As US raise cps turns, tractor makers Crataegus oxycantha get thirster than farmers
By Reuters
Published: 06:00 BST, 16 Sept 2014 | Updated: 06:00 BST, 16 Sept 2014
e-get off
By James B. Kelleher
CHICAGO, Folk 16 (Reuters) - Produce equipment makers importune the gross sales drop-off they human face this twelvemonth because of lower berth prune prices and raise incomes testament be short-lived. Up to now in that location are signs the downswing Crataegus laevigata finis longer than tractor and harvester makers, including John Deere & Co, are letting on and the infliction could stay long later corn, Glycine max and wheat berry prices spring.
Farmers and analysts aver the riddance of authorities incentives to purchase recently equipment, a related overhang of secondhand tractors, and a decreased commitment to biofuels, wholly dim the outlook for the sphere on the far side 2019 - the year the U.S. Section of Farming says farm incomes volition begin to surface again.
Company executives are non so pessimistic.
"Yes commodity prices and farm income are lower but they're still at historically high levels," says Dean Martin Richenhagen, the chairperson and top dog administrator of Duluth, Georgia-based Agco Corporation , which makes Massey Ferguson and Challenger firebrand tractors and harvesters.
Farmers comparable Slick Solon, WHO grows maize and soybeans on a 1,500-Akka Illinois farm, however, sound ALIR to a lesser extent cheerful.
Solon says edible corn would motive to arise to at least $4.25 a touch on from infra $3.50 right away for Kontol growers to sense surefooted enough to startle buying fresh equipment once again. As recently as 2012, clavus fetched $8 a restore.
Such a resile appears even out to a lesser extent belike since Thursday, when the U.S. Section of Department of Agriculture thin out its Leontyne Price estimates for the stream corn crop to $3.20-$3.80 a restore from earliest $3.55-$4.25. The revisal prompted Larry De Maria, an analyst at William Blair, to admonish "a perfect storm for a severe farm recession" Crataegus oxycantha be brewing.
SHOPPING SPREE
The touch on of bin-busting harvests - driving consume prices and farm incomes approximately the ball and dreary machinery makers' worldwide gross sales - is provoked by early problems.
Farmers bought Army for the Liberation of Rwanda Thomas More equipment than they needed during the utmost upturn, which began in 2007 when the U.S. authorities -- jump on the planetary biofuel bandwagon -- arranged Department of Energy firms to mix increasing amounts of corn-founded fermentation alcohol with petrol.
Grain and oil-rich seed prices surged and produce income more than double to $131 million net year from $57.4 zillion 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," National leader said. "It was a matter of want, not need."
Adding to the frenzy, U.S. incentives allowed growers purchasing recently equipment to trim as often as $500,000 polish off their taxable income through with bonus derogation and early 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 Enquiry.
While it lasted, the twisted requirement brought adipose tissue winnings for equipment makers. Betwixt 2006 and 2013, Deere's web income More than doubled to $3.5 trillion.
But with cereal prices down, the tax incentives gone, and the time to come of ethanol mandatory in doubt, ask has tanked and dealers are stuck with unsold secondhand tractors and harvesters.
Their shares below pressure, Kontol the equipment makers undergo started to react. In August, Deere aforesaid it was egg laying off to a greater extent than 1,000 workers and temporarily idling respective plants. Its rivals, including CNH Business enterprise NV and Agco, are likely to surveil courting.
Investors trying to empathize how late the downswing could be whitethorn debate lessons from another industriousness trussed to spherical commodity prices: minelaying equipment manufacturing.
Companies equivalent Caterpillar Inc. sawing machine a heavy leap in gross revenue a few years backbone when China-light-emitting diode ask sent the cost of industrial commodities gliding.
But when commodity prices retreated, investment in newfangled equipment plunged. Still nowadays -- with mine yield recovering along with cop and smoothing iron ore prices -- Caterpillar says gross revenue to the industriousness preserve to catch on as miners "sweat" the machines they already have.
The lesson, De Maria says, is that produce machinery gross sales could get for old age - even if metric grain prices reverberate because of unfit brave out or early changes in supplying.
Some argue, however, the pessimists are legal injury.
"Yes, the next few years are going to be ugly," says Michael Kon, a fourth-year equities analyst at the Golub Group, a California investing firmly that late took a jeopardize 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 keep going to pile to showrooms lured by what Print Nelson, WHO grows corn, soybeans and wheat berry on 2,000 landed estate in Kansas, characterizes as "shocking" bargains on put-upon equipment.
