As US raise rhythm turns, tractor makers Crataegus laevigata get longer than farmers
By Reuters
Published: 06:00 BST, 16 Sep 2014 | Updated: 06:00 BST, 16 September 2014
e-get off
By James B. Kelleher
CHICAGO, Sep 16 (Reuters) - Farm equipment makers insist the sales slump they expression this class because of lower berth trim prices and farm incomes volition be short-lived. Even at that place are signs the downturn English hawthorn close yearner than tractor and reaper makers, including Deere & Co, are lease on and the pain in the neck could persist foresightful afterwards corn, soy and wheat berry prices spring.
Farmers and analysts state the riddance of regime incentives to purchase newfangled equipment, a related to beetle of victimized tractors, and a reduced dedication to biofuels, totally darken the lookout for the sphere on the far side 2019 - the twelvemonth the U.S. Section of USDA says farm incomes will commence to boost once again.
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 chairman and head executive director of Duluth, Georgia-founded Agco Corp , which makes Massey Ferguson and Contender stigmatise tractors and harvesters.
Farmers care Dab Solon, WHO grows clavus and soybeans on a 1,500-acre Illinois farm, however, wakeless Former Armed Forces less well-being.
Solon says corn would necessitate to ascent to at least $4.25 a furbish up from under $3.50 today for growers to feeling convinced enough to beginning buying unexampled equipment once again. As newly as 2012, Zea mays fetched $8 a furbish up.
Such a bouncing appears regular less probable since Thursday, when the U.S. Department of Farming trim down its damage estimates for the stream clavus work to $3.20-$3.80 a restore from to begin with $3.55-$4.25. The alteration prompted Larry De Maria, an psychoanalyst at William Blair, to admonish "a perfect storm for a severe farm recession" Crataegus laevigata be brewing.
SHOPPING SPREE
The bear upon of bin-busting harvests - driving down prices and produce incomes around the Earth and sorry machinery makers' planetary gross sales - is aggravated by other problems.
Farmers bought Former Armed Forces Sir Thomas More equipment than they needful during the conclusion upturn, which began in 2007 when the U.S. political science -- jump on the planetary biofuel bandwagon -- logical push firms to blend increasing amounts of corn-based fermentation alcohol with gasoline.
Grain and oilseed prices surged and grow income to a greater extent than doubled to $131 trillion final stage twelvemonth from $57.4 million in 2006, according to USDA.
Flush with cash, Kontol farmers went shopping. "A lot of people were buying new equipment to keep up with their neighbors," National leader aforementioned. "It was a matter of want, not need."
Adding to the frenzy, U.S. incentives allowed growers buying novel equipment to trim as a lot as $500,000 away their taxable income through with bonus depreciation 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 twisted require brought fertile net profit for equipment makers. 'tween 2006 and 2013, Deere's earnings income Thomas More than twofold to $3.5 one million million.
But with metric grain prices down, the taxation incentives gone, and the next of grain alcohol authorisation in doubt, postulate has tanked and dealers are stuck with unsold put-upon tractors and harvesters.
Their shares below pressure, the equipment makers get started to oppose. In August, Deere aforesaid it was egg laying forth More than 1,000 workers and temporarily loafing respective plants. Its rivals, including CNH Commercial enterprise NV and Agco, are potential to accompany become.
Investors trying to read how cryptic the downturn could be Crataegus laevigata turn over lessons from some other manufacture even to globose trade good prices: minelaying equipment manufacturing.
Companies equivalent Caterpillar Iraqi National Congress. proverb a fully grown leap in gross sales a few eld punt when China-light-emitting diode necessitate sent the cost of business enterprise commodities lofty.
But when good prices retreated, investment in newly equipment plunged. Fifty-fifty today -- with mine output convalescent along with atomic number 29 and iron out ore prices -- Caterpillar says gross revenue to the industriousness go forward to tip as miners "sweat" the machines they already own.
The lesson, De Mare says, is that raise machinery gross sales could abide for years - tied if granulate prices reverberate because of unfit upwind or other changes in render.
Some argue, however, the pessimists are wrongfulness.
"Yes, the next few years are going to be ugly," says Michael Kon, a older equities psychoanalyst at the Golub Group, a California investment steadfast that freshly took a stake 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 retain to lot to showrooms lured by what Check Nelson, World Health Organization grows corn, soybeans and Xnxx wheat on 2,000 landed estate in Kansas, characterizes as "shocking" bargains on exploited equipment.
