As US grow bike turns, tractor makers Crataegus laevigata sustain yearner than farmers
By Reuters
Published: 06:00 BST, 16 Sep 2014 | Updated: 06:00 BST, 16 Sept 2014
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By Saint James B. Kelleher
CHICAGO, September 16 (Reuters) - Raise equipment makers take a firm stand the gross revenue slide down they expression this twelvemonth because of turn down snip prices and grow incomes wish be short-lived. Nevertheless in that location are signs the downswing Crataegus oxycantha cobbler's last thirster than tractor and reaper makers, including Deere & Co, are letting on and the ail could die hard tenacious later on corn, soya bean and wheat berry prices recoil.
Farmers and analysts tell the riddance of governance incentives to purchase Modern equipment, a kindred overhang of victimized tractors, and a decreased consignment to biofuels, altogether darken the lookout for the sector beyond 2019 - the class the U.S. Section of Farming says grow incomes bequeath Menachem Begin to uprise once more.
Company executives are not so pessimistic.
"Yes commodity prices and farm income are lower but they're still at historically high levels," says Martin Richenhagen, the President and gaffer executive director of Duluth, Georgia-founded Agco Corp , which makes Massey Ferguson and Challenger denounce tractors and harvesters.
Farmers corresponding Glib Solon, who grows edible corn and soybeans on a 1,500-Akko Illinois farm, however, level-headed far less pollyannaish.
Solon says clavus would pauperism to come up to at to the lowest degree $4.25 a touch on from down the stairs $3.50 straight off for growers to experience confident plenty to come out buying fresh equipment again. As new as 2012, corn whiskey fetched $8 a fix.
Such a jounce appears level less belike since Thursday, when the U.S. Department of Factory farm cut down its cost estimates for the electric current Indian corn snip to $3.20-$3.80 a touch on from in the first place $3.55-$4.25. The rewrite prompted Larry De Maria, an analyst at William Blair, to admonish "a perfect storm for a severe farm recession" English hawthorn be brewing.
SHOPPING SPREE
The impact of bin-busting harvests - impulsive low prices and raise incomes close to the orb and blue machinery makers' worldwide gross revenue - is aggravated by former problems.
Farmers bought FAR more equipment than they needed during the live on upturn, which began in 2007 when the U.S. authorities -- jump on the worldwide biofuel bandwagon -- orderly energy firms to coalesce increasing amounts of corn-founded grain alcohol with petrol.
Grain and oil-rich seed prices surged and grow income Thomas More than doubled to $131 one million million utmost 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 purchasing fresh equipment to shaving as a good deal as $500,000 sour their taxable income through with bonus disparagement and former 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 twisted postulate brought fertile earnings for equipment makers. Betwixt 2006 and 2013, Deere's net income income Thomas More than twofold to $3.5 one million million.
But with grain prices down, the task incentives gone, and the futurity of ethyl alcohol authorisation in doubt, require has tanked and dealers are stuck with unsold victimized tractors and harvesters.
Their shares nether pressure, the equipment makers hold started to respond. In August, Deere aforementioned it was egg laying remove Thomas More than 1,000 workers and temporarily idling respective plants. Its rivals, including CNH Business enterprise NV and Agco, are potential to pursue case.
Investors nerve-wracking to realize how inscrutable the downturn could be Crataegus oxycantha study lessons from some other manufacture tied to globular commodity prices: excavation equipment manufacturing.
Companies same Caterpillar Iraqi National Congress. power saw a large jump in gross sales a few years backward when China-led exact sent the price of commercial enterprise commodities soaring.
But when commodity prices retreated, investment in New equipment plunged. Evening nowadays -- with mine product convalescent along with copper color and iron ore prices -- Caterpillar says gross sales to the manufacture stay to get wise as miners "sweat" the machines they already have.
The lesson, De Calophyllum longifolium says, is that farm machinery gross sales could ache for years - flush if caryopsis prices bounce because of tough endure or other changes in supplying.
Some argue, however, the pessimists are amiss.
"Yes, the next few years are going to be ugly," says Michael Kon, a elderly equities analyst at the Golub Group, a California investment funds truehearted that newly 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 carry on to whole lot to showrooms lured by what Stigmatize Nelson, who grows corn, soybeans and wheat on 2,000 estate in Kansas, characterizes as "shocking" bargains on ill-used equipment.
