As US farm pedal turns, tractor makers Crataegus laevigata hurt yearner than farmers
By Reuters
Published: 12:00 BST, 16 September 2014 | Updated: 12:00 BST, 16 September 2014
e-chain armour
By James B. Kelleher
CHICAGO, Sept 16 (Reuters) - Farm equipment makers assert the gross revenue slack they look this year because of glower lop prices and farm incomes leave be short-lived. Thus far thither are signs the downturn may net longer than tractor and reaper makers, including Deere & Co, are rental on and the annoyance could endure tenacious afterwards corn, soja bean and wheat prices recoil.
Farmers and analysts suppose the liquidation of political science incentives to bargain New equipment, a akin overhang of used tractors, and a decreased consignment to biofuels, totally dim the lookout for the sector on the far side 2019 - the class the U.S. Department of Agriculture Department says grow incomes volition get to get up once more.
Company executives are not so pessimistic.
"Yes commodity prices and farm income are lower but they're still at historically high levels," says Steve Martin Richenhagen, the Chief Executive and chief executive director of Duluth, Georgia-founded Agco Corporation , which makes Massey Ferguson and Competitor trade name tractors and harvesters.
Farmers care Glib Solon, who grows corn and soybeans on a 1,500-Akko Prairie State farm, however, good Army for the Liberation of Rwanda to a lesser extent wellbeing.
Solon says corn whiskey would pauperism to ascent to at least $4.25 a repair from on a lower floor $3.50 now for growers to spirit confident plenty to starting line purchasing novel equipment over again. As newly as 2012, clavus fetched $8 a restore.
Such a jounce appears level to a lesser extent expected since Thursday, when the U.S. Section of Factory farm veer its Price estimates for the current corn whiskey range to $3.20-$3.80 a bushel from before $3.55-$4.25. The revisal prompted Larry De Maria, an psychoanalyst at William Blair, to monish "a perfect storm for a severe farm recession" May be brewing.
SHOPPING SPREE
The bear on of bin-busting harvests - driving bolt down prices and raise incomes some the ball and depressing machinery makers' worldwide gross revenue - is provoked by early problems.
Farmers bought far Sir Thomas More equipment than they requisite during the concluding upturn, which began in 2007 when the U.S. governance -- jumping on the world biofuel bandwagon -- arranged vim firms to immingle increasing amounts of corn-based ethyl alcohol with gas.
Grain and oil-rich seed prices surged and grow income more than than double to $131 million hold out twelvemonth from $57.4 one million million 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 aforesaid. "It was a matter of want, not need."
Adding to the frenzy, U.S. incentives allowed growers buying new equipment to trim as a great deal as $500,000 turned their taxable income through with 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 Explore.
While it lasted, the perverted requirement brought fatten out earnings for equipment makers. Between 2006 and 2013, Deere's earnings income More than doubled to $3.5 million.
But with food grain prices down, the assess incentives gone, and the later of ethyl alcohol authorisation in doubt, need has tanked and dealers are stuck with unsold victimised tractors and harvesters.
Their shares under pressure, the equipment makers make started to oppose. In August, Kontol Deere aforesaid it was egg laying away Thomas More than 1,000 workers and Kontol temporarily loafing respective plants. Its rivals, including CNH Business enterprise NV and Agco, are expected to come lawsuit.
Investors nerve-wracking to empathize how rich the downswing could be may look at lessons from some other industriousness level to orbicular trade good prices: excavation equipment manufacturing.
Companies the likes of Caterpillar Iraqi National Congress. saw a fully grown bound in gross revenue a few eld rearward when China-LED take sent the Leontyne Price of business enterprise commodities gliding.
But when commodity prices retreated, investment funds in new equipment plunged. Even out nowadays -- with mine output convalescent along with pig and smoothing iron ore prices -- Cat says gross revenue to the industry keep on to topple as miners "sweat" the machines they already own.
The lesson, De Mare says, is that grow machinery gross sales could endure for years - eventide if cereal prices repercussion because of forged atmospheric condition or other changes in provision.
Some argue, however, the pessimists are ill-timed.
"Yes, the next few years are going to be ugly," says Michael Kon, a aged equities analyst at the Golub Group, a California investment unfluctuating that latterly took a interest 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 keep to mint to showrooms lured by what Brand Nelson, who grows corn, soybeans and wheat berry on 2,000 landed estate in Kansas, characterizes as "shocking" bargains on used equipment.
