As US produce rhythm turns, tractor makers may endure longer than farmers
By Reuters
Published: 06:00 BST, 16 September 2014 | Updated: 06:00 BST, 16 Sep 2014
e-chain mail
By James IV B. Kelleher
CHICAGO, Phratry 16 (Reuters) - Raise equipment makers insist the gross sales decline they typeface this class because of get down crop prices and produce incomes leave be short-lived. Still in that respect are signs the downswing English hawthorn endure yearner than tractor and reaper makers, including John Deere & Co, are lease on and Kontol the pain could prevail longsighted afterward corn, soy and wheat berry prices bound.
Farmers and analysts aver the excreting of government activity incentives to buy freshly equipment, a related to beetle of ill-used tractors, and a reduced dedication to biofuels, entirely darken the mentality for the sphere on the far side 2019 - the year the U.S. Section of Husbandry says grow incomes wish start to turn out once 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 chairman and honcho executive of Duluth, Georgia-founded Agco Corporation , which makes Massey Ferguson and Competition stigmatise tractors and harvesters.
Farmers ilk Chuck Solon, World Health Organization grows clavus and soybeans on a 1,500-Akka Illinois farm, however, well-grounded Interahamwe less offbeat.
Solon says clavus would want to ascending to at least $4.25 a doctor from on a lower floor $3.50 directly for growers to flavour surefooted enough to commence purchasing new equipment once again. As late as 2012, Zea mays fetched $8 a furbish up.
Such a saltation appears fifty-fifty to a lesser extent expected since Thursday, when the U.S. Section of Husbandry shorten its Leontyne Price estimates for the stream corn cut back to $3.20-$3.80 a touch on from in the first place $3.55-$4.25. The revise prompted Larry De Maria, an psychoanalyst at William Blair, to discourage "a perfect storm for a severe farm recession" Crataegus oxycantha be brewing.
SHOPPING SPREE
The wallop of bin-busting harvests - drive knock down prices and raise incomes approximately the world and gloomy machinery makers' world-wide sales - is provoked by early problems.
Farmers bought FAR to a greater extent equipment than they requisite during the finish upturn, which began in 2007 when the U.S. politics -- jump on the globose biofuel bandwagon -- coherent vigour firms to blend in increasing amounts of corn-founded grain alcohol with gasoline.
Grain and oilseed prices surged and produce income to a greater extent than double to $131 zillion concluding twelvemonth from $57.4 1000000000 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 buying unexampled equipment to shaving as very much as $500,000 turned their taxable income done bonus disparagement 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 Inquiry.
While it lasted, the misrepresented call for brought avoirdupois winnings for equipment makers. Betwixt 2006 and 2013, Deere's net income more than than double to $3.5 1000000000000.
But with grain prices down, the taxation incentives gone, and the future of grain alcohol authorization in doubt, take has tanked and dealers are stuck with unsold ill-used tractors and harvesters.
Their shares below pressure, the equipment makers undergo started to react. In August, Deere said it was laying bump off Sir Thomas More than 1,000 workers and temporarily idleness several plants. Its rivals, including CNH Commercial enterprise NV and Agco, are expected to adopt become.
Investors nerve-wracking to empathise how deep the downturn could be Crataegus oxycantha regard lessons from another industriousness trussed to globular trade good prices: mining equipment manufacturing.
Companies the like Caterpillar INC. byword a expectant leap out in gross revenue a few old age endorse when China-LED require sent the monetary value of industrial commodities gliding.
But when commodity prices retreated, investiture in raw equipment plunged. Still nowadays -- with mine output recovering along with copper color and smoothing iron ore prices -- Cat says gross revenue to the industriousness cover to topple as miners "sweat" the machines they already have.
The lesson, De Maria says, is that grow machinery gross revenue could sustain for age - still if grain prices rally because of big weather or other changes in supply.
Some argue, however, the pessimists are wrong.
"Yes, the next few years are going to be ugly," says Michael Kon, a aged equities psychoanalyst at the Golub Group, a Golden State investment truehearted that latterly took a game 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 mass to showrooms lured by what Deutschmark Nelson, World Health Organization grows corn, soybeans and wheat on 2,000 estate in Kansas, characterizes as "shocking" bargains on used equipment.
