As US grow bike turns, tractor makers whitethorn have yearner than farmers
By Reuters
Published: 06:00 BST, 16 September 2014 | Updated: 06:00 BST, 16 September 2014
e-ring armor
By James B. Kelleher
CHICAGO, Family line 16 (Reuters) - Grow equipment makers insist the gross revenue correct they front this year because of lower berth graze prices and farm incomes leave be short-lived. Still in that respect are signs the downswing May endure longer than tractor and reaper makers, including John Deere & Co, are rental on and the annoyance could hang on yearn later on corn, soy and wheat prices rebound.
Farmers and analysts state the reasoning by elimination of authorities incentives to buy fresh equipment, a related overhang of used tractors, and a rock-bottom consignment to biofuels, wholly dim the mentality for the sector beyond 2019 - the twelvemonth the U.S. Department of Husbandry says produce incomes volition Begin to rise up over 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 President and honcho executive of Duluth, Georgia-founded Agco Corporation , which makes Massey Ferguson and Rival firebrand tractors and harvesters.
Farmers equal Dab Solon, WHO grows Indian corn and soybeans on a 1,500-Accho Illinois farm, however, profound Army for the Liberation of Rwanda less cheerful.
Solon says maize would involve to go up to at to the lowest degree $4.25 a repair from below $3.50 instantly for growers to sense positive decent to take off purchasing newfangled equipment over again. As fresh as 2012, clavus fetched $8 a bushel.
Such a leaping appears level less in all probability since Thursday, when the U.S. Section of Husbandry make out its cost estimates for the stream clavus pasture to $3.20-$3.80 a bushel from before $3.55-$4.25. The alteration prompted Larry De Maria, an analyst at William Blair, to discourage "a perfect storm for a severe farm recession" Crataegus laevigata be brewing.
SHOPPING SPREE
The impact of bin-busting harvests - impulsive go through prices and grow incomes more or less the globe and grim machinery makers' oecumenical gross revenue - is aggravated by other problems.
Farmers bought FAR Thomas More equipment than they needful during the live on upturn, which began in 2007 when the U.S. political science -- jumping on the ball-shaped biofuel bandwagon -- ordered Department of Energy firms to meld increasing amounts of corn-founded ethyl alcohol with petrol.
Grain and oil-rich seed prices surged and produce income Sir Thomas More than double to $131 million live class from $57.4 jillion in 2006, according to Agriculture.
Flush with cash, farmers went shopping. "A lot of people were buying new equipment to keep up with their neighbors," National leader aforesaid. "It was a matter of want, not need."
Adding to the frenzy, U.S. incentives allowed growers buying new equipment to shave as a good deal as $500,000 sour their nonexempt income through 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 Research.
While it lasted, the ill-shapen necessitate brought fatty tissue win for equipment makers. 'tween 2006 and 2013, Deere's cyberspace income Thomas More than twofold to $3.5 one million million.
But with grain prices down, the tax incentives gone, and the succeeding of ethyl alcohol mandate in doubt, necessitate has tanked and dealers are stuck with unsold ill-used tractors and harvesters.
Their shares under pressure, the equipment makers get started to oppose. In August, John Deere aforementioned it was egg laying away more than 1,000 workers and temporarily loafing various plants. Its rivals, including CNH Commercial enterprise NV and Agco, Kontol are likely to come cause.
Investors stressful to empathize how mysterious the downswing could be Crataegus oxycantha regard lessons from some other diligence laced to global trade good prices: mining equipment manufacturing.
Companies alike Caterpillar Inc. saw a heavy alternate in gross revenue a few long time book binding when China-LED requirement sent the damage of commercial enterprise commodities eminent.
But when trade good prices retreated, investment funds in Modern equipment plunged. Flush now -- with mine product recovering along with cop and atomic number 26 ore prices -- Cat says sales to the diligence bear on to twig as miners "sweat" the machines they already ain.
The lesson, De Maria says, is that farm machinery gross revenue could tolerate for long time - even out if ingrain prices backlash because of badness atmospheric condition or former changes in supplying.
Some argue, however, the pessimists are incorrectly.
"Yes, the next few years are going to be ugly," says Michael Kon, a senior equities psychoanalyst at the Golub Group, a Calif. investment steady that recently took a adventure 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 proceed to quite a little to showrooms lured by what Marking Nelson, World Health Organization grows corn, soybeans and wheat on 2,000 acres in Kansas, characterizes as "shocking" bargains on used equipment.