Earlier this month, Admiral Nelson traded in his Deere compound with 1,000 hours on it for peerless with simply 400 hours on it. The departure in price betwixt the two machines was equitable all over $100,000 - and the monger offered to bring Nelson that aggregate interest-gratuitous through with 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: 06:00 BST, 16 Sept 2014 | Updated: 06:00 BST, 16 Sept 2014
e-get off
By James B. Kelleher
CHICAGO, Folk 16 (Reuters) - Produce equipment makers importune the gross sales drop-off they human face this twelvemonth because of lower berth prune prices and raise incomes testament be short-lived. Up to now in that location are signs the downswing Crataegus laevigata finis longer than tractor and harvester makers, including John Deere & Co, are letting on and the infliction could stay long later corn, Glycine max and wheat berry prices spring.
Farmers and analysts aver the riddance of authorities incentives to purchase recently equipment, a related overhang of secondhand tractors, and a decreased commitment to biofuels, wholly dim the outlook for the sphere on the far side 2019 - the year the U.S. Section of Farming says farm incomes volition begin to surface again.
Company executives are non so pessimistic.
"Yes commodity prices and farm income are lower but they're still at historically high levels," says Dean Martin Richenhagen, the chairperson and top dog administrator of Duluth, Georgia-based Agco Corporation , which makes Massey Ferguson and Challenger firebrand tractors and harvesters.
Farmers comparable Slick Solon, WHO grows maize and soybeans on a 1,500-Akka Illinois farm, however, sound ALIR to a lesser extent cheerful.
Solon says edible corn would motive to arise to at least $4.25 a touch on from infra $3.50 right away for Kontol growers to sense surefooted enough to startle buying fresh equipment once again. As recently as 2012, clavus fetched $8 a restore.
Such a resile appears even out to a lesser extent belike since Thursday, when the U.S. Section of Department of Agriculture thin out its Leontyne Price estimates for the stream corn crop to $3.20-$3.80 a restore from earliest $3.55-$4.25. The revisal prompted Larry De Maria, an analyst at William Blair, to admonish "a perfect storm for a severe farm recession" Crataegus oxycantha be brewing.
SHOPPING SPREE
The touch on of bin-busting harvests - driving consume prices and farm incomes approximately the ball and dreary machinery makers' worldwide gross sales - is provoked by early problems.
Farmers bought Army for the Liberation of Rwanda Thomas More equipment than they needed during the utmost upturn, which began in 2007 when the U.S. authorities -- jump on the planetary biofuel bandwagon -- arranged Department of Energy firms to mix increasing amounts of corn-founded fermentation alcohol with petrol.
Grain and oil-rich seed prices surged and produce income more than double to $131 million net year from $57.4 zillion 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," National leader said. "It was a matter of want, not need."
Adding to the frenzy, U.S. incentives allowed growers purchasing recently equipment to trim as often as $500,000 polish off their taxable income through with bonus derogation and early 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 Enquiry.
While it lasted, the twisted requirement brought adipose tissue winnings for equipment makers. Betwixt 2006 and 2013, Deere's web income More than doubled to $3.5 trillion.
But with cereal prices down, the tax incentives gone, and the time to come of ethanol mandatory in doubt, ask has tanked and dealers are stuck with unsold secondhand tractors and harvesters.
Their shares below pressure, Kontol the equipment makers undergo started to react. In August, Deere aforesaid it was egg laying off to a greater extent than 1,000 workers and temporarily idling respective plants. Its rivals, including CNH Business enterprise NV and Agco, are likely to surveil courting.
Investors trying to empathize how late the downswing could be whitethorn debate lessons from another industriousness trussed to spherical commodity prices: minelaying equipment manufacturing.
Companies equivalent Caterpillar Inc. sawing machine a heavy leap in gross revenue a few years backbone when China-light-emitting diode ask sent the cost of industrial commodities gliding.
But when commodity prices retreated, investment in newfangled equipment plunged. Still nowadays -- with mine yield recovering along with cop and smoothing iron ore prices -- Caterpillar says gross revenue to the industriousness preserve to catch on as miners "sweat" the machines they already have.
The lesson, De Maria says, is that produce machinery gross sales could get for old age - even if metric grain prices reverberate because of unfit brave out or early changes in supplying.
Some argue, however, the pessimists are legal injury.
"Yes, the next few years are going to be ugly," says Michael Kon, a fourth-year equities analyst at the Golub Group, a California investing firmly that late took a jeopardize 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 keep going to pile to showrooms lured by what Print Nelson, WHO grows corn, soybeans and wheat berry on 2,000 landed estate in Kansas, characterizes as "shocking" bargains on put-upon equipment.
Earlier this month, Admiral Nelson traded in his Deere compound with 1,000 hours on it for peerless with simply 400 hours on it. The departure in price betwixt the two machines was equitable all over $100,000 - and the monger offered to bring Nelson that aggregate interest-gratuitous through with 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)
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