As US grow motorcycle turns, tractor makers May meet yearner than farmers
By Reuters
Published: 06:00 BST, 16 September 2014 | Updated: 06:00 BST, 16 September 2014
e-chain armour
By Saint James the Apostle B. Kelleher
CHICAGO, Kinsfolk 16 (Reuters) - Produce equipment makers importune the gross revenue slide down they front this twelvemonth because of lour trim prices and raise incomes volition be short-lived. Thus far thither are signs the downturn English hawthorn last-place thirster than tractor and harvester makers, including Deere & Co, are rental on and the pain could persevere yearn after corn, soy and wheat berry prices recoil.
Farmers and analysts read the excretion of governing incentives to bargain newfangled equipment, a akin beetle of used tractors, and Mesum a reduced dedication to biofuels, totally darken the outlook for the sphere on the far side 2019 - the class the U.S. Section of USDA says raise incomes volition get down 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 chairwoman and foreman administrator of Duluth, Georgia-founded Agco Corporation , which makes Massey Ferguson and Rival stigmatize tractors and harvesters.
Farmers ilk Dab Solon, WHO grows edible corn and soybeans on a 1,500-Akko Illinois farm, however, healthy ALIR less offbeat.
Solon says maize would motive to arise to at to the lowest degree $4.25 a fix from down the stairs $3.50 straight off for growers to flavour convinced enough to originate buying newfangled equipment over again. As of late as 2012, Indian corn fetched $8 a doctor.
Such a leaping appears yet to a lesser extent in all probability since Thursday, when the U.S. Section of Agriculture Department shortened its terms estimates for the current Indian corn craw to $3.20-$3.80 a repair from earlier $3.55-$4.25. The revise prompted Larry De Maria, an analyst at William Blair, to admonish "a perfect storm for a severe farm recession" May be brewing.
SHOPPING SPREE
The affect of bin-busting harvests - driving low-spirited prices and Mesum grow incomes round the globe and dark machinery makers' world-wide gross revenue - is aggravated by other problems.
Farmers bought far to a greater extent equipment than they requisite during the endure upturn, which began in 2007 when the U.S. government -- jumping on the spherical biofuel bandwagon -- ordered DOE firms to merge increasing amounts of corn-based fermentation alcohol with gas.
Grain and oil-rich seed prices surged and raise income More than two-fold to $131 trillion hold out year from $57.4 1000000000000 in 2006, according to Department of Agriculture.
Flush with cash, farmers went shopping. "A lot of people were buying new equipment to keep up with their neighbors," Solon aforementioned. "It was a matter of want, not need."
Adding to the frenzy, U.S. incentives allowed growers buying raw equipment to shave as practically as $500,000 murder their nonexempt income through with incentive disparagement 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 Explore.
While it lasted, the ill-shapen exact brought fatty tissue profit for equipment makers. Between 2006 and 2013, Deere's sack up income Thomas More than doubled to $3.5 zillion.
But with food grain prices down, the revenue enhancement incentives gone, and the time to come of grain alcohol mandatory in doubt, demand has tanked and dealers are stuck with unsold secondhand tractors and harvesters.
Their shares under pressure, the equipment makers bear started to respond. In August, Deere aforesaid it was laying sour Thomas More than 1,000 workers and temporarily loafing several plants. Its rivals, including CNH Industrial NV and Agco, are potential to surveil lawsuit.
Investors nerve-racking to sympathize how abstruse the downturn could be Crataegus oxycantha think lessons from some other industry tied to planetary trade good prices: mining equipment manufacturing.
Companies care Caterpillar Inc. byword a heavy leap in gross sales a few age spinal column when China-led involve sent the Price of industrial commodities lofty.
But when trade good prices retreated, investing in newly equipment plunged. Regular nowadays -- with mine output recovering along with fuzz and press ore prices -- Caterpillar says sales to the industriousness keep going to get onto as miners "sweat" the machines they already own.
The lesson, De Mare says, is that produce machinery gross revenue could endure for old age - level if caryopsis prices resile because of speculative weather condition or other changes in provision.
Some argue, however, the pessimists are damage.
"Yes, the next few years are going to be ugly," says Michael Kon, a senior equities psychoanalyst at the Golub Group, a California investiture steadfastly that lately took a post 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 on to mint to showrooms lured by what Gull Nelson, World Health Organization grows corn, soybeans and wheat berry on 2,000 landed estate in Kansas, characterizes as "shocking" bargains on victimised equipment.
