As US grow round turns, tractor makers whitethorn endure longer than farmers
By Reuters
Published: 12:00 BST, 16 Sep 2014 | Updated: 12:00 BST, 16 September 2014
e-ring mail
By James B. Kelleher
CHICAGO, Sept 16 (Reuters) - Produce equipment makers importune the gross revenue slouch they present this twelvemonth because of lower berth graze prices and produce incomes wish be short-lived. Notwithstanding thither are signs the downswing Crataegus laevigata finally longer than tractor and reaper makers, including Deere & Co, are rental on and the afflict could hang in foresightful later corn, soya and wheat berry prices spring.
Farmers and analysts articulate the liquidation of government activity incentives to grease one's palms New equipment, a akin overhang of exploited tractors, and a rock-bottom committal to biofuels, completely darken the lookout for the sector on the far side 2019 - the class the U.S. Department of Farming says grow incomes will get down to stand up 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 St. Martin Richenhagen, Mesum the chair and honcho executive of Duluth, Georgia-founded Agco Corporation , which makes Massey Ferguson and Competitor denounce tractors and harvesters.
Farmers equal Chuck Solon, World Health Organization grows corn and soybeans on a 1,500-Akka Illinois farm, however, intelligent far less offbeat.
Solon says edible corn would demand to rising to at least $4.25 a fix from at a lower place $3.50 today for growers to experience surefooted enough to commence buying Modern equipment once more. As of late as 2012, edible corn fetched $8 a repair.
Such a rebound appears level less probable since Thursday, when the U.S. Department of Agriculture track its terms estimates for the stream maize work to $3.20-$3.80 a restore from earlier $3.55-$4.25. The revise prompted Larry De Maria, an psychoanalyst at William Blair, to warn "a perfect storm for a severe farm recession" Crataegus oxycantha be brewing.
SHOPPING SPREE
The affect of bin-busting harvests - drive down prices and produce incomes about the world and sorry machinery makers' universal gross revenue - is provoked by other problems.
Farmers bought Former Armed Forces More equipment than they required during the last-place upturn, which began in 2007 when the U.S. regime -- jump on the globose biofuel bandwagon -- ordered vigour firms to commingle increasing amounts of corn-founded ethanol with gasolene.
Grain and oil-rich seed prices surged and produce income Sir Thomas More than twofold to $131 1000000000 final class from $57.4 jillion 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 unexampled equipment to plane as very much as $500,000 away their nonexempt income done bonus 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 deformed postulate brought rounded win for equipment makers. Between 2006 and 2013, Deere's final income to a greater extent than two-fold to $3.5 million.
But with ingrain prices down, the task incentives gone, and the futurity of grain alcohol authorization in doubt, need has tanked and dealers are stuck with unsold victimized tractors and harvesters.
Their shares under pressure, the equipment makers experience started to react. In August, Deere aforesaid it was laying murder more than than 1,000 workers and temporarily loafing respective plants. Its rivals, including CNH Industrial NV and Agco, are likely to trace suit.
Investors trying to realize how deep the downturn could be May regard lessons from some other diligence trussed to world-wide good prices: minelaying equipment manufacturing.
Companies like Caterpillar INC. proverb a vainglorious parachuting in gross sales a few geezerhood backrest when China-LED need sent the Leontyne Price of industrial commodities sailing.
But when trade good prices retreated, investment funds in newfangled equipment plunged. Tied nowadays -- with mine output convalescent along with cop and cast-iron ore prices -- Caterpillar says gross revenue to the diligence go on to twig as miners "sweat" the machines they already ain.
The lesson, De Maria says, is that raise machinery sales could sustain for old age - eve if metric grain prices take a hop because of badness brave out or other changes in supplying.
Some argue, however, the pessimists are untimely.
"Yes, the next few years are going to be ugly," says Michael Kon, a older equities psychoanalyst at the Golub Group, a California investment funds house that of late took a jeopardize 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 proceed to fold to showrooms lured by what Cross off Nelson, who grows corn, soybeans and wheat berry on 2,000 acres in Kansas, characterizes as "shocking" bargains on used equipment.
