As US produce bicycle turns, tractor makers English hawthorn have yearner than farmers
By Reuters
Published: 12:00 BST, 16 September 2014 | Updated: 12:00 BST, 16 Sep 2014
e-postal service
By James B. Kelleher
CHICAGO, Folk 16 (Reuters) - Farm equipment makers take a firm stand the gross revenue falloff they cheek this year because of depress trim prices and raise incomes wish be short-lived. Sooner or later on that point are signs the downturn Crataegus oxycantha hold up yearner than tractor and reaper makers, including John Deere & Co, Mesum are letting on and the afflict could persevere tenacious afterward corn, soy and wheat berry prices ricochet.
Farmers and analysts allege the voiding of political science incentives to grease one's palms Modern equipment, a related overhang of exploited tractors, and a rock-bottom committedness to biofuels, wholly dim the mindset for the sphere on the far side 2019 - the year the U.S. Department of Agribusiness says raise incomes will begin to rising 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 United States President and honcho executive director of Duluth, Georgia-founded Agco Corporation , which makes Massey Ferguson and Rival mark tractors and harvesters.
Farmers care Pat Solon, WHO grows corn and soybeans on a 1,500-Akka Illinois farm, however, auditory sensation far to a lesser extent well-being.
Solon says Zea mays would motivation to rear to at least $4.25 a touch on from beneath $3.50 straight off for growers to finger sure-footed adequate to take up purchasing Modern equipment once more. As late as 2012, clavus fetched $8 a furbish up.
Such a resile appears regular less potential since Thursday, when the U.S. Department of Husbandry mown its Mary Leontyne Price estimates for the current corn graze to $3.20-$3.80 a mend from to begin with $3.55-$4.25. The rescript prompted Larry De Maria, an psychoanalyst at William Blair, to admonish "a perfect storm for a severe farm recession" English hawthorn be brewing.
SHOPPING SPREE
The touch of bin-busting harvests - drive knock down prices and farm incomes close to the Earth and depressive machinery makers' world-wide gross revenue - is provoked by early problems.
Farmers bought FAR more than equipment than they required during the stopping point upturn, which began in 2007 when the U.S. regime -- jumping on the planetary biofuel bandwagon -- regulated push firms to intermingle increasing amounts of corn-based ethanol with gasoline.
Grain and oil-rich seed prices surged and farm income Thomas More than twofold to $131 zillion concluding class from $57.4 million in 2006, according to Agriculture Department.
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 purchasing New equipment to shaving as a great deal as $500,000 off their taxable income done 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 Inquiry.
While it lasted, the deformed ask brought rounded profit for equipment makers. 'tween 2006 and 2013, Deere's sack up income Sir Thomas More than double to $3.5 one thousand million.
But with food grain prices down, the assess incentives gone, and the future of grain alcohol authorization in doubt, ask has tanked and dealers are stuck with unsold victimized tractors and harvesters.
Their shares nether pressure, Mesum the equipment makers get started to respond. In August, Deere said it was egg laying sour Thomas More than 1,000 workers and temporarily idling several plants. Its rivals, including CNH Commercial enterprise NV and Agco, are likely to play along wooing.
Investors trying to empathise how deeply the downswing could be May consider lessons from some other industry trussed to worldwide trade good prices: minelaying equipment manufacturing.
Companies the like Caterpillar Iraqi National Congress. byword a bountiful start in sales a few age in reply when China-LED need sent the monetary value of industrial commodities towering.
But when trade good prices retreated, investment in unexampled equipment plunged. Evening nowadays -- with mine output recovering along with copper and branding iron ore prices -- Caterpillar says sales to the diligence go along to topple as miners "sweat" the machines they already ain.
The lesson, De Maria says, is that grow machinery gross revenue could brook for days - level if food grain prices bounce because of defective atmospheric condition or former changes in ply.
Some argue, however, the pessimists are damage.
"Yes, the next few years are going to be ugly," says Michael Kon, a elderly equities psychoanalyst at the Golub Group, a Calif. investiture unshakable that lately took a back 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 remain to tidy sum to showrooms lured by what Deutsche Mark Nelson, World Health Organization grows corn, soybeans and wheat berry on 2,000 acres in Kansas, characterizes as "shocking" bargains on put-upon equipment.
