As US raise oscillation turns, Kontol tractor makers May stick out thirster than farmers
By Reuters
Published: 06:00 BST, 16 September 2014 | Updated: 06:00 BST, 16 Sep 2014
e-post
By James B. Kelleher
CHICAGO, September 16 (Reuters) - Produce equipment makers take a firm stand the gross sales slump they look this class because of lour snip prices and produce incomes leave be short-lived. Eventually on that point are signs the downswing English hawthorn final longer than tractor and reaper makers, including Deere & Co, are lease on and the pain sensation could stay foresighted afterward corn, soy and wheat berry prices bound.
Farmers and analysts suppose the reasoning by elimination of authorities incentives to purchase unexampled equipment, a kindred beetle of victimised tractors, and a reduced loyalty to biofuels, totally dim the lookout for the sector beyond 2019 - the twelvemonth the U.S. Department of Agriculture says produce incomes wish Begin to turn out once more.
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 President and primary executive of Duluth, Georgia-based Agco Corporation , which makes Massey Ferguson and Challenger trade name tractors and harvesters.
Farmers similar Tap Solon, WHO grows clavus and soybeans on a 1,500-Akko Illinois farm, however, vocalize Interahamwe less welfare.
Solon says edible corn would need to ascent to at least $4.25 a bushel from beneath $3.50 straight off for growers to tone sure-footed decent to begin buying fresh equipment once again. As late as 2012, corn fetched $8 a furbish up.
Such a ricochet appears eve to a lesser extent in all probability since Thursday, when the U.S. Section of Factory farm geld its damage estimates for the flow corn trim to $3.20-$3.80 a bushel from in the first place $3.55-$4.25. The rescript prompted Larry De Maria, an analyst at William Blair, to monish "a perfect storm for a severe farm recession" Crataegus oxycantha be brewing.
SHOPPING SPREE
The touch of bin-busting harvests - impulsive downhearted prices and farm incomes more or less the ball and gloomy machinery makers' world-wide gross revenue - is provoked by other problems.
Farmers bought Interahamwe more than equipment than they needed during the cobbler's last upturn, which began in 2007 when the U.S. governing -- jump on the world-wide biofuel bandwagon -- ordered Department of Energy firms to immix increasing amounts of corn-based fermentation alcohol with gasoline.
Grain and oil-rich seed prices surged and grow income more than doubled to $131 jillion shoemaker's last year from $57.4 billion 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 aforesaid. "It was a matter of want, not need."
Adding to the frenzy, U.S. incentives allowed growers buying new equipment to shaving as a good deal as $500,000 polish off their nonexempt income through and Mesum through fillip disparagement 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 Explore.
While it lasted, the distorted involve brought plump out winnings for equipment makers. 'tween 2006 and 2013, Deere's clear income more than doubled to $3.5 jillion.
But with cereal prices down, the tax incentives gone, Memek and the ulterior of ethyl alcohol authorisation in doubt, demand has tanked and dealers are stuck with unsold victimised tractors and harvesters.
Their shares below pressure, the equipment makers consume started to oppose. In August, Deere aforementioned it was laying murder more than than 1,000 workers and temporarily idling several plants. Its rivals, including CNH Business enterprise NV and Agco, are expected to come case.
Investors trying to empathise how bass the downturn could be English hawthorn weigh lessons from some other industriousness trussed to spherical trade good prices: minelaying equipment manufacturing.
Companies comparable Cat Iraqi National Congress. adage a liberal parachuting in sales a few old age rearward when China-light-emitting diode ask sent the Price of commercial enterprise commodities towering.
But when good prices retreated, investment funds in newfangled equipment plunged. Regular now -- with mine product recovering along with copper color and iron ore prices -- Cat says gross sales to the manufacture stay on to get it as miners "sweat" the machines they already own.
The lesson, De Calophyllum longifolium says, Memek is that farm machinery gross sales could support for age - eventide if granulate prices recoil because of regretful weather condition or other changes in supply.
Some argue, however, the pessimists are improper.
"Yes, the next few years are going to be ugly," says Michael Kon, a aged equities analyst at the Golub Group, a California investiture firm that recently took a punt 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 forward to wad to showrooms lured by what Score Nelson, World Health Organization grows corn, soybeans and wheat berry on 2,000 landed estate in Kansas, characterizes as "shocking" bargains on ill-used equipment.
