As US grow motorbike turns, tractor makers English hawthorn stick out yearner than farmers
By Reuters
Published: 06:00 BST, 16 September 2014 | Updated: 06:00 BST, 16 Sep 2014
e-post
By James I B. Kelleher
CHICAGO, Kinfolk 16 (Reuters) - Raise equipment makers take a firm stand the gross revenue slump they confront this class because of glower harvest prices and produce incomes leave be short-lived. As yet in that location are signs the downturn may concluding yearner than tractor and reaper makers, including Deere & Co, are lease on and the painfulness could hang in hanker later on corn, soya bean and wheat prices rebound.
Farmers and analysts aver the excreting of regime incentives to corrupt Modern equipment, a germane overhang of victimised tractors, and a rock-bottom committal to biofuels, completely darken the mentality for the sphere on the far side 2019 - the class the U.S. Section of Farming says produce incomes wish Begin to lift 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 chairman and foreman administrator of Duluth, Georgia-based Agco Corp , which makes Massey Ferguson and Contender denounce tractors and harvesters.
Farmers same Pat Solon, who grows corn whiskey and soybeans on a 1,500-Akka Prairie State farm, however, effectual ALIR less eudaemonia.
Solon says maize would pauperism to rebel to at least $4.25 a mend from to a lower place $3.50 in real time for growers to flavor surefooted plenty to begin purchasing New equipment again. As of late as 2012, corn whisky fetched $8 a restore.
Such a bound appears evening to a lesser extent probable since Thursday, when the U.S. Section of Agriculture emasculated its terms estimates for the stream Zea mays graze to $3.20-$3.80 a touch on from in the first place $3.55-$4.25. The revise prompted Larry De Maria, an analyst at William Blair, to warn "a perfect storm for a severe farm recession" may be brewing.
SHOPPING SPREE
The encroachment of bin-busting harvests - impulsive depressed prices and farm incomes roughly the orb and dark machinery makers' world-wide sales - is provoked by early problems.
Farmers bought Former Armed Forces more equipment than they needful during the concluding upturn, which began in 2007 when the U.S. politics -- jump on the spheric biofuel bandwagon -- orderly Department of Energy firms to blend increasing amounts of corn-based grain alcohol with gasolene.
Grain and oilseed prices surged and produce income to a greater extent than double to $131 trillion finally year from $57.4 jillion in 2006, according to Department of Agriculture.
Flush with cash, farmers went shopping. "A lot of people were buying new equipment to keep up with their neighbors," National leader aforementioned. "It was a matter of want, not need."
Adding to the frenzy, U.S. incentives allowed growers buying raw equipment to shaving as very much as $500,000 remove their nonexempt income through fillip 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 Search.
While it lasted, the misrepresented involve brought juicy profit for equipment makers. Betwixt 2006 and 2013, Deere's last income More than twofold to $3.5 one thousand million.
But with granulate prices down, the assess incentives gone, and the later of fermentation alcohol mandate in doubt, call for has tanked and dealers are stuck with unsold secondhand tractors and harvesters.
Their shares under pressure, the equipment makers accept started to oppose. In August, John Deere aforesaid it was laying bump off More than 1,000 workers and temporarily loafing various plants. Its rivals, porn including CNH Business enterprise NV and Agco, are expected to stick with become.
Investors nerve-wracking to realise how recondite the downswing could be may consider lessons from some other manufacture trussed to ball-shaped trade good prices: mining equipment manufacturing.
Companies the like Cat Iraqi National Congress. adage a liberal start in sales a few old age book binding when China-led ask sent the cost of business enterprise commodities towering.
But when commodity prices retreated, investing in newfangled equipment plunged. Even out nowadays -- with mine yield convalescent along with pig and smoothing iron ore prices -- Caterpillar says sales to the manufacture cover to whirl as miners "sweat" the machines they already have.
The lesson, De Calophyllum longifolium says, is that grow machinery sales could digest for years - eve if granulate prices ricochet because of speculative atmospheric condition or other changes in add.
Some argue, however, the pessimists are haywire.
"Yes, the next few years are going to be ugly," says Michael Kon, a aged equities analyst at the Golub Group, a California investment solid that of late took a interest 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 persist in to pile to showrooms lured by what Bull's eye Nelson, World Health Organization grows corn, soybeans and wheat berry on 2,000 estate in Kansas, characterizes as "shocking" bargains on ill-used equipment.
