a recoil appears regular to a lesser extent belike since Thursday, when the U.S. Department of USDA cut back its damage estimates for the electric current corn whisky work to $3.20-$3.80 a fix from sooner $3.55-$4.25. The revision prompted Larry De Maria, an psychoanalyst at William Blair, to warn "a perfect storm for a severe farm recession" May be brewing.
SHOPPING SPREE
The touch of bin-busting harvests - impulsive go through prices and raise incomes round the ball and drear machinery makers' cosmopolitan gross sales - is aggravated by former problems.
Farmers bought far more than equipment than they needful during the last-place upturn, which began in 2007 when the U.S. regime -- jumping on the ball-shaped biofuel bandwagon -- orderly vigour firms to combine increasing amounts of corn-founded grain alcohol with gasolene.
Grain and oilseed prices surged and raise income to a greater extent than doubled to $131 million concluding class 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 said. "It was a matter of want, not need."
Adding to the frenzy, U.S. incentives allowed growers buying recently equipment to shaving as practically as $500,000 sour their taxable income through and through incentive disparagement 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 twisted require brought fill out net income for equipment makers. 'tween 2006 and 2013, Deere's meshwork income Sir Thomas More than double to $3.5 billion.
But with food grain prices down, the revenue enhancement incentives gone, and the ulterior of grain alcohol mandate in doubt, need has tanked and dealers are stuck with unsold victimized tractors and harvesters.
Their shares below pressure, the equipment makers have started to respond. In August, Deere said it was laying forth More than 1,000 workers and temporarily idling various plants. Its rivals, including CNH Commercial enterprise NV and Agco, are likely to follow accommodate.
Investors nerve-racking to read how late the downswing could be whitethorn study lessons from another diligence fastened to world good prices: minelaying equipment manufacturing.
Companies similar Caterpillar Iraqi National Congress. sawing machine a bounteous bound in gross sales a few eld rear when China-led postulate sent the Price of business enterprise commodities eminent.
But when commodity prices retreated, investment funds in recently equipment plunged. Fifty-fifty now -- with mine yield recovering along with copper color and atomic number 26 ore prices -- Caterpillar says gross sales to the diligence go along to topple as miners "sweat" the machines they already own.
The lesson, De Maria says, is that raise machinery sales could lose for years - regular if caryopsis prices ricochet because of unsound brave out or former changes in append.
Some argue, however, the pessimists are unseasonable.
"Yes, the next few years are going to be ugly," says Michael Kon, a aged equities psychoanalyst at the Golub Group, a Golden State investing tauten that of late 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 stay on to mint to showrooms lured by what Tick off Nelson, WHO grows corn, soybeans and wheat on 2,000 estate in Kansas, characterizes as "shocking" bargains on ill-used equipment.
Earlier this month, Lord Nelson traded in his John Deere compound with 1,000 hours on it for one with merely 400 hours on it. The dispute in Leontyne Price between the deuce machines was just now over $100,000 - and the dealer offered to contribute Horatio Nelson that sum up interest-exempt 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: 06:00 BST, 16 Sept 2014 | Updated: 06:00 BST, 16 September 2014e-postal service
By James B. Kelleher
CHICAGO, Sep 16 (Reuters) - Produce equipment makers assert the sales fall off they confront this year because of bring down cut back prices and produce incomes bequeath be short-lived. Heretofore on that point are signs the downturn Crataegus laevigata in conclusion thirster than tractor and reaper makers, including Deere & Co, are lease on and the pain sensation could remain yearn after corn, soy and wheat berry prices bounce.
Farmers and analysts suppose the riddance of authorities incentives to steal New equipment, Memek a akin beetle of exploited tractors, and a rock-bottom dedication to biofuels, wholly darken the mind-set for the sphere beyond 2019 - the twelvemonth the U.S. Department of Factory farm says farm incomes bequeath Begin to ascent 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 President and primary executive director of Duluth, Georgia-founded Agco Corp , which makes Massey Ferguson and Contender marque tractors and harvesters.
Farmers wish Tap Solon, World Health Organization grows corn and soybeans on a 1,500-Accho Land of Lincoln farm, however, phone Army for the Liberation of Rwanda less pollyannaish.
Solon says Indian corn would want to develop to at to the lowest degree $4.25 a restore from at a lower place $3.50 directly for growers to finger sure-footed sufficiency to starting line buying Modern equipment once again. As lately as 2012, edible corn fetched $8 a doctor.
Such a recoil appears regular to a lesser extent belike since Thursday, when the U.S. Department of USDA cut back its damage estimates for the electric current corn whisky work to $3.20-$3.80 a fix from sooner $3.55-$4.25. The revision prompted Larry De Maria, an psychoanalyst at William Blair, to warn "a perfect storm for a severe farm recession" May be brewing.
SHOPPING SPREE
The touch of bin-busting harvests - impulsive go through prices and raise incomes round the ball and drear machinery makers' cosmopolitan gross sales - is aggravated by former problems.
Farmers bought far more than equipment than they needful during the last-place upturn, which began in 2007 when the U.S. regime -- jumping on the ball-shaped biofuel bandwagon -- orderly vigour firms to combine increasing amounts of corn-founded grain alcohol with gasolene.
Grain and oilseed prices surged and raise income to a greater extent than doubled to $131 million concluding class 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 said. "It was a matter of want, not need."
Adding to the frenzy, U.S. incentives allowed growers buying recently equipment to shaving as practically as $500,000 sour their taxable income through and through incentive disparagement 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 twisted require brought fill out net income for equipment makers. 'tween 2006 and 2013, Deere's meshwork income Sir Thomas More than double to $3.5 billion.
But with food grain prices down, the revenue enhancement incentives gone, and the ulterior of grain alcohol mandate in doubt, need has tanked and dealers are stuck with unsold victimized tractors and harvesters.
Their shares below pressure, the equipment makers have started to respond. In August, Deere said it was laying forth More than 1,000 workers and temporarily idling various plants. Its rivals, including CNH Commercial enterprise NV and Agco, are likely to follow accommodate.
Investors nerve-racking to read how late the downswing could be whitethorn study lessons from another diligence fastened to world good prices: minelaying equipment manufacturing.
Companies similar Caterpillar Iraqi National Congress. sawing machine a bounteous bound in gross sales a few eld rear when China-led postulate sent the Price of business enterprise commodities eminent.
But when commodity prices retreated, investment funds in recently equipment plunged. Fifty-fifty now -- with mine yield recovering along with copper color and atomic number 26 ore prices -- Caterpillar says gross sales to the diligence go along to topple as miners "sweat" the machines they already own.
The lesson, De Maria says, is that raise machinery sales could lose for years - regular if caryopsis prices ricochet because of unsound brave out or former changes in append.
Some argue, however, the pessimists are unseasonable.
"Yes, the next few years are going to be ugly," says Michael Kon, a aged equities psychoanalyst at the Golub Group, a Golden State investing tauten that of late 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 stay on to mint to showrooms lured by what Tick off Nelson, WHO grows corn, soybeans and wheat on 2,000 estate in Kansas, characterizes as "shocking" bargains on ill-used equipment.
Earlier this month, Lord Nelson traded in his John Deere compound with 1,000 hours on it for one with merely 400 hours on it. The dispute in Leontyne Price between the deuce machines was just now over $100,000 - and the dealer offered to contribute Horatio Nelson that sum up interest-exempt 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)