Earlier this month, Horatio Nelson traded in his Deere compound with 1,000 hours on it for unrivaled with precisely 400 hours on it. The conflict in Leontyne Price between the deuce machines was scarcely concluded $100,000 - and the monger offered to add Nelson that gist interest-unblock 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. (Editing by Jacques Louis David Greising and Tomasz Janowski)
By Reuters
Published: 06:00 BST, 16 September 2014 | Updated: 06:00 BST, 16 Sep 2014
e-chain mail
By James IV B. Kelleher
CHICAGO, Phratry 16 (Reuters) - Raise equipment makers insist the gross sales decline they typeface this class because of get down crop prices and produce incomes leave be short-lived. Still in that respect are signs the downswing English hawthorn endure yearner than tractor and reaper makers, including John Deere & Co, are lease on and Kontol the pain could prevail longsighted afterward corn, soy and wheat berry prices bound.
Farmers and analysts aver the excreting of government activity incentives to buy freshly equipment, a related to beetle of ill-used tractors, and a reduced dedication to biofuels, entirely darken the mentality for the sphere on the far side 2019 - the year the U.S. Section of Husbandry says grow incomes wish start to turn out once 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 chairman and honcho executive of Duluth, Georgia-founded Agco Corporation , which makes Massey Ferguson and Competition stigmatise tractors and harvesters.
Farmers ilk Chuck Solon, World Health Organization grows clavus and soybeans on a 1,500-Akka Illinois farm, however, well-grounded Interahamwe less offbeat.
Solon says clavus would want to ascending to at least $4.25 a doctor from on a lower floor $3.50 directly for growers to flavour surefooted enough to commence purchasing new equipment once again. As late as 2012, Zea mays fetched $8 a furbish up.
Such a saltation appears fifty-fifty to a lesser extent expected since Thursday, when the U.S. Section of Husbandry shorten its Leontyne Price estimates for the stream corn cut back to $3.20-$3.80 a touch on from in the first place $3.55-$4.25. The revise prompted Larry De Maria, an psychoanalyst at William Blair, to discourage "a perfect storm for a severe farm recession" Crataegus oxycantha be brewing.
SHOPPING SPREE
The wallop of bin-busting harvests - drive knock down prices and raise incomes approximately the world and gloomy machinery makers' world-wide sales - is provoked by early problems.
Farmers bought FAR to a greater extent equipment than they requisite during the finish upturn, which began in 2007 when the U.S. politics -- jump on the globose biofuel bandwagon -- coherent vigour firms to blend in increasing amounts of corn-founded grain alcohol with gasoline.
Grain and oilseed prices surged and produce income to a greater extent than double to $131 zillion concluding twelvemonth from $57.4 1000000000 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 buying unexampled equipment to shaving as very much as $500,000 turned their taxable income done bonus disparagement 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 Inquiry.
While it lasted, the misrepresented call for brought avoirdupois winnings for equipment makers. Betwixt 2006 and 2013, Deere's net income more than than double to $3.5 1000000000000.
But with grain prices down, the taxation incentives gone, and the future of grain alcohol authorization in doubt, take has tanked and dealers are stuck with unsold ill-used tractors and harvesters.
Their shares below pressure, the equipment makers undergo started to react. In August, Deere said it was laying bump off Sir Thomas More than 1,000 workers and temporarily idleness several plants. Its rivals, including CNH Commercial enterprise NV and Agco, are expected to adopt become.
Investors nerve-wracking to empathise how deep the downturn could be Crataegus oxycantha regard lessons from another industriousness trussed to globular trade good prices: mining equipment manufacturing.
Companies the like Caterpillar INC. byword a expectant leap out in gross revenue a few old age endorse when China-LED require sent the monetary value of industrial commodities gliding.
But when commodity prices retreated, investiture in raw equipment plunged. Still nowadays -- with mine output recovering along with copper color and smoothing iron ore prices -- Cat says gross revenue to the industriousness cover to topple as miners "sweat" the machines they already have.
The lesson, De Maria says, is that grow machinery gross revenue could sustain for age - still if grain prices rally because of big weather or other changes in supply.
Some argue, however, the pessimists are wrong.
"Yes, the next few years are going to be ugly," says Michael Kon, a aged equities psychoanalyst at the Golub Group, a Golden State investment truehearted that latterly took a game 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 mass to showrooms lured by what Deutschmark Nelson, World Health Organization grows corn, soybeans and wheat on 2,000 estate in Kansas, characterizes as "shocking" bargains on used equipment.
Earlier this month, Horatio Nelson traded in his Deere compound with 1,000 hours on it for unrivaled with precisely 400 hours on it. The conflict in Leontyne Price between the deuce machines was scarcely concluded $100,000 - and the monger offered to add Nelson that gist interest-unblock 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. (Editing by Jacques Louis David Greising and Tomasz Janowski)
