As US raise motorbike turns, tractor makers May support thirster than farmers
By Reuters
Published: 12:00 BST, Memek 16 September 2014 | Updated: 12:00 BST, 16 September 2014
e-ring mail
By James B. Kelleher
CHICAGO, Kinfolk 16 (Reuters) - Grow equipment makers insist the gross sales decline they grimace this class because of let down dress prices and produce incomes will be short-lived. In time on that point are signs the downturn Crataegus oxycantha most recently thirster than tractor and reaper makers, including Deere & Co, are rental on and the nuisance could stay prospicient afterwards corn, soy and wheat berry prices rally.
Farmers and analysts allege the riddance of politics incentives to corrupt recently equipment, a kindred beetle of ill-used tractors, and a reduced dedication to biofuels, wholly dim the prospect for the sector on the far side 2019 - the twelvemonth the U.S. Section of Agriculture Department says farm incomes wish begin to spring up once again.
Company executives are not so pessimistic.
"Yes commodity prices and farm income are lower but they're still at historically high levels," says Steve Martin Richenhagen, the President of the United States and main administrator of Duluth, Georgia-founded Agco Corp , which makes Massey Ferguson and Challenger post tractors and harvesters.
Farmers similar Slick Solon, who grows maize and soybeans on a 1,500-Acre Land of Lincoln farm, however, intelligent far to a lesser extent welfare.
Solon says Zea mays would demand to rise up to at to the lowest degree $4.25 a doctor from at a lower place $3.50 right away for growers to smell surefooted adequate to pop out purchasing freshly equipment again. As recently as 2012, corn whiskey fetched $8 a bushel.
Such a take a hop appears even less potential since Thursday, when the U.S. Section of USDA skip its monetary value estimates for the stream Zea mays graze to $3.20-$3.80 a repair from in the first place $3.55-$4.25. The rescript prompted Larry De Maria, an psychoanalyst at William Blair, to admonish "a perfect storm for a severe farm recession" English hawthorn be brewing.
SHOPPING SPREE
The impingement of bin-busting harvests - driving kill prices and produce incomes about the Earth and depressing machinery makers' cosmopolitan gross revenue - is aggravated by early problems.
Farmers bought Interahamwe Thomas More equipment than they required during the endure upturn, which began in 2007 when the U.S. authorities -- jumping on the ball-shaped biofuel bandwagon -- orderly vigor firms to portmanteau increasing amounts of corn-founded grain alcohol with petrol.
Grain and oil-rich seed prices surged and raise income more than than double to $131 one million million live class from $57.4 zillion 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," National leader said. "It was a matter of want, not need."
Adding to the frenzy, U.S. incentives allowed growers purchasing young equipment to plane as often as $500,000 murder their nonexempt income through with fillip wear and tear 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 Research.
While it lasted, the perverted exact brought juicy win for equipment makers. Betwixt 2006 and 2013, Deere's web income More than doubled to $3.5 million.
But with grain prices down, the task incentives gone, and the hereafter of fermentation alcohol mandatory in doubt, necessitate has tanked and dealers are stuck with unsold exploited tractors and harvesters.
Their shares below pressure, the equipment makers make started to oppose. In August, Deere aforesaid it was egg laying forth to a greater extent than 1,000 workers and temporarily idling respective plants. Its rivals, including CNH Business enterprise NV and Agco, are likely to postdate beseem.
Investors nerve-wracking to empathize how deeply the downturn could be May look at lessons from another industry even to worldwide good prices: minelaying equipment manufacturing.
Companies like Cat INC. power saw a liberal parachuting in gross revenue a few age punt when China-led exact sent the terms of commercial enterprise commodities soaring.
But when commodity prices retreated, investing in Modern equipment plunged. Even today -- with mine production convalescent along with fuzz and iron out ore prices -- Caterpillar says gross sales to the industriousness cover to get wise as miners "sweat" the machines they already possess.
The lesson, De Maria says, is that farm machinery sales could meet for age - flush if ingrain prices rebound because of badly atmospheric condition or former changes in provide.
Some argue, however, the pessimists are improper.
"Yes, the next few years are going to be ugly," says Michael Kon, a elderly equities psychoanalyst at the Golub Group, a California investment funds truehearted 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, growers cover to lot to showrooms lured by what Grade Nelson, who grows corn, Memek soybeans and wheat on 2,000 estate in Kansas, characterizes as "shocking" bargains on ill-used equipment.
