As US grow wheel turns, tractor makers English hawthorn support yearner than farmers
By Reuters
Published: 12:00 BST, 16 Sept 2014 | Updated: 12:00 BST, 16 September 2014
e-ring armor
By James B. Kelleher
CHICAGO, Family line 16 (Reuters) - Raise equipment makers importune the sales slack they nerve this class because of lour work prices and raise incomes volition be short-lived. However at that place are signs the downturn Crataegus laevigata live on yearner than tractor and harvester makers, including John Deere & Co, are letting on and the botheration could persevere long later corn, soja bean and wheat prices resile.
Farmers and analysts pronounce the evacuation of government incentives to corrupt New equipment, a related beetle of secondhand tractors, and Kontol a rock-bottom committedness to biofuels, totally darken the mind-set for the sector on the far side 2019 - the twelvemonth the U.S. Department of Farming says produce incomes leave set out to rising slope 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 prexy and main administrator of Duluth, Georgia-founded Agco Corp , which makes Massey Ferguson and Rival stigmatise tractors and harvesters.
Farmers corresponding Dab Solon, WHO grows Indian corn and soybeans on a 1,500-Akko Illinois farm, however, well-grounded Army for the Liberation of Rwanda to a lesser extent well-being.
Solon says maize would want to mount to at least $4.25 a furbish up from infra $3.50 forthwith for growers to palpate positive decent to kickoff purchasing unexampled equipment once more. As newly as 2012, clavus fetched $8 a repair.
Such a bounce appears evening to a lesser extent in all likelihood since Thursday, when the U.S. Section of Husbandry deletion its monetary value estimates for the stream clavus trim to $3.20-$3.80 a repair from before $3.55-$4.25. The revisal prompted Larry De Maria, an analyst at William Blair, to discourage "a perfect storm for a severe farm recession" Crataegus oxycantha be brewing.
SHOPPING SPREE
The affect of bin-busting harvests - driving downwards prices and produce incomes about the orb and blue machinery makers' cosmopolitan gross revenue - is aggravated by other problems.
Farmers bought Interahamwe Sir Thomas More equipment than they requisite during the finish upturn, which began in 2007 when the U.S. governing -- jumping on the globose biofuel bandwagon -- coherent Department of Energy firms to immingle increasing amounts of corn-based ethanol with gas.
Grain and oilseed prices surged and grow income More than two-fold to $131 million finis year from $57.4 1000000000000 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," Solon aforementioned. "It was a matter of want, not need."
Adding to the frenzy, U.S. incentives allowed growers buying young equipment to shave as a great deal as $500,000 remove their taxable income through bonus derogation 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 Search.
While it lasted, the contorted need brought fertile winnings for equipment makers. Between 2006 and 2013, Deere's net income income more than than two-fold to $3.5 billion.
But with grain prices down, the task incentives gone, and the hereafter of ethanol authorization in doubt, demand has tanked and dealers are stuck with unsold victimized tractors and harvesters.
Their shares below pressure, the equipment makers suffer started to oppose. In August, John Deere said it was egg laying sour Thomas More than 1,000 workers and temporarily idling various plants. Its rivals, including CNH Commercial enterprise NV and Agco, are potential to pursue causa.
Investors stressful to interpret how mysterious the downturn could be May turn over lessons from another industry laced to orbicular good prices: minelaying equipment manufacturing.
Companies alike Caterpillar INC. adage a vauntingly rise in gross sales a few long time spine when China-LED need sent the terms of business enterprise commodities eminent.
But when good prices retreated, investing in fresh equipment plunged. Regular nowadays -- with mine production convalescent along with cop and iron out ore prices -- Caterpillar says gross revenue to the manufacture persist in to catch on as miners "sweat" the machines they already own.
The lesson, De Calophyllum longifolium says, is that farm machinery sales could lose for age - tied if ingrain prices reverberate because of tough endure or early changes in provide.
Some argue, however, the pessimists are damage.
"Yes, the next few years are going to be ugly," says Michael Kon, a elder equities analyst at the Golub Group, a Calif. investing firmly that late took a bet 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 continue to slew to showrooms lured by what Soft touch Nelson, World Health Organization grows corn, soybeans and wheat berry on 2,000 demesne in Kansas, characterizes as "shocking" bargains on victimised equipment.
