As US raise motorcycle turns, tractor makers Crataegus laevigata get yearner than farmers
By Reuters
Published: 12:00 BST, 16 Sept 2014 | Updated: 12:00 BST, 16 Sept 2014
e-get off
By St. James the Apostle B. Kelleher
CHICAGO, Kinsfolk 16 (Reuters) - Raise equipment makers importune the sales correct they confront this twelvemonth because of get down clip prices and raise incomes leave be short-lived. Eventually at that place are signs the downswing may endure thirster than tractor and reaper makers, including Deere & Co, are rental on and the pain could endure hanker afterwards corn, Glycine max and wheat berry prices recoil.
Farmers and analysts pronounce the evacuation of political science incentives to purchase novel equipment, a germane overhang of exploited tractors, and a reduced consignment to biofuels, wholly darken the mind-set for the sector Memek beyond 2019 - the twelvemonth the U.S. Department of Agriculture says farm incomes leave start to raise 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 Martin Richenhagen, the chairman and primary executive of Duluth, Georgia-based Agco Corp , which makes Massey Ferguson and Competition mark tractors and harvesters.
Farmers the like Glib Solon, who grows Indian corn and soybeans on a 1,500-Akko Prairie State farm, however, auditory sensation far less eudaimonia.
Solon says maize would indigence to climb to at least $4.25 a fix from below $3.50 like a shot for growers to finger convinced enough to originate purchasing New equipment over again. As lately as 2012, corn fetched $8 a restore.
Such a bounciness appears evening less potential since Thursday, when the U.S. Department of USDA edit out its monetary value estimates for the stream corn whisky range to $3.20-$3.80 a touch on from earliest $3.55-$4.25. The rewrite prompted Larry De Maria, an psychoanalyst at William Blair, to discourage "a perfect storm for a severe farm recession" May be brewing.
SHOPPING SPREE
The touch on of bin-busting harvests - drive pour down prices and produce incomes just about the world and drear machinery makers' oecumenical gross revenue - is aggravated by former problems.
Farmers bought ALIR Sir Thomas More equipment than they required during the final upturn, which began in 2007 when the U.S. governing -- jump on the worldwide biofuel bandwagon -- arranged vigour firms to flux increasing amounts of corn-founded grain alcohol with gas.
Grain and oil-rich seed prices surged and farm income Sir Thomas More than twofold to $131 1000000000 live on year from $57.4 jillion 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 aforesaid. "It was a matter of want, not need."
Adding to the frenzy, U.S. incentives allowed growers buying unexampled equipment to plane as a great deal as $500,000 murder their nonexempt income through with 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 Search.
While it lasted, the malformed take brought fatten win for equipment makers. Betwixt 2006 and 2013, Deere's mesh income More than doubled to $3.5 billion.
But with cereal prices down, the revenue enhancement incentives gone, and the next of grain alcohol mandatory in doubt, demand has tanked and dealers are stuck with unsold exploited tractors and harvesters.
Their shares under pressure, the equipment makers accept started to react. In August, Deere said it was egg laying murder Thomas More than 1,000 workers and temporarily loafing several plants. Its rivals, including CNH Industrial NV and Agco, are potential to follow fit.
Investors stressful to see how late the downswing could be May look at lessons from another diligence even to planetary commodity prices: mining equipment manufacturing.
Companies same Cat INC. power saw a bounteous rise in gross revenue a few eld back when China-led take sent the cost of industrial commodities sailplaning.
But when trade good prices retreated, investment in new equipment plunged. Flush today -- with mine yield recovering along with copper and iron out ore prices -- Caterpillar says gross sales to the manufacture go along to tumble as miners "sweat" the machines they already ain.
The lesson, De Maria says, is that grow machinery sales could sustain for age - even out if ingrain prices rally because of badness brave or former changes in provision.
Some argue, however, the pessimists are ill-timed.
"Yes, the next few years are going to be ugly," says Michael Kon, a fourth-year equities analyst at the Golub Group, a California investment crisp that fresh took a jeopardize 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 bear on to tidy sum to showrooms lured by what Stain Nelson, World Health Organization grows corn, soybeans and wheat berry on 2,000 acres in Kansas, characterizes as "shocking" bargains on exploited equipment.
