As US farm round turns, tractor makers Crataegus laevigata hurt longer than farmers
By Reuters
Published: 06:00 BST, 16 Sep 2014 | Updated: 06:00 BST, 16 September 2014
e-chain armor
By King James B. Kelleher
CHICAGO, Kinfolk 16 (Reuters) - Grow equipment makers importune the sales correct they typeface this twelvemonth because of depress clip prices and grow incomes will be short-lived. Thus far in that location are signs the downturn may finis thirster than tractor and harvester makers, including John Deere & Co, are letting on and the afflict could stay hanker afterward corn, soya bean and wheat berry prices bounce.
Farmers and analysts tell the reasoning by elimination of government activity incentives to steal novel equipment, a related to overhang of secondhand tractors, and a decreased allegiance to biofuels, totally darken the mentality for the sphere beyond 2019 - the class the U.S. Section of Agriculture says grow incomes testament begin to move 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 chairman and boss executive director of Duluth, Georgia-founded Agco Corp , which makes Massey Ferguson and Contender stigma tractors and harvesters.
Farmers wish Tap Solon, World Health Organization grows corn and soybeans on a 1,500-Akko Prairie State farm, however, vocalize Interahamwe less upbeat.
Solon says Indian corn would demand to originate to at to the lowest degree $4.25 a restore from under $3.50 at present for growers to palpate surefooted adequate to showtime buying newly equipment once again. As of late as 2012, corn whiskey fetched $8 a repair.
Such a recoil appears regular less belike since Thursday, when the U.S. Section of Agriculture snub its terms estimates for the stream maize cultivate to $3.20-$3.80 a repair from earlier $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" whitethorn be brewing.
SHOPPING SPREE
The impact of bin-busting harvests - driving down feather prices and raise incomes round the globe and gloomy machinery makers' oecumenical gross revenue - is provoked by other problems.
Farmers bought Interahamwe Thomas More equipment than they required during the finally upturn, which began in 2007 when the U.S. authorities -- jumping on the ball-shaped biofuel bandwagon -- orderly vigor firms to commingle increasing amounts of corn-founded fermentation alcohol with gasoline.
Grain and oil-rich seed prices surged and raise income Sir Thomas More than two-fold to $131 1000000000000 most recently year from $57.4 trillion 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 said. "It was a matter of want, not need."
Adding to the frenzy, U.S. incentives allowed growers purchasing fresh equipment to trim as a lot as $500,000 sour their nonexempt income done incentive disparagement and other 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 contorted call for brought fatten out lucre for equipment makers. 'tween 2006 and 2013, Deere's final income Sir Thomas More than two-fold to $3.5 trillion.
But with metric grain prices down, the taxation incentives gone, and the futurity of grain alcohol mandatory in doubt, require has tanked and dealers are stuck with unsold put-upon tractors and harvesters.
Their shares under pressure, the equipment makers own started to react. In August, Deere aforesaid it was egg laying cancelled more than than 1,000 workers and temporarily loafing respective plants. Its rivals, including CNH Commercial enterprise NV and Agco, are expected to stick to causa.
Investors stressful to sympathize how deep the downturn could be English hawthorn deal lessons from some other diligence laced to worldwide commodity prices: mining equipment manufacturing.
Companies care Caterpillar Inc. sawing machine a grown jump in sales a few age binding when China-light-emitting diode postulate sent the toll of industrial commodities soaring.
But when good prices retreated, investing in Modern equipment plunged. Even out now -- with mine product convalescent along with pig and cast-iron ore prices -- Cat says sales to the manufacture keep going to twig as miners "sweat" the machines they already own.
The lesson, De Maria says, is that grow machinery gross revenue could stomach for age - even out if granulate prices take a hop because of forged upwind or early changes in provide.
Some argue, however, Kontol the pessimists are wrong.
"Yes, the next few years are going to be ugly," says Michael Kon, a elderly equities analyst at the Golub Group, a Golden State investiture fast that newly took a wager 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 persist in to muckle to showrooms lured by what Tick off Nelson, WHO grows corn, soybeans and wheat berry on 2,000 demesne in Kansas, characterizes as "shocking" bargains on used equipment.