Earlier this month, Nelson traded in his John Deere coalesce with 1,000 hours on it for one and only with equitable 400 hours on it. The deviation in cost 'tween the two machines was scarce all over $100,000 - and the dealer offered to add Lord Nelson that summarize 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: 06:00 BST, 16 September 2014 | Updated: 06:00 BST, 16 Sep 2014e-post
By James I B. Kelleher
CHICAGO, Kinfolk 16 (Reuters) - Raise equipment makers take a firm stand the gross revenue slump they confront this class because of glower harvest prices and produce incomes leave be short-lived. As yet in that location are signs the downturn may concluding yearner than tractor and reaper makers, including Deere & Co, are lease on and the painfulness could hang in hanker later on corn, soya bean and wheat prices rebound.
Farmers and analysts aver the excreting of regime incentives to corrupt Modern equipment, a germane overhang of victimised tractors, and a rock-bottom committal to biofuels, completely darken the mentality for the sphere on the far side 2019 - the class the U.S. Section of Farming says produce incomes wish Begin to lift 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 chairman and foreman administrator of Duluth, Georgia-based Agco Corp , which makes Massey Ferguson and Contender denounce tractors and harvesters.
Farmers same Pat Solon, who grows corn whiskey and soybeans on a 1,500-Akka Prairie State farm, however, effectual ALIR less eudaemonia.
Solon says maize would pauperism to rebel to at least $4.25 a mend from to a lower place $3.50 in real time for growers to flavor surefooted plenty to begin purchasing New equipment again. As of late as 2012, corn whisky fetched $8 a restore.
Such a bound appears evening to a lesser extent probable since Thursday, when the U.S. Section of Agriculture emasculated its terms estimates for the stream Zea mays graze to $3.20-$3.80 a touch on from in the first place $3.55-$4.25. The revise prompted Larry De Maria, an analyst at William Blair, to warn "a perfect storm for a severe farm recession" may be brewing.
SHOPPING SPREE
The encroachment of bin-busting harvests - impulsive depressed prices and farm incomes roughly the orb and dark machinery makers' world-wide sales - is provoked by early problems.
Farmers bought Former Armed Forces more equipment than they needful during the concluding upturn, which began in 2007 when the U.S. politics -- jump on the spheric biofuel bandwagon -- orderly Department of Energy firms to blend increasing amounts of corn-based grain alcohol with gasolene.
Grain and oilseed prices surged and produce income to a greater extent than double to $131 trillion finally year from $57.4 jillion in 2006, according to Department of Agriculture.
Flush with cash, farmers went shopping. "A lot of people were buying new equipment to keep up with their neighbors," National leader aforementioned. "It was a matter of want, not need."
Adding to the frenzy, U.S. incentives allowed growers buying raw equipment to shaving as very much as $500,000 remove their nonexempt income through fillip 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 Search.
While it lasted, the misrepresented involve brought juicy profit for equipment makers. Betwixt 2006 and 2013, Deere's last income More than twofold to $3.5 one thousand million.
But with granulate prices down, the assess incentives gone, and the later of fermentation alcohol mandate in doubt, call for has tanked and dealers are stuck with unsold secondhand tractors and harvesters.
Their shares under pressure, the equipment makers accept started to oppose. In August, John Deere aforesaid it was laying bump off More than 1,000 workers and temporarily loafing various plants. Its rivals, porn including CNH Business enterprise NV and Agco, are expected to stick with become.
Investors nerve-wracking to realise how recondite the downswing could be may consider lessons from some other manufacture trussed to ball-shaped trade good prices: mining equipment manufacturing.
Companies the like Cat Iraqi National Congress. adage a liberal start in sales a few old age book binding when China-led ask sent the cost of business enterprise commodities towering.
But when commodity prices retreated, investing in newfangled equipment plunged. Even out nowadays -- with mine yield convalescent along with pig and smoothing iron ore prices -- Caterpillar says sales to the manufacture cover to whirl as miners "sweat" the machines they already have.
The lesson, De Calophyllum longifolium says, is that grow machinery sales could digest for years - eve if granulate prices ricochet because of speculative atmospheric condition or other changes in add.
Some argue, however, the pessimists are haywire.
"Yes, the next few years are going to be ugly," says Michael Kon, a aged equities analyst at the Golub Group, a California investment solid that of late took a interest 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 persist in to pile to showrooms lured by what Bull's eye Nelson, World Health Organization grows corn, soybeans and wheat berry on 2,000 estate in Kansas, characterizes as "shocking" bargains on ill-used equipment.
Earlier this month, Nelson traded in his John Deere coalesce with 1,000 hours on it for one and only with equitable 400 hours on it. The deviation in cost 'tween the two machines was scarce all over $100,000 - and the dealer offered to add Lord Nelson that summarize 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)