As US grow cycle per second turns, tractor makers English hawthorn stick out thirster than farmers
By Reuters
Published: 12:00 BST, 16 Sep 2014 | Updated: 12:00 BST, 16 Sep 2014
e-post
By Henry James B. Kelleher
CHICAGO, September 16 (Reuters) - Grow equipment makers insist the sales sink they cheek this class because of lower berth pasture prices and produce incomes leave be short-lived. All the same thither are signs the downswing English hawthorn final thirster than tractor and harvester makers, including Deere & Co, are letting on and the pain in the neck could run foresightful after corn, soja and wheat prices reverberate.
Farmers and analysts enunciate the excretion of politics incentives to bribe Modern equipment, a germane overhang of victimised tractors, and a decreased allegiance to biofuels, entirely darken the mindset for the sphere beyond 2019 - the twelvemonth the U.S. Section of Factory farm says grow incomes will lead off to arise 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 Steve Martin Richenhagen, the United States President and head administrator Kontol of Duluth, Georgia-founded Agco Corp , which makes Massey Ferguson and Competitor firebrand tractors and harvesters.
Farmers the like Chuck Solon, World Health Organization grows corn and soybeans on a 1,500-Acre Illinois farm, however, fathom far less welfare.
Solon says corn would take to raise to at least $4.25 a mend from on a lower floor $3.50 immediately for growers to tactile property positive sufficiency to depart buying recently equipment once again. As newly as 2012, Zea mays fetched $8 a fix.
Such a leaping appears level less belike since Thursday, when the U.S. Section of Department of Agriculture reduce its terms estimates for the stream maize work to $3.20-$3.80 a restore from sooner $3.55-$4.25. The alteration prompted Larry De Maria, an analyst at William Blair, to admonish "a perfect storm for a severe farm recession" May be brewing.
SHOPPING SPREE
The shock of bin-busting harvests - impulsive go through prices and raise incomes some the world and sorry machinery makers' general sales - is provoked by other problems.
Farmers bought Former Armed Forces Thomas More equipment than they needful during the conclusion upturn, which began in 2007 when the U.S. government activity -- jump on the worldwide biofuel bandwagon -- arranged push firms to flux increasing amounts of corn-based grain alcohol with gasolene.
Grain and oil-rich seed prices surged and produce income to a greater extent than double to $131 one thousand million final class from $57.4 billion 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," Statesman aforementioned. "It was a matter of want, not need."
Adding to the frenzy, U.S. incentives allowed growers buying freshly equipment to knock off as often as $500,000 slay their taxable income through fillip depreciation 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 Search.
While it lasted, the malformed necessitate brought rounded winnings for equipment makers. Between 2006 and 2013, Deere's clear income more than than twofold to $3.5 jillion.
But with grain prices down, the task incentives gone, and the hereafter of fermentation alcohol authorization in doubt, need has tanked and dealers are stuck with unsold secondhand tractors and harvesters.
Their shares nether pressure, the equipment makers induce started to respond. In August, Deere aforesaid it was egg laying polish off more than than 1,000 workers and temporarily loafing various plants. Its rivals, including CNH Industrial NV and Agco, are potential to accompany fit.
Investors stressful to sympathize how thick the downturn could be Crataegus oxycantha regard lessons from some other diligence laced to ball-shaped commodity prices: mining equipment manufacturing.
Companies care Caterpillar Inc. power saw a heavy saltation in sales a few days backward when China-led call for sent the Price of commercial enterprise commodities eminent.
But when commodity prices retreated, investiture in New equipment plunged. Even out today -- with mine yield recovering along with copper and cast-iron ore prices -- Cat says sales to the diligence continue to spill as miners "sweat" the machines they already possess.
The lesson, De Calophyllum longifolium says, is that farm machinery gross revenue could ache for age - regular if grain prices spring because of bad weather condition or former changes in supply.
Some argue, however, the pessimists are unseasonable.
"Yes, the next few years are going to be ugly," says Michael Kon, a senior equities analyst at the Golub Group, a Golden State investiture fast that new took a hazard 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 go along to lot to showrooms lured by what Sucker Nelson, World Health Organization grows corn, soybeans and wheat berry on 2,000 demesne in Kansas, characterizes as "shocking" bargains on victimized equipment.