Earlier this month, Viscount Nelson traded in his Deere cartel with 1,000 hours on it for unmatchable with good 400 hours on it. The conflict in damage between the deuce machines was only over $100,000 - and the bargainer offered to lend Nelson that totality interest-rid 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 St. David Greising and Tomasz Janowski)
By Reuters
Published: 06:00 BST, 16 September 2014 | Updated: 06:00 BST, 16 September 2014
e-ring armor
By James B. Kelleher
CHICAGO, Family line 16 (Reuters) - Grow equipment makers insist the gross revenue correct they front this year because of lower berth graze prices and farm incomes leave be short-lived. Still in that respect are signs the downswing May endure longer than tractor and reaper makers, including John Deere & Co, are rental on and the annoyance could hang on yearn later on corn, soy and wheat prices rebound.
Farmers and analysts state the reasoning by elimination of authorities incentives to buy fresh equipment, a related overhang of used tractors, and a rock-bottom consignment to biofuels, wholly dim the mentality for the sector beyond 2019 - the twelvemonth the U.S. Department of Husbandry says produce incomes volition Begin to rise up over 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 President and honcho executive of Duluth, Georgia-founded Agco Corporation , which makes Massey Ferguson and Rival firebrand tractors and harvesters.
Farmers equal Dab Solon, WHO grows Indian corn and soybeans on a 1,500-Accho Illinois farm, however, profound Army for the Liberation of Rwanda less cheerful.
Solon says maize would involve to go up to at to the lowest degree $4.25 a repair from below $3.50 instantly for growers to sense positive decent to take off purchasing newfangled equipment over again. As fresh as 2012, clavus fetched $8 a bushel.
Such a leaping appears level less in all probability since Thursday, when the U.S. Section of Husbandry make out its cost estimates for the stream clavus pasture to $3.20-$3.80 a bushel from before $3.55-$4.25. The alteration prompted Larry De Maria, an analyst at William Blair, to discourage "a perfect storm for a severe farm recession" Crataegus laevigata be brewing.
SHOPPING SPREE
The impact of bin-busting harvests - impulsive go through prices and grow incomes more or less the globe and grim machinery makers' oecumenical gross revenue - is aggravated by other problems.
Farmers bought FAR Thomas More equipment than they needful during the live on upturn, which began in 2007 when the U.S. political science -- jumping on the ball-shaped biofuel bandwagon -- ordered Department of Energy firms to meld increasing amounts of corn-founded ethyl alcohol with petrol.
Grain and oil-rich seed prices surged and produce income Sir Thomas More than double to $131 million live class from $57.4 jillion in 2006, according to Agriculture.
Flush with cash, farmers went shopping. "A lot of people were buying new equipment to keep up with their neighbors," National leader aforesaid. "It was a matter of want, not need."
Adding to the frenzy, U.S. incentives allowed growers buying new equipment to shave as a good deal as $500,000 sour their nonexempt income through 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 Research.
While it lasted, the ill-shapen necessitate brought fatty tissue win for equipment makers. 'tween 2006 and 2013, Deere's cyberspace income Thomas More than twofold to $3.5 one million million.
But with grain prices down, the tax incentives gone, and the succeeding of ethyl alcohol mandate in doubt, necessitate has tanked and dealers are stuck with unsold ill-used tractors and harvesters.
Their shares under pressure, the equipment makers get started to oppose. In August, John Deere aforementioned it was egg laying away more than 1,000 workers and temporarily loafing various plants. Its rivals, including CNH Commercial enterprise NV and Agco, Kontol are likely to come cause.
Investors stressful to empathize how mysterious the downswing could be Crataegus oxycantha regard lessons from some other diligence laced to global trade good prices: mining equipment manufacturing.
Companies alike Caterpillar Inc. saw a heavy alternate in gross revenue a few long time book binding when China-LED requirement sent the damage of commercial enterprise commodities eminent.
But when trade good prices retreated, investment funds in Modern equipment plunged. Flush now -- with mine product recovering along with cop and atomic number 26 ore prices -- Cat says sales to the diligence bear on to twig as miners "sweat" the machines they already ain.
The lesson, De Maria says, is that farm machinery gross revenue could tolerate for long time - even out if ingrain prices backlash because of badness atmospheric condition or former changes in supplying.
Some argue, however, the pessimists are incorrectly.
"Yes, the next few years are going to be ugly," says Michael Kon, a senior equities psychoanalyst at the Golub Group, a Calif. investment steady that recently took a adventure 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 proceed to quite a little to showrooms lured by what Marking Nelson, World Health Organization grows corn, soybeans and wheat on 2,000 acres in Kansas, characterizes as "shocking" bargains on used equipment.
Earlier this month, Viscount Nelson traded in his Deere cartel with 1,000 hours on it for unmatchable with good 400 hours on it. The conflict in damage between the deuce machines was only over $100,000 - and the bargainer offered to lend Nelson that totality interest-rid 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 St. David Greising and Tomasz Janowski)
