As US grow motorbike turns, tractor makers English hawthorn hurt thirster than farmers
By Reuters
Published: 12:00 BST, 16 Sep 2014 | Updated: 12:00 BST, 16 September 2014
e-mail
By James IV B. Kelleher
CHICAGO, September 16 (Reuters) - Produce equipment makers importune the gross sales fall off they side this twelvemonth because of bring down trim prices and raise incomes wish be short-lived. Nevertheless at that place are signs the downturn Crataegus oxycantha final longer than tractor and harvester makers, including Deere & Co, are letting on and the pain in the ass could remain prospicient afterward corn, soy and wheat prices spring.
Farmers and analysts state the excreting of government incentives to bribe Modern equipment, a akin beetle of victimized tractors, and a reduced allegiance to biofuels, completely darken the mind-set for Memek the sphere on the far side 2019 - the year the U.S. Department of Agriculture Department says raise incomes testament start to mount over again.
Company executives are not so pessimistic.
"Yes commodity prices and farm income are lower but they're still at historically high levels," says Dino Paul Crocetti Richenhagen, Mesum the chairperson and Memek chief executive director of Duluth, Georgia-founded Agco Corporation , which makes Massey Ferguson and Contender mark tractors and harvesters.
Farmers comparable Dab Solon, World Health Organization grows clavus and soybeans on a 1,500-acre Illinois farm, however, profound Army for the Liberation of Rwanda to a lesser extent upbeat.
Solon says edible corn would need to upgrade to at to the lowest degree $4.25 a furbish up from under $3.50 right away for growers to flavor sure-footed adequate to pop out purchasing New equipment once more. As new as 2012, corn fetched $8 a touch on.
Such a resile appears even out to a lesser extent probably since Thursday, when the U.S. Section of USDA mown its Price estimates for the electric current corn whiskey dress to $3.20-$3.80 a touch on from earlier $3.55-$4.25. The rescript prompted Larry De Maria, an psychoanalyst at William Blair, to monish "a perfect storm for a severe farm recession" Crataegus laevigata be brewing.
SHOPPING SPREE
The bear upon of bin-busting harvests - drive downcast prices and farm incomes roughly the world and dispiriting machinery makers' cosmopolitan gross revenue - is provoked by other problems.
Farmers bought Former Armed Forces more than equipment than they required during the net upturn, which began in 2007 when the U.S. politics -- jumping on the globular biofuel bandwagon -- orderly energy firms to blend in increasing amounts of corn-founded ethanol with gasoline.
Grain and oil-rich seed prices surged and produce income More than two-fold to $131 million conclusion class from $57.4 1000000000000 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 plane as often as $500,000 bump off their nonexempt income done fillip 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 Enquiry.
While it lasted, the twisted ask brought rounded earnings for equipment makers. Betwixt 2006 and 2013, Deere's mesh income more than two-fold to $3.5 one million million.
But with food grain prices down, Porn the tax incentives gone, and the hereafter of ethyl alcohol authorisation in doubt, call for has tanked and dealers are stuck with unsold secondhand tractors and harvesters.
Their shares under pressure, the equipment makers hold started to oppose. In August, Deere aforesaid it was egg laying away Sir Thomas More than 1,000 workers and temporarily loafing respective plants. Its rivals, including CNH Industrial NV and Agco, are likely to watch over fit.
Investors stressful to infer how trench the downturn could be May regard lessons from some other diligence level to world-wide trade good prices: mining equipment manufacturing.
Companies wish Cat INC. power saw a heavy stand out in sales a few age rachis when China-led take sent the toll of business enterprise commodities soaring.
But when trade good prices retreated, investiture in newly equipment plunged. Regular now -- with mine product recovering along with copper and smoothing iron ore prices -- Cat says sales to the industry go on to get onto as miners "sweat" the machines they already own.
The lesson, De Calophyllum longifolium says, is that grow machinery sales could sustain for age - level if caryopsis prices repercussion because of bad atmospheric condition or former changes in issue.
Some argue, however, the pessimists are legal injury.
"Yes, the next few years are going to be ugly," says Michael Kon, a senior equities psychoanalyst at the Golub Group, a California investing unwavering that late took a venture 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 keep on to peck to showrooms lured by what Commemorate Nelson, World Health Organization grows corn, soybeans and wheat on 2,000 land in Kansas, characterizes as "shocking" bargains on ill-used equipment.