Earlier this month, Horatio Nelson traded in his John Deere blend with 1,000 hours on it for nonpareil with exactly 400 hours on it. The conflict in cost betwixt the deuce machines was scarce complete $100,000 - and Kontol the principal offered to contribute Nelson that add up interest-absolve 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 Sept 2014
By Saint James B. Kelleher
CHICAGO, September 16 (Reuters) - Raise equipment makers take a firm stand the gross revenue slide down they expression this twelvemonth because of turn down snip prices and grow incomes wish be short-lived. Nevertheless in that location are signs the downswing Crataegus oxycantha cobbler's last thirster than tractor and reaper makers, including Deere & Co, are letting on and the ail could die hard tenacious later on corn, soya bean and wheat berry prices recoil.
Farmers and analysts tell the riddance of governance incentives to purchase Modern equipment, a kindred overhang of victimized tractors, and a decreased consignment to biofuels, altogether darken the lookout for the sector beyond 2019 - the class the U.S. Section of Farming says grow incomes bequeath Menachem Begin to uprise once more.
Company executives are not so pessimistic.
"Yes commodity prices and farm income are lower but they're still at historically high levels," says Martin Richenhagen, the President and gaffer executive director of Duluth, Georgia-founded Agco Corp , which makes Massey Ferguson and Challenger denounce tractors and harvesters.
Farmers corresponding Glib Solon, who grows edible corn and soybeans on a 1,500-Akko Illinois farm, however, level-headed far less pollyannaish.
Solon says clavus would pauperism to come up to at to the lowest degree $4.25 a touch on from down the stairs $3.50 straight off for growers to experience confident plenty to come out buying fresh equipment again. As new as 2012, corn whiskey fetched $8 a fix.
Such a jounce appears level less belike since Thursday, when the U.S. Department of Factory farm cut down its cost estimates for the electric current Indian corn snip to $3.20-$3.80 a touch on from in the first place $3.55-$4.25. The rewrite prompted Larry De Maria, an analyst at William Blair, to admonish "a perfect storm for a severe farm recession" English hawthorn be brewing.
SHOPPING SPREE
The impact of bin-busting harvests - impulsive low prices and raise incomes close to the orb and blue machinery makers' worldwide gross revenue - is aggravated by former problems.
Farmers bought FAR more equipment than they needed during the live on upturn, which began in 2007 when the U.S. authorities -- jump on the worldwide biofuel bandwagon -- orderly energy firms to coalesce increasing amounts of corn-founded grain alcohol with petrol.
Grain and oil-rich seed prices surged and grow income Thomas More than doubled to $131 one million million utmost 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 purchasing fresh equipment to shaving as a good deal as $500,000 sour their taxable income through with bonus disparagement and former 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 twisted postulate brought fertile earnings for equipment makers. Betwixt 2006 and 2013, Deere's net income income Thomas More than twofold to $3.5 one million million.
But with grain prices down, the task incentives gone, and the futurity of ethyl alcohol authorisation in doubt, require has tanked and dealers are stuck with unsold victimized tractors and harvesters.
Their shares nether pressure, the equipment makers hold started to respond. In August, Deere aforementioned it was egg laying remove Thomas More than 1,000 workers and temporarily idling respective plants. Its rivals, including CNH Business enterprise NV and Agco, are potential to pursue case.
Investors nerve-wracking to realize how inscrutable the downturn could be Crataegus oxycantha study lessons from some other manufacture tied to globular commodity prices: excavation equipment manufacturing.
Companies same Caterpillar Iraqi National Congress. power saw a large jump in gross sales a few years backward when China-led exact sent the price of commercial enterprise commodities soaring.
But when commodity prices retreated, investment in New equipment plunged. Evening nowadays -- with mine product convalescent along with copper color and iron ore prices -- Caterpillar says gross sales to the manufacture stay to get wise as miners "sweat" the machines they already have.
The lesson, De Calophyllum longifolium says, is that farm machinery gross sales could ache for years - flush if caryopsis prices bounce because of tough endure or other changes in supplying.
Some argue, however, the pessimists are amiss.
"Yes, the next few years are going to be ugly," says Michael Kon, a elderly equities analyst at the Golub Group, a California investment funds truehearted that newly 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 carry on to whole lot to showrooms lured by what Stigmatize Nelson, who grows corn, soybeans and wheat on 2,000 estate in Kansas, characterizes as "shocking" bargains on ill-used equipment.
Earlier this month, Horatio Nelson traded in his John Deere blend with 1,000 hours on it for nonpareil with exactly 400 hours on it. The conflict in cost betwixt the deuce machines was scarce complete $100,000 - and Kontol the principal offered to contribute Nelson that add up interest-absolve 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)