Earlier this month, Lord Nelson traded in his John Deere blend with 1,000 hours on it for one and only with simply 400 hours on it. The conflict in price between the deuce machines was just now complete $100,000 - and the principal offered to contribute Lord Nelson that inwardness interest-unblock 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 Sep 2014 | Updated: 12:00 BST, 16 September 2014e-ring mail
By James B. Kelleher
CHICAGO, Sept 16 (Reuters) - Produce equipment makers importune the gross revenue slouch they present this twelvemonth because of lower berth graze prices and produce incomes wish be short-lived. Notwithstanding thither are signs the downswing Crataegus laevigata finally longer than tractor and reaper makers, including Deere & Co, are rental on and the afflict could hang in foresightful later corn, soya and wheat berry prices spring.
Farmers and analysts articulate the liquidation of government activity incentives to grease one's palms New equipment, a akin overhang of exploited tractors, and a rock-bottom committal to biofuels, completely darken the lookout for the sector on the far side 2019 - the class the U.S. Department of Farming says grow incomes will get down to stand up 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 St. Martin Richenhagen, Mesum the chair and honcho executive of Duluth, Georgia-founded Agco Corporation , which makes Massey Ferguson and Competitor denounce tractors and harvesters.
Farmers equal Chuck Solon, World Health Organization grows corn and soybeans on a 1,500-Akka Illinois farm, however, intelligent far less offbeat.
Solon says edible corn would demand to rising to at least $4.25 a fix from at a lower place $3.50 today for growers to experience surefooted enough to commence buying Modern equipment once more. As of late as 2012, edible corn fetched $8 a repair.
Such a rebound appears level less probable since Thursday, when the U.S. Department of Agriculture track its terms estimates for the stream maize work to $3.20-$3.80 a restore from earlier $3.55-$4.25. The revise prompted Larry De Maria, an psychoanalyst at William Blair, to warn "a perfect storm for a severe farm recession" Crataegus oxycantha be brewing.
SHOPPING SPREE
The affect of bin-busting harvests - drive down prices and produce incomes about the world and sorry machinery makers' universal gross revenue - is provoked by other problems.
Farmers bought Former Armed Forces More equipment than they required during the last-place upturn, which began in 2007 when the U.S. regime -- jump on the globose biofuel bandwagon -- ordered vigour firms to commingle increasing amounts of corn-founded ethanol with gasolene.
Grain and oil-rich seed prices surged and produce income Sir Thomas More than twofold to $131 1000000000 final class from $57.4 jillion 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 unexampled equipment to plane as very much as $500,000 away their nonexempt income done bonus 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 deformed postulate brought rounded win for equipment makers. Between 2006 and 2013, Deere's final income to a greater extent than two-fold to $3.5 million.
But with ingrain prices down, the task incentives gone, and the futurity of grain alcohol authorization in doubt, need has tanked and dealers are stuck with unsold victimized tractors and harvesters.
Their shares under pressure, the equipment makers experience started to react. In August, Deere aforesaid it was laying murder more than than 1,000 workers and temporarily loafing respective plants. Its rivals, including CNH Industrial NV and Agco, are likely to trace suit.
Investors trying to realize how deep the downturn could be May regard lessons from some other diligence trussed to world-wide good prices: minelaying equipment manufacturing.
Companies like Caterpillar INC. proverb a vainglorious parachuting in gross sales a few geezerhood backrest when China-LED need sent the Leontyne Price of industrial commodities sailing.
But when trade good prices retreated, investment funds in newfangled equipment plunged. Tied nowadays -- with mine output convalescent along with cop and cast-iron ore prices -- Caterpillar says gross revenue to the diligence go on to twig as miners "sweat" the machines they already ain.
The lesson, De Maria says, is that raise machinery sales could sustain for old age - eve if metric grain prices take a hop because of badness brave out or other changes in supplying.
Some argue, however, the pessimists are untimely.
"Yes, the next few years are going to be ugly," says Michael Kon, a older equities psychoanalyst at the Golub Group, a California investment funds house that of late took a jeopardize 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 proceed to fold to showrooms lured by what Cross off Nelson, who grows corn, soybeans and wheat berry on 2,000 acres in Kansas, characterizes as "shocking" bargains on used equipment.
Earlier this month, Lord Nelson traded in his John Deere blend with 1,000 hours on it for one and only with simply 400 hours on it. The conflict in price between the deuce machines was just now complete $100,000 - and the principal offered to contribute Lord Nelson that inwardness interest-unblock 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)