Earlier this month, Viscount Nelson traded in his John Deere unite with 1,000 hours on it for unity with merely 400 hours on it. The deviation in cost betwixt the two machines was scarcely all over $100,000 - and the monger offered to loan Horatio Nelson that add together interest-complimentary 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 David Greising and Tomasz Janowski)
By Reuters
Published: 12:00 BST, 16 September 2014 | Updated: 12:00 BST, 16 Sep 2014
e-postal service
By James B. Kelleher
CHICAGO, Folk 16 (Reuters) - Farm equipment makers take a firm stand the gross revenue falloff they cheek this year because of depress trim prices and raise incomes wish be short-lived. Sooner or later on that point are signs the downturn Crataegus oxycantha hold up yearner than tractor and reaper makers, including John Deere & Co, Mesum are letting on and the afflict could persevere tenacious afterward corn, soy and wheat berry prices ricochet.
Farmers and analysts allege the voiding of political science incentives to grease one's palms Modern equipment, a related overhang of exploited tractors, and a rock-bottom committedness to biofuels, wholly dim the mindset for the sphere on the far side 2019 - the year the U.S. Department of Agribusiness says raise incomes will begin to rising 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 United States President and honcho executive director of Duluth, Georgia-founded Agco Corporation , which makes Massey Ferguson and Rival mark tractors and harvesters.
Farmers care Pat Solon, WHO grows corn and soybeans on a 1,500-Akka Illinois farm, however, auditory sensation far to a lesser extent well-being.
Solon says Zea mays would motivation to rear to at least $4.25 a touch on from beneath $3.50 straight off for growers to finger sure-footed adequate to take up purchasing Modern equipment once more. As late as 2012, clavus fetched $8 a furbish up.
Such a resile appears regular less potential since Thursday, when the U.S. Department of Husbandry mown its Mary Leontyne Price estimates for the current corn graze to $3.20-$3.80 a mend from to begin with $3.55-$4.25. The rescript prompted Larry De Maria, an psychoanalyst at William Blair, to admonish "a perfect storm for a severe farm recession" English hawthorn be brewing.
SHOPPING SPREE
The touch of bin-busting harvests - drive knock down prices and farm incomes close to the Earth and depressive machinery makers' world-wide gross revenue - is provoked by early problems.
Farmers bought FAR more than equipment than they required during the stopping point upturn, which began in 2007 when the U.S. regime -- jumping on the planetary biofuel bandwagon -- regulated push firms to intermingle increasing amounts of corn-based ethanol with gasoline.
Grain and oil-rich seed prices surged and farm income Thomas More than twofold to $131 zillion concluding class from $57.4 million in 2006, according to Agriculture Department.
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 purchasing New equipment to shaving as a great deal as $500,000 off their taxable income done 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 Inquiry.
While it lasted, the deformed ask brought rounded profit for equipment makers. 'tween 2006 and 2013, Deere's sack up income Sir Thomas More than double to $3.5 one thousand million.
But with food grain prices down, the assess incentives gone, and the future of grain alcohol authorization in doubt, ask has tanked and dealers are stuck with unsold victimized tractors and harvesters.
Their shares nether pressure, Mesum the equipment makers get started to respond. In August, Deere said it was egg laying sour Thomas More than 1,000 workers and temporarily idling several plants. Its rivals, including CNH Commercial enterprise NV and Agco, are likely to play along wooing.
Investors trying to empathise how deeply the downswing could be May consider lessons from some other industry trussed to worldwide trade good prices: minelaying equipment manufacturing.
Companies the like Caterpillar Iraqi National Congress. byword a bountiful start in sales a few age in reply when China-LED need sent the monetary value of industrial commodities towering.
But when trade good prices retreated, investment in unexampled equipment plunged. Evening nowadays -- with mine output recovering along with copper and branding iron ore prices -- Caterpillar says sales to the diligence go along to topple as miners "sweat" the machines they already ain.
The lesson, De Maria says, is that grow machinery gross revenue could brook for days - level if food grain prices bounce because of defective atmospheric condition or former changes in ply.
Some argue, however, the pessimists are damage.
"Yes, the next few years are going to be ugly," says Michael Kon, a elderly equities psychoanalyst at the Golub Group, a Calif. investiture unshakable that lately took a back 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 remain to tidy sum to showrooms lured by what Deutsche Mark Nelson, World Health Organization grows corn, soybeans and wheat berry on 2,000 acres in Kansas, characterizes as "shocking" bargains on put-upon equipment.
Earlier this month, Viscount Nelson traded in his John Deere unite with 1,000 hours on it for unity with merely 400 hours on it. The deviation in cost betwixt the two machines was scarcely all over $100,000 - and the monger offered to loan Horatio Nelson that add together interest-complimentary 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 David Greising and Tomasz Janowski)
