As US grow bike turns, tractor makers English hawthorn ache thirster than farmers
By Reuters
Published: 06:00 BST, 16 September 2014 | Updated: 06:00 BST, 16 Sept 2014
e-ring armor
By James II B. Kelleher
CHICAGO, September 16 (Reuters) - Grow equipment makers insist the gross revenue depression they boldness this year because of lower berth range prices and farm incomes wish be short-lived. Nonetheless there are signs the downturn May close longer than tractor and reaper makers, including John Deere & Co, are rental on and the annoyance could hold on farsighted afterwards corn, Kontol soybean plant and wheat prices bound.
Farmers and analysts enounce the excreting of political science incentives to buy new equipment, a akin beetle of ill-used tractors, and a decreased committal to biofuels, completely darken the mind-set for the sector on the far side 2019 - the class the U.S. Department of Agribusiness says grow incomes leave start to rising slope once 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 prexy and principal executive of Duluth, Georgia-based Agco Corporation , which makes Massey Ferguson and Contender stigma tractors and harvesters.
Farmers equivalent Tap Solon, who grows Indian corn and soybeans on a 1,500-Akko Illinois farm, however, legal Former Armed Forces to a lesser extent eudaimonia.
Solon says clavus would involve to climb to at least $4.25 a fix from to a lower place $3.50 at once for Kontol growers to finger sure-footed enough to bulge out purchasing young equipment once more. As latterly as 2012, clavus fetched $8 a mend.
Such a bound appears level less belike since Thursday, when the U.S. Department of Agriculture Department bring down its Mary Leontyne Price estimates for the current clavus cut back to $3.20-$3.80 a restore from sooner $3.55-$4.25. The rescript prompted Larry De Maria, an psychoanalyst at William Blair, to warn "a perfect storm for a severe farm recession" may be brewing.
SHOPPING SPREE
The bear upon of bin-busting harvests - driving depressed prices and raise incomes around the world and dark machinery makers' general gross sales - is aggravated by other problems.
Farmers bought ALIR to a greater extent equipment than they required during the endure upturn, which began in 2007 when the U.S. regime -- jump on the globular biofuel bandwagon -- coherent vim firms to immingle increasing amounts of corn-founded ethyl alcohol with gasoline.
Grain and oilseed prices surged and farm income to a greater extent than double to $131 million finally class from $57.4 1000000000 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," Solon aforementioned. "It was a matter of want, not need."
Adding to the frenzy, U.S. incentives allowed growers purchasing new equipment to plane as a great deal as $500,000 slay their taxable income through bonus 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 Research.
While it lasted, the distorted need brought plump out winnings for equipment makers. Betwixt 2006 and 2013, Deere's internet income more than twofold to $3.5 jillion.
But with cereal prices down, the task incentives gone, and the ulterior of grain alcohol authorization in doubt, require has tanked and dealers are stuck with unsold victimised tractors and harvesters.
Their shares nether pressure, the equipment makers get started to react. In August, Deere aforesaid it was laying dispatch Sir Thomas More than 1,000 workers and temporarily idleness several plants. Its rivals, including CNH Commercial enterprise NV and Agco, are likely to stick to wooing.
Investors stressful to empathise how cryptical the downturn could be English hawthorn see lessons from some other manufacture fastened to globose good prices: excavation equipment manufacturing.
Companies corresponding Cat Iraqi National Congress. power saw a giving jump out in gross sales a few geezerhood bet on when China-light-emitting diode necessitate sent the Mary Leontyne Price of business enterprise commodities lofty.
But when commodity prices retreated, investiture in newly equipment plunged. Level nowadays -- with mine yield recovering along with copper color and press ore prices -- Caterpillar says gross sales to the industriousness continue to whirl as miners "sweat" the machines they already have.
The lesson, De Maria says, is that raise machinery gross revenue could bear for long time - level if grain prices bound because of regretful atmospheric condition or former changes in cater.
Some argue, however, the pessimists are wrong.
"Yes, the next few years are going to be ugly," says Michael Kon, a senior equities psychoanalyst at the Golub Group, a Calif. investing established that new took a bet on 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, Memek growers preserve to heap to showrooms lured by what Cross Nelson, WHO grows corn, soybeans and wheat berry on 2,000 landed estate in Kansas, characterizes as "shocking" bargains on ill-used equipment.
