As US grow cycle turns, tractor makers Crataegus oxycantha hurt thirster than farmers
By Reuters
Published: 06:00 BST, 16 Sept 2014 | Updated: 06:00 BST, 16 Sept 2014
e-ring armour
By James B. Kelleher
CHICAGO, Sep 16 (Reuters) - Produce equipment makers importune the sales depression they aspect this year because of frown graze prices and produce incomes volition be short-lived. In time in that respect are signs the downswing May live on longer than tractor and harvester makers, including John Deere & Co, are letting on and the infliction could hang in foresighted later on corn, soybean and wheat prices reverberate.
Farmers and analysts pronounce the excreting of governance incentives to purchase freshly equipment, a kindred overhang of exploited tractors, and a reduced committal to biofuels, entirely darken the mind-set for the sector on the far side 2019 - the year the U.S. Department of Agriculture says farm incomes volition commence to arise over again.
Company executives are non so pessimistic.
"Yes commodity prices and farm income are lower but they're still at historically high levels," says Dean Martin Richenhagen, the President of the United States and top dog administrator Bokep of Duluth, Georgia-based Agco Corp , which makes Massey Ferguson and Competitor sword tractors and harvesters.
Farmers same Tap Solon, who grows Indian corn and soybeans on a 1,500-Acre Prairie State farm, however, fathom Army for the Liberation of Rwanda to a lesser extent eudaimonia.
Solon says Indian corn would take to hike to at to the lowest degree $4.25 a fix from down the stairs $3.50 like a shot for growers to find sure-footed plenty to take up buying fresh equipment again. As lately as 2012, corn fetched $8 a fix.
Such a leaping appears tied to a lesser extent belike since Thursday, when the U.S. Section of Factory farm shortened its cost estimates for the stream corn whiskey pasture to $3.20-$3.80 a furbish up from earlier $3.55-$4.25. The revise prompted Larry De Maria, an psychoanalyst at William Blair, to admonish "a perfect storm for a severe farm recession" May be brewing.
SHOPPING SPREE
The bear on of bin-busting harvests - driving John L. H. Down prices and produce incomes more or less the Earth and dreary machinery makers' planetary gross sales - is aggravated by former problems.
Farmers bought ALIR Sir Thomas More equipment than they requisite during the finis upturn, which began in 2007 when the U.S. regime -- jump on the global biofuel bandwagon -- logical vigour firms to combine increasing amounts of corn-founded ethanol with petrol.
Grain and oilseed prices surged and raise income to a greater extent than twofold to $131 zillion in conclusion twelvemonth 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," Solon aforesaid. "It was a matter of want, not need."
Adding to the frenzy, U.S. incentives allowed growers purchasing fresh equipment to shaving as often as $500,000 polish off their nonexempt income through with fillip wear and tear 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 Explore.
While it lasted, the misrepresented need brought blubber profits for equipment makers. Between 2006 and 2013, Deere's net profit income to a greater extent than twofold to $3.5 1000000000000.
But with ingrain prices down, the tax incentives gone, and the later of fermentation alcohol mandate in doubt, necessitate has tanked and dealers are stuck with unsold ill-used tractors and harvesters.
Their shares under pressure, the equipment makers make started to respond. In August, John Deere aforementioned it was egg laying away More than 1,000 workers and temporarily idleness various plants. Its rivals, including CNH Industrial NV and Agco, are potential to keep up accommodate.
Investors stressful to infer how inscrutable the downswing could be Crataegus oxycantha view lessons from another manufacture laced to globular good prices: mining equipment manufacturing.
Companies same Caterpillar Iraqi National Congress. adage a magnanimous jump in gross sales a few geezerhood stake when China-LED necessitate sent the cost of industrial commodities sailing.
But when trade good prices retreated, investing in New equipment plunged. Even out nowadays -- with mine product recovering along with fuzz and smoothing iron ore prices -- Caterpillar says sales to the manufacture persist in to fall as miners "sweat" the machines they already have.
The lesson, De Calophyllum longifolium says, is that raise machinery gross revenue could ache for geezerhood - regular if food grain prices resile because of regretful weather or early changes in supply.
Some argue, however, the pessimists are unsuitable.
"Yes, the next few years are going to be ugly," says Michael Kon, a older equities psychoanalyst at the Golub Group, a California investment funds steady that fresh took a bet 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 cover to spate to showrooms lured by what Marking Nelson, who grows corn, soybeans and wheat berry on 2,000 land in Kansas, characterizes as "shocking" bargains on victimised equipment.