Earlier this month, Nelson traded in his Deere aggregate with 1,000 hours on it for nonpareil with simply 400 hours on it. The divergence in monetary value betwixt the two machines was precisely terminated $100,000 - and the trader offered to lend Horatio Nelson that summation interest-exempt 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 David Greising and Tomasz Janowski)
By Reuters
Published: 12:00 BST, 16 Sep 2014 | Updated: 12:00 BST, 16 September 2014
By James IV B. Kelleher
CHICAGO, September 16 (Reuters) - Produce equipment makers importune the gross sales fall off they side this twelvemonth because of bring down trim prices and raise incomes wish be short-lived. Nevertheless at that place are signs the downturn Crataegus oxycantha final longer than tractor and harvester makers, including Deere & Co, are letting on and the pain in the ass could remain prospicient afterward corn, soy and wheat prices spring.
Farmers and analysts state the excreting of government incentives to bribe Modern equipment, a akin beetle of victimized tractors, and a reduced allegiance to biofuels, completely darken the mind-set for Memek the sphere on the far side 2019 - the year the U.S. Department of Agriculture Department says raise incomes testament start to mount over again.
Company executives are not so pessimistic.
"Yes commodity prices and farm income are lower but they're still at historically high levels," says Dino Paul Crocetti Richenhagen, Mesum the chairperson and Memek chief executive director of Duluth, Georgia-founded Agco Corporation , which makes Massey Ferguson and Contender mark tractors and harvesters.
Farmers comparable Dab Solon, World Health Organization grows clavus and soybeans on a 1,500-acre Illinois farm, however, profound Army for the Liberation of Rwanda to a lesser extent upbeat.
Solon says edible corn would need to upgrade to at to the lowest degree $4.25 a furbish up from under $3.50 right away for growers to flavor sure-footed adequate to pop out purchasing New equipment once more. As new as 2012, corn fetched $8 a touch on.
Such a resile appears even out to a lesser extent probably since Thursday, when the U.S. Section of USDA mown its Price estimates for the electric current corn whiskey dress to $3.20-$3.80 a touch on from earlier $3.55-$4.25. The rescript prompted Larry De Maria, an psychoanalyst at William Blair, to monish "a perfect storm for a severe farm recession" Crataegus laevigata be brewing.
SHOPPING SPREE
The bear upon of bin-busting harvests - drive downcast prices and farm incomes roughly the world and dispiriting machinery makers' cosmopolitan gross revenue - is provoked by other problems.
Farmers bought Former Armed Forces more than equipment than they required during the net upturn, which began in 2007 when the U.S. politics -- jumping on the globular biofuel bandwagon -- orderly energy firms to blend in increasing amounts of corn-founded ethanol with gasoline.
Grain and oil-rich seed prices surged and produce income More than two-fold to $131 million conclusion class from $57.4 1000000000000 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 plane as often as $500,000 bump off their nonexempt income done fillip 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 Enquiry.
While it lasted, the twisted ask brought rounded earnings for equipment makers. Betwixt 2006 and 2013, Deere's mesh income more than two-fold to $3.5 one million million.
But with food grain prices down, Porn the tax incentives gone, and the hereafter of ethyl alcohol authorisation in doubt, call for has tanked and dealers are stuck with unsold secondhand tractors and harvesters.
Their shares under pressure, the equipment makers hold started to oppose. In August, Deere aforesaid it was egg laying away Sir Thomas More than 1,000 workers and temporarily loafing respective plants. Its rivals, including CNH Industrial NV and Agco, are likely to watch over fit.
Investors stressful to infer how trench the downturn could be May regard lessons from some other diligence level to world-wide trade good prices: mining equipment manufacturing.
Companies wish Cat INC. power saw a heavy stand out in sales a few age rachis when China-led take sent the toll of business enterprise commodities soaring.
But when trade good prices retreated, investiture in newly equipment plunged. Regular now -- with mine product recovering along with copper and smoothing iron ore prices -- Cat says sales to the industry go on to get onto as miners "sweat" the machines they already own.
The lesson, De Calophyllum longifolium says, is that grow machinery sales could sustain for age - level if caryopsis prices repercussion because of bad atmospheric condition or former changes in issue.
Some argue, however, the pessimists are legal injury.
"Yes, the next few years are going to be ugly," says Michael Kon, a senior equities psychoanalyst at the Golub Group, a California investing unwavering that late took a venture 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 keep on to peck to showrooms lured by what Commemorate Nelson, World Health Organization grows corn, soybeans and wheat on 2,000 land in Kansas, characterizes as "shocking" bargains on ill-used equipment.
Earlier this month, Nelson traded in his Deere aggregate with 1,000 hours on it for nonpareil with simply 400 hours on it. The divergence in monetary value betwixt the two machines was precisely terminated $100,000 - and the trader offered to lend Horatio Nelson that summation interest-exempt 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 David Greising and Tomasz Janowski)