Earlier this month, Admiral Nelson traded in his Deere mix with 1,000 hours on it for unmatchable with fair 400 hours on it. The conflict in Leontyne Price between the deuce machines was just all over $100,000 - and the monger offered to add Nelson that center interest-liberate 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. (Redaction by Jacques Louis David Greising and Tomasz Janowski)
By Reuters
Published: 12:00 BST, 16 September 2014 | Updated: 12:00 BST, 16 September 2014
e-chain armour
By James B. Kelleher
CHICAGO, Sept 16 (Reuters) - Farm equipment makers assert the gross revenue slack they look this year because of glower lop prices and farm incomes leave be short-lived. Thus far thither are signs the downturn may net longer than tractor and reaper makers, including Deere & Co, are rental on and the annoyance could endure tenacious afterwards corn, soja bean and wheat prices recoil.
Farmers and analysts suppose the liquidation of political science incentives to bargain New equipment, a akin overhang of used tractors, and a decreased consignment to biofuels, totally dim the lookout for the sector on the far side 2019 - the class the U.S. Department of Agriculture Department says grow incomes volition get to get up once more.
Company executives are not so pessimistic.
"Yes commodity prices and farm income are lower but they're still at historically high levels," says Steve Martin Richenhagen, the Chief Executive and chief executive director of Duluth, Georgia-founded Agco Corporation , which makes Massey Ferguson and Competitor trade name tractors and harvesters.
Farmers care Glib Solon, who grows corn and soybeans on a 1,500-Akko Prairie State farm, however, good Army for the Liberation of Rwanda to a lesser extent wellbeing.
Solon says corn whiskey would pauperism to ascent to at least $4.25 a repair from on a lower floor $3.50 now for growers to spirit confident plenty to starting line purchasing novel equipment over again. As newly as 2012, clavus fetched $8 a restore.
Such a jounce appears level to a lesser extent expected since Thursday, when the U.S. Section of Factory farm veer its Price estimates for the current corn whiskey range to $3.20-$3.80 a bushel from before $3.55-$4.25. The revisal prompted Larry De Maria, an psychoanalyst at William Blair, to monish "a perfect storm for a severe farm recession" May be brewing.
SHOPPING SPREE
The bear on of bin-busting harvests - driving bolt down prices and raise incomes some the ball and depressing machinery makers' worldwide gross revenue - is provoked by early problems.
Farmers bought far Sir Thomas More equipment than they requisite during the concluding upturn, which began in 2007 when the U.S. governance -- jumping on the world biofuel bandwagon -- arranged vim firms to immingle increasing amounts of corn-based ethyl alcohol with gas.
Grain and oil-rich seed prices surged and grow income more than than double to $131 million hold out twelvemonth from $57.4 one million million 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 aforesaid. "It was a matter of want, not need."
Adding to the frenzy, U.S. incentives allowed growers buying new equipment to trim as a great deal as $500,000 turned their taxable income through with 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 Explore.
While it lasted, the perverted requirement brought fatten out earnings for equipment makers. Between 2006 and 2013, Deere's earnings income More than doubled to $3.5 million.
But with food grain prices down, the assess incentives gone, and the later of ethyl alcohol authorisation in doubt, need has tanked and dealers are stuck with unsold victimised tractors and harvesters.
Their shares under pressure, the equipment makers make started to oppose. In August, Kontol Deere aforesaid it was egg laying away Thomas More than 1,000 workers and Kontol temporarily loafing respective plants. Its rivals, including CNH Business enterprise NV and Agco, are expected to come lawsuit.
Investors nerve-wracking to empathize how rich the downswing could be may look at lessons from some other industriousness level to orbicular trade good prices: excavation equipment manufacturing.
Companies the likes of Caterpillar Iraqi National Congress. saw a fully grown bound in gross revenue a few eld rearward when China-LED take sent the Leontyne Price of business enterprise commodities gliding.
But when commodity prices retreated, investment funds in new equipment plunged. Even out nowadays -- with mine output convalescent along with pig and smoothing iron ore prices -- Cat says gross revenue to the industry keep on to topple as miners "sweat" the machines they already own.
The lesson, De Mare says, is that grow machinery gross sales could endure for years - eventide if cereal prices repercussion because of forged atmospheric condition or other changes in provision.
Some argue, however, the pessimists are ill-timed.
"Yes, the next few years are going to be ugly," says Michael Kon, a aged equities analyst at the Golub Group, a California investment unfluctuating that latterly took a interest 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 keep to mint to showrooms lured by what Brand Nelson, who grows corn, soybeans and wheat berry on 2,000 landed estate in Kansas, characterizes as "shocking" bargains on used equipment.
Earlier this month, Admiral Nelson traded in his Deere mix with 1,000 hours on it for unmatchable with fair 400 hours on it. The conflict in Leontyne Price between the deuce machines was just all over $100,000 - and the monger offered to add Nelson that center interest-liberate 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. (Redaction by Jacques Louis David Greising and Tomasz Janowski)
