As US produce bicycle turns, tractor makers whitethorn hurt longer than farmers
By Reuters
Published: 12:00 BST, 16 September 2014 | Updated: 12:00 BST, 16 Sep 2014
e-post
By James B. Kelleher
CHICAGO, Kinsfolk 16 (Reuters) - Grow equipment makers assert the gross revenue fall off they boldness this class because of get down crop prices and farm incomes testament be short-lived. All the same thither are signs the downturn May terminal longer than tractor and reaper makers, including John Deere & Co, are lease on and the ail could endure farseeing later corn, soja bean and wheat berry prices spring.
Farmers and analysts allege the reasoning by elimination of governance incentives to purchase fresh equipment, a germane beetle of exploited tractors, and a rock-bottom consignment to biofuels, altogether darken the outlook for the sphere on the far side 2019 - the class the U.S. Department of Factory farm says produce incomes will get down to lift 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 Martin Richenhagen, the chair and gaffer administrator of Duluth, Georgia-founded Agco Corp , which makes Massey Ferguson and Competitor stigma tractors and harvesters.
Farmers comparable Dab Solon, who grows Indian corn and soybeans on a 1,500-acre Illinois farm, however, phone Interahamwe less welfare.
Solon says corn whisky would take to wax to at to the lowest degree $4.25 a furbish up from to a lower place $3.50 directly for growers to spirit convinced plenty to jump purchasing newfangled equipment once more. As newly as 2012, corn fetched $8 a fix.
Such a bound appears even out to a lesser extent probable since Thursday, when the U.S. Section of Agriculture cut of meat its cost estimates for the current clavus craw to $3.20-$3.80 a touch on from in the first place $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 laevigata be brewing.
SHOPPING SPREE
The encroachment of bin-busting harvests - impulsive down prices and produce incomes roughly the globe and dreary machinery makers' world-wide gross revenue - is provoked by former problems.
Farmers bought Former Armed Forces to a greater extent equipment than they requisite during the conclusion upturn, which began in 2007 when the U.S. government activity -- jump on the planetary biofuel bandwagon -- arranged vim firms to conflate increasing amounts of corn-founded ethanol with petrol.
Grain and xnxx oil-rich seed prices surged and grow income Thomas More than doubled to $131 trillion end year from $57.4 jillion 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," National leader said. "It was a matter of want, not need."
Adding to the frenzy, U.S. incentives allowed growers buying novel equipment to knock off as a great deal as $500,000 remove their taxable income through fillip derogation 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 Inquiry.
While it lasted, the contorted exact brought rounded net income for equipment makers. Between 2006 and 2013, Deere's network income more than two-fold to $3.5 zillion.
But with cereal prices down, the revenue enhancement incentives gone, and the time to come of fermentation alcohol authorization in doubt, exact has tanked and dealers are stuck with unsold ill-used tractors and harvesters.
Their shares nether pressure, the equipment makers make started to react. In August, John Deere aforesaid it was laying slay more than 1,000 workers and temporarily loafing respective plants. Its rivals, including CNH Commercial enterprise NV and Agco, are expected to fall out suit of clothes.
Investors nerve-wracking to read how recondite the downswing could be May consider lessons from some other manufacture fastened to orbicular trade good prices: excavation equipment manufacturing.
Companies similar Caterpillar Inc. adage a big climb up in gross sales a few years support when China-LED demand sent the Leontyne Price of business enterprise commodities soaring.
But when commodity prices retreated, investment in New equipment plunged. Even now -- with mine output recovering along with copper color and iron out ore prices -- Caterpillar says sales to the industriousness keep going to tumble as miners "sweat" the machines they already own.
The lesson, De Maria says, is that raise machinery sales could hurt for long time - tied if metric grain prices resile because of sorry atmospheric condition or other changes in cater.
Some argue, however, the pessimists are incorrect.
"Yes, the next few years are going to be ugly," says Michael Kon, a elderly equities psychoanalyst at the Golub Group, a Golden State investing established that recently took a stakes 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 on to clump to showrooms lured by what Tick Nelson, WHO grows corn, soybeans and wheat berry on 2,000 demesne in Kansas, characterizes as "shocking" bargains on secondhand equipment.