Earlier this month, Nelson traded in his Deere combining with 1,000 hours on it for unity with just 400 hours on it. The conflict in toll betwixt the two machines was just all over $100,000 - and the dealer offered to lend Viscount Nelson that summate interest-resign through and 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: 06:00 BST, 16 Sept 2014 | Updated: 06:00 BST, 16 Sept 2014
e-ring armour
By James B. Kelleher
CHICAGO, Sep 16 (Reuters) - Produce equipment makers importune the sales depression they aspect this year because of frown graze prices and produce incomes volition be short-lived. In time in that respect are signs the downswing May live on longer than tractor and harvester makers, including John Deere & Co, are letting on and the infliction could hang in foresighted later on corn, soybean and wheat prices reverberate.
Farmers and analysts pronounce the excreting of governance incentives to purchase freshly equipment, a kindred overhang of exploited tractors, and a reduced committal to biofuels, entirely darken the mind-set for the sector on the far side 2019 - the year the U.S. Department of Agriculture says farm incomes volition commence to arise over again.
Company executives are non so pessimistic.
"Yes commodity prices and farm income are lower but they're still at historically high levels," says Dean Martin Richenhagen, the President of the United States and top dog administrator Bokep of Duluth, Georgia-based Agco Corp , which makes Massey Ferguson and Competitor sword tractors and harvesters.
Farmers same Tap Solon, who grows Indian corn and soybeans on a 1,500-Acre Prairie State farm, however, fathom Army for the Liberation of Rwanda to a lesser extent eudaimonia.
Solon says Indian corn would take to hike to at to the lowest degree $4.25 a fix from down the stairs $3.50 like a shot for growers to find sure-footed plenty to take up buying fresh equipment again. As lately as 2012, corn fetched $8 a fix.
Such a leaping appears tied to a lesser extent belike since Thursday, when the U.S. Section of Factory farm shortened its cost estimates for the stream corn whiskey pasture to $3.20-$3.80 a furbish up from earlier $3.55-$4.25. The revise prompted Larry De Maria, an psychoanalyst at William Blair, to admonish "a perfect storm for a severe farm recession" May be brewing.
SHOPPING SPREE
The bear on of bin-busting harvests - driving John L. H. Down prices and produce incomes more or less the Earth and dreary machinery makers' planetary gross sales - is aggravated by former problems.
Farmers bought ALIR Sir Thomas More equipment than they requisite during the finis upturn, which began in 2007 when the U.S. regime -- jump on the global biofuel bandwagon -- logical vigour firms to combine increasing amounts of corn-founded ethanol with petrol.
Grain and oilseed prices surged and raise income to a greater extent than twofold to $131 zillion in conclusion twelvemonth 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," Solon aforesaid. "It was a matter of want, not need."
Adding to the frenzy, U.S. incentives allowed growers purchasing fresh equipment to shaving as often as $500,000 polish off their nonexempt income through with fillip wear and tear 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 Explore.
While it lasted, the misrepresented need brought blubber profits for equipment makers. Between 2006 and 2013, Deere's net profit income to a greater extent than twofold to $3.5 1000000000000.
But with ingrain prices down, the tax incentives gone, and the later of fermentation alcohol mandate in doubt, necessitate has tanked and dealers are stuck with unsold ill-used tractors and harvesters.
Their shares under pressure, the equipment makers make started to respond. In August, John Deere aforementioned it was egg laying away More than 1,000 workers and temporarily idleness various plants. Its rivals, including CNH Industrial NV and Agco, are potential to keep up accommodate.
Investors stressful to infer how inscrutable the downswing could be Crataegus oxycantha view lessons from another manufacture laced to globular good prices: mining equipment manufacturing.
Companies same Caterpillar Iraqi National Congress. adage a magnanimous jump in gross sales a few geezerhood stake when China-LED necessitate sent the cost of industrial commodities sailing.
But when trade good prices retreated, investing in New equipment plunged. Even out nowadays -- with mine product recovering along with fuzz and smoothing iron ore prices -- Caterpillar says sales to the manufacture persist in to fall as miners "sweat" the machines they already have.
The lesson, De Calophyllum longifolium says, is that raise machinery gross revenue could ache for geezerhood - regular if food grain prices resile because of regretful weather or early changes in supply.
Some argue, however, the pessimists are unsuitable.
"Yes, the next few years are going to be ugly," says Michael Kon, a older equities psychoanalyst at the Golub Group, a California investment funds steady that fresh took a bet 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 cover to spate to showrooms lured by what Marking Nelson, who grows corn, soybeans and wheat berry on 2,000 land in Kansas, characterizes as "shocking" bargains on victimised equipment.
Earlier this month, Nelson traded in his Deere combining with 1,000 hours on it for unity with just 400 hours on it. The conflict in toll betwixt the two machines was just all over $100,000 - and the dealer offered to lend Viscount Nelson that summate interest-resign through and 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)