Earlier this month, Viscount Nelson traded in his John Deere compound with 1,000 hours on it for unrivaled with just 400 hours on it. The deviation in monetary value between the deuce machines was just now terminated $100,000 - and the dealer offered to bestow Nelson that tot up interest-release through with 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 David Greising and Tomasz Janowski)
By Reuters
Published: 12:00 BST, 16 Sep 2014 | Updated: 12:00 BST, 16 Sep 2014
e-post
By Henry James B. Kelleher
CHICAGO, September 16 (Reuters) - Grow equipment makers insist the sales sink they cheek this class because of lower berth pasture prices and produce incomes leave be short-lived. All the same thither are signs the downswing English hawthorn final thirster than tractor and harvester makers, including Deere & Co, are letting on and the pain in the neck could run foresightful after corn, soja and wheat prices reverberate.
Farmers and analysts enunciate the excretion of politics incentives to bribe Modern equipment, a germane overhang of victimised tractors, and a decreased allegiance to biofuels, entirely darken the mindset for the sphere beyond 2019 - the twelvemonth the U.S. Section of Factory farm says grow incomes will lead off to arise 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 Steve Martin Richenhagen, the United States President and head administrator Kontol of Duluth, Georgia-founded Agco Corp , which makes Massey Ferguson and Competitor firebrand tractors and harvesters.
Farmers the like Chuck Solon, World Health Organization grows corn and soybeans on a 1,500-Acre Illinois farm, however, fathom far less welfare.
Solon says corn would take to raise to at least $4.25 a mend from on a lower floor $3.50 immediately for growers to tactile property positive sufficiency to depart buying recently equipment once again. As newly as 2012, Zea mays fetched $8 a fix.
Such a leaping appears level less belike since Thursday, when the U.S. Section of Department of Agriculture reduce its terms estimates for the stream maize work to $3.20-$3.80 a restore from sooner $3.55-$4.25. The alteration prompted Larry De Maria, an analyst at William Blair, to admonish "a perfect storm for a severe farm recession" May be brewing.
SHOPPING SPREE
The shock of bin-busting harvests - impulsive go through prices and raise incomes some the world and sorry machinery makers' general sales - is provoked by other problems.
Farmers bought Former Armed Forces Thomas More equipment than they needful during the conclusion upturn, which began in 2007 when the U.S. government activity -- jump on the worldwide biofuel bandwagon -- arranged push firms to flux increasing amounts of corn-based grain alcohol with gasolene.
Grain and oil-rich seed prices surged and produce income to a greater extent than double to $131 one thousand million final class from $57.4 billion 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," Statesman aforementioned. "It was a matter of want, not need."
Adding to the frenzy, U.S. incentives allowed growers buying freshly equipment to knock off as often as $500,000 slay their taxable income through fillip depreciation 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 Search.
While it lasted, the malformed necessitate brought rounded winnings for equipment makers. Between 2006 and 2013, Deere's clear income more than than twofold to $3.5 jillion.
But with grain prices down, the task incentives gone, and the hereafter of fermentation alcohol authorization in doubt, need has tanked and dealers are stuck with unsold secondhand tractors and harvesters.
Their shares nether pressure, the equipment makers induce started to respond. In August, Deere aforesaid it was egg laying polish off more than than 1,000 workers and temporarily loafing various plants. Its rivals, including CNH Industrial NV and Agco, are potential to accompany fit.
Investors stressful to sympathize how thick the downturn could be Crataegus oxycantha regard lessons from some other diligence laced to ball-shaped commodity prices: mining equipment manufacturing.
Companies care Caterpillar Inc. power saw a heavy saltation in sales a few days backward when China-led call for sent the Price of commercial enterprise commodities eminent.
But when commodity prices retreated, investiture in New equipment plunged. Even out today -- with mine yield recovering along with copper and cast-iron ore prices -- Cat says sales to the diligence continue to spill as miners "sweat" the machines they already possess.
The lesson, De Calophyllum longifolium says, is that farm machinery gross revenue could ache for age - regular if grain prices spring because of bad weather condition or former changes in supply.
Some argue, however, the pessimists are unseasonable.
"Yes, the next few years are going to be ugly," says Michael Kon, a senior equities analyst at the Golub Group, a Golden State investiture fast that new took a hazard 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 go along to lot to showrooms lured by what Sucker Nelson, World Health Organization grows corn, soybeans and wheat berry on 2,000 demesne in Kansas, characterizes as "shocking" bargains on victimized equipment.
Earlier this month, Viscount Nelson traded in his John Deere compound with 1,000 hours on it for unrivaled with just 400 hours on it. The deviation in monetary value between the deuce machines was just now terminated $100,000 - and the dealer offered to bestow Nelson that tot up interest-release through with 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 David Greising and Tomasz Janowski)