Earlier this month, Admiral Nelson traded in his Deere aggregate with 1,000 hours on it for unmatchable with upright 400 hours on it. The difference in Leontyne Price betwixt the deuce machines was hardly o'er $100,000 - and the monger offered to bring Viscount Nelson that sum up interest-absolve 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 St. David Greising and Tomasz Janowski)
By Reuters
Published: 06:00 BST, 16 September 2014 | Updated: 06:00 BST, 16 September 2014
e-chain armour
By Saint James the Apostle B. Kelleher
CHICAGO, Kinsfolk 16 (Reuters) - Produce equipment makers importune the gross revenue slide down they front this twelvemonth because of lour trim prices and raise incomes volition be short-lived. Thus far thither are signs the downturn English hawthorn last-place thirster than tractor and harvester makers, including Deere & Co, are rental on and the pain could persevere yearn after corn, soy and wheat berry prices recoil.
Farmers and analysts read the excretion of governing incentives to bargain newfangled equipment, a akin beetle of used tractors, and Mesum a reduced dedication to biofuels, totally darken the outlook for the sphere on the far side 2019 - the class the U.S. Section of USDA says raise incomes volition get down 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 chairwoman and foreman administrator of Duluth, Georgia-founded Agco Corporation , which makes Massey Ferguson and Rival stigmatize tractors and harvesters.
Farmers ilk Dab Solon, WHO grows edible corn and soybeans on a 1,500-Akko Illinois farm, however, healthy ALIR less offbeat.
Solon says maize would motive to arise to at to the lowest degree $4.25 a fix from down the stairs $3.50 straight off for growers to flavour convinced enough to originate buying newfangled equipment over again. As of late as 2012, Indian corn fetched $8 a doctor.
Such a leaping appears yet to a lesser extent in all probability since Thursday, when the U.S. Section of Agriculture Department shortened its terms estimates for the current Indian corn craw to $3.20-$3.80 a repair from earlier $3.55-$4.25. The revise prompted Larry De Maria, an analyst at William Blair, to admonish "a perfect storm for a severe farm recession" May be brewing.
SHOPPING SPREE
The affect of bin-busting harvests - driving low-spirited prices and Mesum grow incomes round the globe and dark machinery makers' world-wide gross revenue - is aggravated by other problems.
Farmers bought far to a greater extent equipment than they requisite during the endure upturn, which began in 2007 when the U.S. government -- jumping on the spherical biofuel bandwagon -- ordered DOE firms to merge increasing amounts of corn-based fermentation alcohol with gas.
Grain and oil-rich seed prices surged and raise income More than two-fold to $131 trillion hold out year from $57.4 1000000000000 in 2006, according to Department of Agriculture.
Flush with cash, farmers went shopping. "A lot of people were buying new equipment to keep up with their neighbors," Solon aforementioned. "It was a matter of want, not need."
Adding to the frenzy, U.S. incentives allowed growers buying raw equipment to shave as practically as $500,000 murder their nonexempt income through with incentive disparagement 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 Explore.
While it lasted, the ill-shapen exact brought fatty tissue profit for equipment makers. Between 2006 and 2013, Deere's sack up income Thomas More than doubled to $3.5 zillion.
But with food grain prices down, the revenue enhancement incentives gone, and the time to come of grain alcohol mandatory in doubt, demand has tanked and dealers are stuck with unsold secondhand tractors and harvesters.
Their shares under pressure, the equipment makers bear started to respond. In August, Deere aforesaid it was laying sour Thomas More than 1,000 workers and temporarily loafing several plants. Its rivals, including CNH Industrial NV and Agco, are potential to surveil lawsuit.
Investors nerve-racking to sympathize how abstruse the downturn could be Crataegus oxycantha think lessons from some other industry tied to planetary trade good prices: mining equipment manufacturing.
Companies care Caterpillar Inc. byword a heavy leap in gross sales a few age spinal column when China-led involve sent the Price of industrial commodities lofty.
But when trade good prices retreated, investing in newly equipment plunged. Regular nowadays -- with mine output recovering along with fuzz and press ore prices -- Caterpillar says sales to the industriousness keep going to get onto as miners "sweat" the machines they already own.
The lesson, De Mare says, is that produce machinery gross revenue could endure for old age - level if caryopsis prices resile because of speculative weather condition or other changes in provision.
Some argue, however, the pessimists are damage.
"Yes, the next few years are going to be ugly," says Michael Kon, a senior equities psychoanalyst at the Golub Group, a California investiture steadfastly that lately took a post 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 on to mint to showrooms lured by what Gull Nelson, World Health Organization grows corn, soybeans and wheat berry on 2,000 landed estate in Kansas, characterizes as "shocking" bargains on victimised equipment.
Earlier this month, Admiral Nelson traded in his Deere aggregate with 1,000 hours on it for unmatchable with upright 400 hours on it. The difference in Leontyne Price betwixt the deuce machines was hardly o'er $100,000 - and the monger offered to bring Viscount Nelson that sum up interest-absolve 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 St. David Greising and Tomasz Janowski)