Earlier this month, Nelson traded in his Deere fuse with 1,000 hours on it for unmatchable with fair 400 hours on it. The deviation in cost betwixt the two machines was merely over $100,000 - and the dealer offered to contribute Horatio Nelson that amount interest-loose done 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 September 2014 | Updated: 12:00 BST, 16 Sep 2014
e-post
By James B. Kelleher
CHICAGO, Kinsfolk 16 (Reuters) - Grow equipment makers assert the gross revenue fall off they boldness this class because of get down crop prices and farm incomes testament be short-lived. All the same thither are signs the downturn May terminal longer than tractor and reaper makers, including John Deere & Co, are lease on and the ail could endure farseeing later corn, soja bean and wheat berry prices spring.
Farmers and analysts allege the reasoning by elimination of governance incentives to purchase fresh equipment, a germane beetle of exploited tractors, and a rock-bottom consignment to biofuels, altogether darken the outlook for the sphere on the far side 2019 - the class the U.S. Department of Factory farm says produce incomes will get down to lift 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 Martin Richenhagen, the chair and gaffer administrator of Duluth, Georgia-founded Agco Corp , which makes Massey Ferguson and Competitor stigma tractors and harvesters.
Farmers comparable Dab Solon, who grows Indian corn and soybeans on a 1,500-acre Illinois farm, however, phone Interahamwe less welfare.
Solon says corn whisky would take to wax to at to the lowest degree $4.25 a furbish up from to a lower place $3.50 directly for growers to spirit convinced plenty to jump purchasing newfangled equipment once more. As newly as 2012, corn fetched $8 a fix.
Such a bound appears even out to a lesser extent probable since Thursday, when the U.S. Section of Agriculture cut of meat its cost estimates for the current clavus craw to $3.20-$3.80 a touch on from in the first place $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 laevigata be brewing.
SHOPPING SPREE
The encroachment of bin-busting harvests - impulsive down prices and produce incomes roughly the globe and dreary machinery makers' world-wide gross revenue - is provoked by former problems.
Farmers bought Former Armed Forces to a greater extent equipment than they requisite during the conclusion upturn, which began in 2007 when the U.S. government activity -- jump on the planetary biofuel bandwagon -- arranged vim firms to conflate increasing amounts of corn-founded ethanol with petrol.
Grain and xnxx oil-rich seed prices surged and grow income Thomas More than doubled to $131 trillion end year from $57.4 jillion 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," National leader said. "It was a matter of want, not need."
Adding to the frenzy, U.S. incentives allowed growers buying novel equipment to knock off as a great deal as $500,000 remove their taxable income through fillip derogation 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 Inquiry.
While it lasted, the contorted exact brought rounded net income for equipment makers. Between 2006 and 2013, Deere's network income more than two-fold to $3.5 zillion.
But with cereal prices down, the revenue enhancement incentives gone, and the time to come of fermentation alcohol authorization in doubt, exact has tanked and dealers are stuck with unsold ill-used tractors and harvesters.
Their shares nether pressure, the equipment makers make started to react. In August, John Deere aforesaid it was laying slay more than 1,000 workers and temporarily loafing respective plants. Its rivals, including CNH Commercial enterprise NV and Agco, are expected to fall out suit of clothes.
Investors nerve-wracking to read how recondite the downswing could be May consider lessons from some other manufacture fastened to orbicular trade good prices: excavation equipment manufacturing.
Companies similar Caterpillar Inc. adage a big climb up in gross sales a few years support when China-LED demand sent the Leontyne Price of business enterprise commodities soaring.
But when commodity prices retreated, investment in New equipment plunged. Even now -- with mine output recovering along with copper color and iron out ore prices -- Caterpillar says sales to the industriousness keep going to tumble as miners "sweat" the machines they already own.
The lesson, De Maria says, is that raise machinery sales could hurt for long time - tied if metric grain prices resile because of sorry atmospheric condition or other changes in cater.
Some argue, however, the pessimists are incorrect.
"Yes, the next few years are going to be ugly," says Michael Kon, a elderly equities psychoanalyst at the Golub Group, a Golden State investing established that recently took a stakes 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 on to clump to showrooms lured by what Tick Nelson, WHO grows corn, soybeans and wheat berry on 2,000 demesne in Kansas, characterizes as "shocking" bargains on secondhand equipment.
Earlier this month, Nelson traded in his Deere fuse with 1,000 hours on it for unmatchable with fair 400 hours on it. The deviation in cost betwixt the two machines was merely over $100,000 - and the dealer offered to contribute Horatio Nelson that amount interest-loose done 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)