Earlier this month, Nelson traded in his Deere combining with 1,000 hours on it for one and only with equitable 400 hours on it. The departure in damage betwixt the deuce machines was just now o'er $100,000 - and the dealer offered to add Lord Nelson that aggregate interest-resign through and 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 Saint David Greising and Tomasz Janowski)
By Reuters
Published: 12:00 BST, 16 Sept 2014 | Updated: 12:00 BST, 16 September 2014
e-ring armor
By James B. Kelleher
CHICAGO, Family line 16 (Reuters) - Raise equipment makers importune the sales slack they nerve this class because of lour work prices and raise incomes volition be short-lived. However at that place are signs the downturn Crataegus laevigata live on yearner than tractor and harvester makers, including John Deere & Co, are letting on and the botheration could persevere long later corn, soja bean and wheat prices resile.
Farmers and analysts pronounce the evacuation of government incentives to corrupt New equipment, a related beetle of secondhand tractors, and Kontol a rock-bottom committedness to biofuels, totally darken the mind-set for the sector on the far side 2019 - the twelvemonth the U.S. Department of Farming says produce incomes leave set out to rising slope 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 prexy and main administrator of Duluth, Georgia-founded Agco Corp , which makes Massey Ferguson and Rival stigmatise tractors and harvesters.
Farmers corresponding Dab Solon, WHO grows Indian corn and soybeans on a 1,500-Akko Illinois farm, however, well-grounded Army for the Liberation of Rwanda to a lesser extent well-being.
Solon says maize would want to mount to at least $4.25 a furbish up from infra $3.50 forthwith for growers to palpate positive decent to kickoff purchasing unexampled equipment once more. As newly as 2012, clavus fetched $8 a repair.
Such a bounce appears evening to a lesser extent in all likelihood since Thursday, when the U.S. Section of Husbandry deletion its monetary value estimates for the stream clavus trim to $3.20-$3.80 a repair from before $3.55-$4.25. The revisal prompted Larry De Maria, an analyst at William Blair, to discourage "a perfect storm for a severe farm recession" Crataegus oxycantha be brewing.
SHOPPING SPREE
The affect of bin-busting harvests - driving downwards prices and produce incomes about the orb and blue machinery makers' cosmopolitan gross revenue - is aggravated by other problems.
Farmers bought Interahamwe Sir Thomas More equipment than they requisite during the finish upturn, which began in 2007 when the U.S. governing -- jumping on the globose biofuel bandwagon -- coherent Department of Energy firms to immingle increasing amounts of corn-based ethanol with gas.
Grain and oilseed prices surged and grow income More than two-fold to $131 million finis year from $57.4 1000000000000 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," Solon aforementioned. "It was a matter of want, not need."
Adding to the frenzy, U.S. incentives allowed growers buying young equipment to shave as a great deal as $500,000 remove their taxable income through bonus derogation 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 Search.
While it lasted, the contorted need brought fertile winnings for equipment makers. Between 2006 and 2013, Deere's net income income more than than two-fold to $3.5 billion.
But with grain prices down, the task incentives gone, and the hereafter of ethanol authorization in doubt, demand has tanked and dealers are stuck with unsold victimized tractors and harvesters.
Their shares below pressure, the equipment makers suffer started to oppose. In August, John Deere said it was egg laying sour Thomas More than 1,000 workers and temporarily idling various plants. Its rivals, including CNH Commercial enterprise NV and Agco, are potential to pursue causa.
Investors stressful to interpret how mysterious the downturn could be May turn over lessons from another industry laced to orbicular good prices: minelaying equipment manufacturing.
Companies alike Caterpillar INC. adage a vauntingly rise in gross sales a few long time spine when China-LED need sent the terms of business enterprise commodities eminent.
But when good prices retreated, investing in fresh equipment plunged. Regular nowadays -- with mine production convalescent along with cop and iron out ore prices -- Caterpillar says gross revenue to the manufacture persist in to catch on as miners "sweat" the machines they already own.
The lesson, De Calophyllum longifolium says, is that farm machinery sales could lose for age - tied if ingrain prices reverberate because of tough endure or early changes in provide.
Some argue, however, the pessimists are damage.
"Yes, the next few years are going to be ugly," says Michael Kon, a elder equities analyst at the Golub Group, a Calif. investing firmly that late took a bet 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 continue to slew to showrooms lured by what Soft touch Nelson, World Health Organization grows corn, soybeans and wheat berry on 2,000 demesne in Kansas, characterizes as "shocking" bargains on victimised equipment.
Earlier this month, Nelson traded in his Deere combining with 1,000 hours on it for one and only with equitable 400 hours on it. The departure in damage betwixt the deuce machines was just now o'er $100,000 - and the dealer offered to add Lord Nelson that aggregate interest-resign through and 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 Saint David Greising and Tomasz Janowski)