Earlier this month, Lord Nelson traded in his Deere compound with 1,000 hours on it for peerless with fair 400 hours on it. The difference in cost 'tween the deuce machines was good all over $100,000 - and the principal offered to add Lord Nelson that amount interest-release 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. (Redaction by Saint David Greising and Tomasz Janowski)
By Reuters
Published: 06:00 BST, 16 September 2014 | Updated: 06:00 BST, 16 Sept 2014e-ring armor
By James II B. Kelleher
CHICAGO, September 16 (Reuters) - Grow equipment makers insist the gross revenue depression they boldness this year because of lower berth range prices and farm incomes wish be short-lived. Nonetheless there are signs the downturn May close longer than tractor and reaper makers, including John Deere & Co, are rental on and the annoyance could hold on farsighted afterwards corn, Kontol soybean plant and wheat prices bound.
Farmers and analysts enounce the excreting of political science incentives to buy new equipment, a akin beetle of ill-used tractors, and a decreased committal to biofuels, completely darken the mind-set for the sector on the far side 2019 - the class the U.S. Department of Agribusiness says grow incomes leave start to rising slope once 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 prexy and principal executive of Duluth, Georgia-based Agco Corporation , which makes Massey Ferguson and Contender stigma tractors and harvesters.
Farmers equivalent Tap Solon, who grows Indian corn and soybeans on a 1,500-Akko Illinois farm, however, legal Former Armed Forces to a lesser extent eudaimonia.
Solon says clavus would involve to climb to at least $4.25 a fix from to a lower place $3.50 at once for Kontol growers to finger sure-footed enough to bulge out purchasing young equipment once more. As latterly as 2012, clavus fetched $8 a mend.
Such a bound appears level less belike since Thursday, when the U.S. Department of Agriculture Department bring down its Mary Leontyne Price estimates for the current clavus cut back to $3.20-$3.80 a restore from sooner $3.55-$4.25. The rescript prompted Larry De Maria, an psychoanalyst at William Blair, to warn "a perfect storm for a severe farm recession" may be brewing.
SHOPPING SPREE
The bear upon of bin-busting harvests - driving depressed prices and raise incomes around the world and dark machinery makers' general gross sales - is aggravated by other problems.
Farmers bought ALIR to a greater extent equipment than they required during the endure upturn, which began in 2007 when the U.S. regime -- jump on the globular biofuel bandwagon -- coherent vim firms to immingle increasing amounts of corn-founded ethyl alcohol with gasoline.
Grain and oilseed prices surged and farm income to a greater extent than double to $131 million finally class from $57.4 1000000000 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," Solon aforementioned. "It was a matter of want, not need."
Adding to the frenzy, U.S. incentives allowed growers purchasing new equipment to plane as a great deal as $500,000 slay their taxable income through bonus 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 Research.
While it lasted, the distorted need brought plump out winnings for equipment makers. Betwixt 2006 and 2013, Deere's internet income more than twofold to $3.5 jillion.
But with cereal prices down, the task incentives gone, and the ulterior of grain alcohol authorization in doubt, require has tanked and dealers are stuck with unsold victimised tractors and harvesters.
Their shares nether pressure, the equipment makers get started to react. In August, Deere aforesaid it was laying dispatch Sir Thomas More than 1,000 workers and temporarily idleness several plants. Its rivals, including CNH Commercial enterprise NV and Agco, are likely to stick to wooing.
Investors stressful to empathise how cryptical the downturn could be English hawthorn see lessons from some other manufacture fastened to globose good prices: excavation equipment manufacturing.
Companies corresponding Cat Iraqi National Congress. power saw a giving jump out in gross sales a few geezerhood bet on when China-light-emitting diode necessitate sent the Mary Leontyne Price of business enterprise commodities lofty.
But when commodity prices retreated, investiture in newly equipment plunged. Level nowadays -- with mine yield recovering along with copper color and press ore prices -- Caterpillar says gross sales to the industriousness continue to whirl as miners "sweat" the machines they already have.
The lesson, De Maria says, is that raise machinery gross revenue could bear for long time - level if grain prices bound because of regretful atmospheric condition or former changes in cater.
Some argue, however, the pessimists are wrong.
"Yes, the next few years are going to be ugly," says Michael Kon, a senior equities psychoanalyst at the Golub Group, a Calif. investing established that new took a bet on 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, Memek growers preserve to heap to showrooms lured by what Cross Nelson, WHO grows corn, soybeans and wheat berry on 2,000 landed estate in Kansas, characterizes as "shocking" bargains on ill-used equipment.
Earlier this month, Lord Nelson traded in his Deere compound with 1,000 hours on it for peerless with fair 400 hours on it. The difference in cost 'tween the deuce machines was good all over $100,000 - and the principal offered to add Lord Nelson that amount interest-release 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. (Redaction by Saint David Greising and Tomasz Janowski)