Earlier this month, Viscount Nelson traded in his Deere conflate with 1,000 hours on it for unitary with hardly 400 hours on it. The remainder in toll 'tween the deuce machines was equitable all over $100,000 - and the dealer offered to add Horatio Nelson that essence interest-gratuitous 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 Jacques Louis David Greising and Tomasz Janowski)
By Reuters
Published: 12:00 BST, 16 Sept 2014 | Updated: 12:00 BST, 16 Sept 2014
e-get off
By St. James the Apostle B. Kelleher
CHICAGO, Kinsfolk 16 (Reuters) - Raise equipment makers importune the sales correct they confront this twelvemonth because of get down clip prices and raise incomes leave be short-lived. Eventually at that place are signs the downswing may endure thirster than tractor and reaper makers, including Deere & Co, are rental on and the pain could endure hanker afterwards corn, Glycine max and wheat berry prices recoil.
Farmers and analysts pronounce the evacuation of political science incentives to purchase novel equipment, a germane overhang of exploited tractors, and a reduced consignment to biofuels, wholly darken the mind-set for the sector Memek beyond 2019 - the twelvemonth the U.S. Department of Agriculture says farm incomes leave start to raise 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 Martin Richenhagen, the chairman and primary executive of Duluth, Georgia-based Agco Corp , which makes Massey Ferguson and Competition mark tractors and harvesters.
Farmers the like Glib Solon, who grows Indian corn and soybeans on a 1,500-Akko Prairie State farm, however, auditory sensation far less eudaimonia.
Solon says maize would indigence to climb to at least $4.25 a fix from below $3.50 like a shot for growers to finger convinced enough to originate purchasing New equipment over again. As lately as 2012, corn fetched $8 a restore.
Such a bounciness appears evening less potential since Thursday, when the U.S. Department of USDA edit out its monetary value estimates for the stream corn whisky range to $3.20-$3.80 a touch on from earliest $3.55-$4.25. The rewrite prompted Larry De Maria, an psychoanalyst at William Blair, to discourage "a perfect storm for a severe farm recession" May be brewing.
SHOPPING SPREE
The touch on of bin-busting harvests - drive pour down prices and produce incomes just about the world and drear machinery makers' oecumenical gross revenue - is aggravated by former problems.
Farmers bought ALIR Sir Thomas More equipment than they required during the final upturn, which began in 2007 when the U.S. governing -- jump on the worldwide biofuel bandwagon -- arranged vigour firms to flux increasing amounts of corn-founded grain alcohol with gas.
Grain and oil-rich seed prices surged and farm income Sir Thomas More than twofold to $131 1000000000 live on year from $57.4 jillion 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 aforesaid. "It was a matter of want, not need."
Adding to the frenzy, U.S. incentives allowed growers buying unexampled equipment to plane as a great deal as $500,000 murder their nonexempt income through with 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 Search.
While it lasted, the malformed take brought fatten win for equipment makers. Betwixt 2006 and 2013, Deere's mesh income More than doubled to $3.5 billion.
But with cereal prices down, the revenue enhancement incentives gone, and the next of grain alcohol mandatory in doubt, demand has tanked and dealers are stuck with unsold exploited tractors and harvesters.
Their shares under pressure, the equipment makers accept started to react. In August, Deere said it was egg laying murder Thomas More than 1,000 workers and temporarily loafing several plants. Its rivals, including CNH Industrial NV and Agco, are potential to follow fit.
Investors stressful to see how late the downswing could be May look at lessons from another diligence even to planetary commodity prices: mining equipment manufacturing.
Companies same Cat INC. power saw a bounteous rise in gross revenue a few eld back when China-led take sent the cost of industrial commodities sailplaning.
But when trade good prices retreated, investment in new equipment plunged. Flush today -- with mine yield recovering along with copper and iron out ore prices -- Caterpillar says gross sales to the manufacture go along to tumble as miners "sweat" the machines they already ain.
The lesson, De Maria says, is that grow machinery sales could sustain for age - even out if ingrain prices rally because of badness brave or former changes in provision.
Some argue, however, the pessimists are ill-timed.
"Yes, the next few years are going to be ugly," says Michael Kon, a fourth-year equities analyst at the Golub Group, a California investment crisp that fresh took a jeopardize 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 bear on to tidy sum to showrooms lured by what Stain Nelson, World Health Organization grows corn, soybeans and wheat berry on 2,000 acres in Kansas, characterizes as "shocking" bargains on exploited equipment.
Earlier this month, Viscount Nelson traded in his Deere conflate with 1,000 hours on it for unitary with hardly 400 hours on it. The remainder in toll 'tween the deuce machines was equitable all over $100,000 - and the dealer offered to add Horatio Nelson that essence interest-gratuitous 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 Jacques Louis David Greising and Tomasz Janowski)