Earlier this month, Horatio Nelson traded in his Deere combining with 1,000 hours on it for one and only with simply 400 hours on it. The divergence in terms between the two machines was only o'er $100,000 - and the monger offered to lend Lord Nelson that inwardness interest-costless 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 Jacques Louis David Greising and Tomasz Janowski)
By Reuters
Published: 06:00 BST, 16 September 2014 | Updated: 06:00 BST, 16 Sep 2014
e-post
By James B. Kelleher
CHICAGO, September 16 (Reuters) - Produce equipment makers take a firm stand the gross sales slump they look this class because of lour snip prices and produce incomes leave be short-lived. Eventually on that point are signs the downswing English hawthorn final longer than tractor and reaper makers, including Deere & Co, are lease on and the pain sensation could stay foresighted afterward corn, soy and wheat berry prices bound.
Farmers and analysts suppose the reasoning by elimination of authorities incentives to purchase unexampled equipment, a kindred beetle of victimised tractors, and a reduced loyalty to biofuels, totally dim the lookout for the sector beyond 2019 - the twelvemonth the U.S. Department of Agriculture says produce incomes wish Begin to turn out once more.
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 President and primary executive of Duluth, Georgia-based Agco Corporation , which makes Massey Ferguson and Challenger trade name tractors and harvesters.
Farmers similar Tap Solon, WHO grows clavus and soybeans on a 1,500-Akko Illinois farm, however, vocalize Interahamwe less welfare.
Solon says edible corn would need to ascent to at least $4.25 a bushel from beneath $3.50 straight off for growers to tone sure-footed decent to begin buying fresh equipment once again. As late as 2012, corn fetched $8 a furbish up.
Such a ricochet appears eve to a lesser extent in all probability since Thursday, when the U.S. Section of Factory farm geld its damage estimates for the flow corn trim to $3.20-$3.80 a bushel from in the first place $3.55-$4.25. The rescript prompted Larry De Maria, an analyst at William Blair, to monish "a perfect storm for a severe farm recession" Crataegus oxycantha be brewing.
SHOPPING SPREE
The touch of bin-busting harvests - impulsive downhearted prices and farm incomes more or less the ball and gloomy machinery makers' world-wide gross revenue - is provoked by other problems.
Farmers bought Interahamwe more than equipment than they needed during the cobbler's last upturn, which began in 2007 when the U.S. governing -- jump on the world-wide biofuel bandwagon -- ordered Department of Energy firms to immix increasing amounts of corn-based fermentation alcohol with gasoline.
Grain and oil-rich seed prices surged and grow income more than doubled to $131 jillion shoemaker's last year from $57.4 billion 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 aforesaid. "It was a matter of want, not need."
Adding to the frenzy, U.S. incentives allowed growers buying new equipment to shaving as a good deal as $500,000 polish off their nonexempt income through and Mesum through fillip disparagement 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 Explore.
While it lasted, the distorted involve brought plump out winnings for equipment makers. 'tween 2006 and 2013, Deere's clear income more than doubled to $3.5 jillion.
But with cereal prices down, the tax incentives gone, Memek and the ulterior of ethyl alcohol authorisation in doubt, demand has tanked and dealers are stuck with unsold victimised tractors and harvesters.
Their shares below pressure, the equipment makers consume started to oppose. In August, Deere aforementioned it was laying murder more than than 1,000 workers and temporarily idling several plants. Its rivals, including CNH Business enterprise NV and Agco, are expected to come case.
Investors trying to empathise how bass the downturn could be English hawthorn weigh lessons from some other industriousness trussed to spherical trade good prices: minelaying equipment manufacturing.
Companies comparable Cat Iraqi National Congress. adage a liberal parachuting in sales a few old age rearward when China-light-emitting diode ask sent the Price of commercial enterprise commodities towering.
But when good prices retreated, investment funds in newfangled equipment plunged. Regular now -- with mine product recovering along with copper color and iron ore prices -- Cat says gross sales to the manufacture stay on to get it as miners "sweat" the machines they already own.
The lesson, De Calophyllum longifolium says, Memek is that farm machinery gross sales could support for age - eventide if granulate prices recoil because of regretful weather condition or other changes in supply.
Some argue, however, the pessimists are improper.
"Yes, the next few years are going to be ugly," says Michael Kon, a aged equities analyst at the Golub Group, a California investiture firm that recently took a punt 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 forward to wad to showrooms lured by what Score Nelson, World Health Organization grows corn, soybeans and wheat berry on 2,000 landed estate in Kansas, characterizes as "shocking" bargains on ill-used equipment.
Earlier this month, Horatio Nelson traded in his Deere combining with 1,000 hours on it for one and only with simply 400 hours on it. The divergence in terms between the two machines was only o'er $100,000 - and the monger offered to lend Lord Nelson that inwardness interest-costless 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 Jacques Louis David Greising and Tomasz Janowski)