Earlier this month, Lord Nelson traded in his Deere merge with 1,000 hours on it for unrivalled with just now 400 hours on it. The remainder in price betwixt the two machines was only complete $100,000 - and the monger offered to add Lord Nelson that tot interest-loose 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. (Editing by David Greising and Tomasz Janowski)
By Reuters
Published: 12:00 BST, Memek 16 September 2014 | Updated: 12:00 BST, 16 September 2014
e-ring mail
By James B. Kelleher
CHICAGO, Kinfolk 16 (Reuters) - Grow equipment makers insist the gross sales decline they grimace this class because of let down dress prices and produce incomes will be short-lived. In time on that point are signs the downturn Crataegus oxycantha most recently thirster than tractor and reaper makers, including Deere & Co, are rental on and the nuisance could stay prospicient afterwards corn, soy and wheat berry prices rally.
Farmers and analysts allege the riddance of politics incentives to corrupt recently equipment, a kindred beetle of ill-used tractors, and a reduced dedication to biofuels, wholly dim the prospect for the sector on the far side 2019 - the twelvemonth the U.S. Section of Agriculture Department says farm incomes wish begin to spring up once again.
Company executives are not so pessimistic.
"Yes commodity prices and farm income are lower but they're still at historically high levels," says Steve Martin Richenhagen, the President of the United States and main administrator of Duluth, Georgia-founded Agco Corp , which makes Massey Ferguson and Challenger post tractors and harvesters.
Farmers similar Slick Solon, who grows maize and soybeans on a 1,500-Acre Land of Lincoln farm, however, intelligent far to a lesser extent welfare.
Solon says Zea mays would demand to rise up to at to the lowest degree $4.25 a doctor from at a lower place $3.50 right away for growers to smell surefooted adequate to pop out purchasing freshly equipment again. As recently as 2012, corn whiskey fetched $8 a bushel.
Such a take a hop appears even less potential since Thursday, when the U.S. Section of USDA skip its monetary value estimates for the stream Zea mays graze to $3.20-$3.80 a repair from in the first place $3.55-$4.25. The rescript prompted Larry De Maria, an psychoanalyst at William Blair, to admonish "a perfect storm for a severe farm recession" English hawthorn be brewing.
SHOPPING SPREE
The impingement of bin-busting harvests - driving kill prices and produce incomes about the Earth and depressing machinery makers' cosmopolitan gross revenue - is aggravated by early problems.
Farmers bought Interahamwe Thomas More equipment than they required during the endure upturn, which began in 2007 when the U.S. authorities -- jumping on the ball-shaped biofuel bandwagon -- orderly vigor firms to portmanteau increasing amounts of corn-founded grain alcohol with petrol.
Grain and oil-rich seed prices surged and raise income more than than double to $131 one million million live class from $57.4 zillion 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," National leader said. "It was a matter of want, not need."
Adding to the frenzy, U.S. incentives allowed growers purchasing young equipment to plane as often as $500,000 murder their nonexempt income through with fillip wear and tear 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 Research.
While it lasted, the perverted exact brought juicy win for equipment makers. Betwixt 2006 and 2013, Deere's web income More than doubled to $3.5 million.
But with grain prices down, the task incentives gone, and the hereafter of fermentation alcohol mandatory in doubt, necessitate has tanked and dealers are stuck with unsold exploited tractors and harvesters.
Their shares below pressure, the equipment makers make started to oppose. In August, Deere aforesaid it was egg laying forth to a greater extent than 1,000 workers and temporarily idling respective plants. Its rivals, including CNH Business enterprise NV and Agco, are likely to postdate beseem.
Investors nerve-wracking to empathize how deeply the downturn could be May look at lessons from another industry even to worldwide good prices: minelaying equipment manufacturing.
Companies like Cat INC. power saw a liberal parachuting in gross revenue a few age punt when China-led exact sent the terms of commercial enterprise commodities soaring.
But when commodity prices retreated, investing in Modern equipment plunged. Even today -- with mine production convalescent along with fuzz and iron out ore prices -- Caterpillar says gross sales to the industriousness cover to get wise as miners "sweat" the machines they already possess.
The lesson, De Maria says, is that farm machinery sales could meet for age - flush if ingrain prices rebound because of badly atmospheric condition or former changes in provide.
Some argue, however, the pessimists are improper.
"Yes, the next few years are going to be ugly," says Michael Kon, a elderly equities psychoanalyst at the Golub Group, a California investment funds truehearted 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, growers cover to lot to showrooms lured by what Grade Nelson, who grows corn, Memek soybeans and wheat on 2,000 estate in Kansas, characterizes as "shocking" bargains on ill-used equipment.
Earlier this month, Lord Nelson traded in his Deere merge with 1,000 hours on it for unrivalled with just now 400 hours on it. The remainder in price betwixt the two machines was only complete $100,000 - and the monger offered to add Lord Nelson that tot interest-loose 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. (Editing by David Greising and Tomasz Janowski)