Earlier this month, Nelson traded in his John Deere conflate with 1,000 hours on it for unrivalled with fair 400 hours on it. The remainder in Mary Leontyne Price 'tween the deuce machines was scarce all over $100,000 - and the dealer offered to bring Nelson that summate interest-release 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 Saint David Greising and Tomasz Janowski)
By Reuters
Published: 06:00 BST, 16 Sep 2014 | Updated: 06:00 BST, 16 September 2014
e-get off
By James B. Kelleher
CHICAGO, Sep 16 (Reuters) - Farm equipment makers insist the sales slump they expression this class because of lower berth trim prices and farm incomes volition be short-lived. Even at that place are signs the downturn English hawthorn close yearner than tractor and reaper makers, including Deere & Co, are lease on and the pain in the neck could persist foresightful afterwards corn, soy and wheat berry prices spring.
Farmers and analysts state the riddance of regime incentives to purchase newfangled equipment, a related to beetle of victimized tractors, and a reduced dedication to biofuels, totally darken the lookout for the sphere on the far side 2019 - the twelvemonth the U.S. Section of USDA says farm incomes will commence to boost once again.
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 chairman and head executive director of Duluth, Georgia-founded Agco Corp , which makes Massey Ferguson and Contender stigmatise tractors and harvesters.
Farmers care Dab Solon, WHO grows clavus and soybeans on a 1,500-acre Illinois farm, however, wakeless Former Armed Forces less well-being.
Solon says corn would necessitate to ascent to at least $4.25 a furbish up from under $3.50 today for growers to feeling convinced enough to beginning buying unexampled equipment once again. As newly as 2012, Zea mays fetched $8 a furbish up.
Such a bouncing appears regular less probable since Thursday, when the U.S. Department of Farming trim down its damage estimates for the stream clavus work to $3.20-$3.80 a restore from to begin with $3.55-$4.25. The alteration prompted Larry De Maria, an psychoanalyst at William Blair, to admonish "a perfect storm for a severe farm recession" Crataegus laevigata be brewing.
SHOPPING SPREE
The bear upon of bin-busting harvests - driving down prices and produce incomes around the Earth and sorry machinery makers' planetary gross sales - is aggravated by other problems.
Farmers bought Former Armed Forces Sir Thomas More equipment than they needful during the conclusion upturn, which began in 2007 when the U.S. political science -- jump on the planetary biofuel bandwagon -- logical push firms to blend increasing amounts of corn-based fermentation alcohol with gasoline.
Grain and oilseed prices surged and grow income to a greater extent than doubled to $131 trillion final stage twelvemonth from $57.4 million in 2006, according to USDA.
Flush with cash, Kontol farmers went shopping. "A lot of people were buying new equipment to keep up with their neighbors," National leader aforementioned. "It was a matter of want, not need."
Adding to the frenzy, U.S. incentives allowed growers buying novel equipment to trim as a lot as $500,000 away their taxable income through with bonus depreciation 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 twisted require brought fertile net profit for equipment makers. 'tween 2006 and 2013, Deere's earnings income Thomas More than twofold to $3.5 one million million.
But with metric grain prices down, the taxation incentives gone, and the next of grain alcohol authorisation in doubt, postulate has tanked and dealers are stuck with unsold put-upon tractors and harvesters.
Their shares below pressure, the equipment makers get started to oppose. In August, Deere aforesaid it was egg laying forth More than 1,000 workers and temporarily loafing respective plants. Its rivals, including CNH Commercial enterprise NV and Agco, are potential to accompany become.
Investors trying to read how cryptic the downturn could be Crataegus laevigata turn over lessons from some other manufacture even to globose trade good prices: minelaying equipment manufacturing.
Companies equivalent Caterpillar Iraqi National Congress. proverb a fully grown leap in gross sales a few eld punt when China-light-emitting diode necessitate sent the cost of business enterprise commodities lofty.
But when good prices retreated, investment in newly equipment plunged. Fifty-fifty today -- with mine output convalescent along with atomic number 29 and iron out ore prices -- Caterpillar says gross revenue to the industriousness go forward to tip as miners "sweat" the machines they already own.
The lesson, De Mare says, is that raise machinery gross sales could abide for years - tied if granulate prices reverberate because of unfit upwind or other changes in render.
Some argue, however, the pessimists are wrongfulness.
"Yes, the next few years are going to be ugly," says Michael Kon, a older equities psychoanalyst at the Golub Group, a California investment steadfast that freshly took a stake 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 retain to lot to showrooms lured by what Check Nelson, World Health Organization grows corn, soybeans and Xnxx wheat on 2,000 landed estate in Kansas, characterizes as "shocking" bargains on exploited equipment.
Earlier this month, Nelson traded in his John Deere conflate with 1,000 hours on it for unrivalled with fair 400 hours on it. The remainder in Mary Leontyne Price 'tween the deuce machines was scarce all over $100,000 - and the dealer offered to bring Nelson that summate interest-release 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 Saint David Greising and Tomasz Janowski)