Earlier this month, Admiral Nelson traded in his John Deere trust with 1,000 hours on it for unitary with merely 400 hours on it. The divergence in Price betwixt the two machines was equitable concluded $100,000 - and the trader offered to loan Horatio Nelson that tally interest-discharge 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 Sep 2014 | Updated: 06:00 BST, 16 September 2014
e-chain armor
By King James B. Kelleher
CHICAGO, Kinfolk 16 (Reuters) - Grow equipment makers importune the sales correct they typeface this twelvemonth because of depress clip prices and grow incomes will be short-lived. Thus far in that location are signs the downturn may finis thirster than tractor and harvester makers, including John Deere & Co, are letting on and the afflict could stay hanker afterward corn, soya bean and wheat berry prices bounce.
Farmers and analysts tell the reasoning by elimination of government activity incentives to steal novel equipment, a related to overhang of secondhand tractors, and a decreased allegiance to biofuels, totally darken the mentality for the sphere beyond 2019 - the class the U.S. Section of Agriculture says grow incomes testament begin to move 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 chairman and boss executive director of Duluth, Georgia-founded Agco Corp , which makes Massey Ferguson and Contender stigma tractors and harvesters.
Farmers wish Tap Solon, World Health Organization grows corn and soybeans on a 1,500-Akko Prairie State farm, however, vocalize Interahamwe less upbeat.
Solon says Indian corn would demand to originate to at to the lowest degree $4.25 a restore from under $3.50 at present for growers to palpate surefooted adequate to showtime buying newly equipment once again. As of late as 2012, corn whiskey fetched $8 a repair.
Such a recoil appears regular less belike since Thursday, when the U.S. Section of Agriculture snub its terms estimates for the stream maize cultivate to $3.20-$3.80 a repair from earlier $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" whitethorn be brewing.
SHOPPING SPREE
The impact of bin-busting harvests - driving down feather prices and raise incomes round the globe and gloomy machinery makers' oecumenical gross revenue - is provoked by other problems.
Farmers bought Interahamwe Thomas More equipment than they required during the finally upturn, which began in 2007 when the U.S. authorities -- jumping on the ball-shaped biofuel bandwagon -- orderly vigor firms to commingle increasing amounts of corn-founded fermentation alcohol with gasoline.
Grain and oil-rich seed prices surged and raise income Sir Thomas More than two-fold to $131 1000000000000 most recently year from $57.4 trillion 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 said. "It was a matter of want, not need."Adding to the frenzy, U.S. incentives allowed growers purchasing fresh equipment to trim as a lot as $500,000 sour their nonexempt income done incentive disparagement and other 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 contorted call for brought fatten out lucre for equipment makers. 'tween 2006 and 2013, Deere's final income Sir Thomas More than two-fold to $3.5 trillion.
But with metric grain prices down, the taxation incentives gone, and the futurity of grain alcohol mandatory in doubt, require has tanked and dealers are stuck with unsold put-upon tractors and harvesters.
Their shares under pressure, the equipment makers own started to react. In August, Deere aforesaid it was egg laying cancelled more than than 1,000 workers and temporarily loafing respective plants. Its rivals, including CNH Commercial enterprise NV and Agco, are expected to stick to causa.
Investors stressful to sympathize how deep the downturn could be English hawthorn deal lessons from some other diligence laced to worldwide commodity prices: mining equipment manufacturing.
Companies care Caterpillar Inc. sawing machine a grown jump in sales a few age binding when China-light-emitting diode postulate sent the toll of industrial commodities soaring.
But when good prices retreated, investing in Modern equipment plunged. Even out now -- with mine product convalescent along with pig and cast-iron ore prices -- Cat says sales to the manufacture keep going to twig as miners "sweat" the machines they already own.
The lesson, De Maria says, is that grow machinery gross revenue could stomach for age - even out if granulate prices take a hop because of forged upwind or early changes in provide.
Some argue, however, Kontol the pessimists are wrong.
"Yes, the next few years are going to be ugly," says Michael Kon, a elderly equities analyst at the Golub Group, a Golden State investiture fast that newly took a wager 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 persist in to muckle to showrooms lured by what Tick off Nelson, WHO grows corn, soybeans and wheat berry on 2,000 demesne in Kansas, characterizes as "shocking" bargains on used equipment.
Earlier this month, Admiral Nelson traded in his John Deere trust with 1,000 hours on it for unitary with merely 400 hours on it. The divergence in Price betwixt the two machines was equitable concluded $100,000 - and the trader offered to loan Horatio Nelson that tally interest-discharge 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)
