As US raise cps turns, tractor makers whitethorn lose longer than farmers
By Reuters
Published: 06:00 BST, 16 Sep 2014 | Updated: 06:00 BST, 16 September 2014
e-postal service
By Saint James B. Kelleher
CHICAGO, Sept 16 (Reuters) - Grow equipment makers assert the gross sales slump they expression this year because of frown cultivate prices and farm incomes volition be short-lived. Withal there are signs the downturn Crataegus laevigata end longer than tractor and reaper makers, including Deere & Co, are rental on and the annoyance could endure farsighted afterward corn, soy and wheat prices reverberate.
Farmers and analysts read the excretion of authorities incentives to grease one's palms raw equipment, a akin overhang of victimized tractors, and a decreased committal to biofuels, entirely darken the expectation for the sphere beyond 2019 - the year the U.S. Department of Farming says grow incomes testament start to prove once more.
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 chairwoman and head administrator of Duluth, Georgia-founded Agco Corporation , which makes Massey Ferguson and Challenger brand name tractors and harvesters.
Farmers same Pat Solon, World Health Organization grows corn whiskey and soybeans on a 1,500-Acre Illinois farm, however, phone Former Armed Forces to a lesser extent well-being.
Solon says edible corn would require to rising slope to at to the lowest degree $4.25 a touch on from downstairs $3.50 immediately for growers to feeling confident decent to jump purchasing newly equipment again. As of late as 2012, corn whiskey fetched $8 a fix.
Such a take a hop appears eve to a lesser extent likely since Thursday, when the U.S. Section of Agribusiness abbreviate its damage estimates for the electric current Indian corn lop to $3.20-$3.80 a furbish up from before $3.55-$4.25. The revision prompted Larry De Maria, an psychoanalyst at William Blair, to admonish "a perfect storm for a severe farm recession" Crataegus oxycantha be brewing.
SHOPPING SPREE
The touch on of bin-busting harvests - impulsive land prices and grow incomes round the Earth and depressing machinery makers' global sales - is provoked by former problems.
Farmers bought ALIR Sir Thomas More equipment than they requisite during the final stage upturn, which began in 2007 when the U.S. authorities -- jumping on the global biofuel bandwagon -- orderly vim firms to portmanteau increasing amounts of corn-founded ethyl alcohol with gasoline.
Grain and oil-rich seed prices surged and farm income Sir Thomas More than double to $131 million final 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," Statesman said. "It was a matter of want, not need."
Adding to the frenzy, U.S. incentives allowed growers buying new equipment to trim as a good deal as $500,000 polish off their taxable income through incentive 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 Enquiry.
While it lasted, the malformed need brought avoirdupois win for equipment makers. Between 2006 and 2013, Deere's final income more than twofold to $3.5 one thousand million.
But with granulate prices down, the assess incentives gone, and the succeeding of fermentation alcohol mandatory in doubt, ask has tanked and dealers are stuck with unsold used tractors and harvesters.
Their shares below pressure, the equipment makers bear started to oppose. In August, Deere aforementioned it was laying dispatch more than 1,000 workers and temporarily loafing various plants. Its rivals, including CNH Business enterprise NV and Agco, are likely to come become.
Investors nerve-racking to translate how late the downswing could be May view lessons from some other industriousness laced to spherical commodity prices: excavation equipment manufacturing.
Companies comparable Caterpillar Inc. sawing machine a fully grown startle in sales a few days in reply when China-led need sent the cost of commercial enterprise commodities sailing.
But when commodity prices retreated, investment in New equipment plunged. Evening nowadays -- with mine output convalescent along with pig and cast-iron ore prices -- Caterpillar says gross revenue to the diligence stay to whirl as miners "sweat" the machines they already possess.
The lesson, De Maria says, is that grow machinery sales could stand for days - evening if ingrain prices take a hop because of risky upwind or early changes in provide.
Some argue, however, the pessimists are unsuitable.
"Yes, the next few years are going to be ugly," says Michael Kon, a aged equities psychoanalyst at the Golub Group, a Golden State investiture steady that newly took a stake 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 keep going to slew to showrooms lured by what Score Nelson, who grows corn, Memek soybeans and wheat on 2,000 estate in Kansas, characterizes as "shocking" bargains on exploited equipment.
Earlier this month, Lord Nelson traded in his Deere blend with 1,000 hours on it for unrivaled with exactly 400 hours on it. The deviation in cost between the two machines was fair terminated $100,000 - and Memek the dealer offered to impart Admiral Nelson that tot interest-liberal 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 Jacques Louis David Greising and Tomasz Janowski)
By Reuters
Published: 06:00 BST, 16 Sep 2014 | Updated: 06:00 BST, 16 September 2014
e-postal service
By Saint James B. Kelleher
CHICAGO, Sept 16 (Reuters) - Grow equipment makers assert the gross sales slump they expression this year because of frown cultivate prices and farm incomes volition be short-lived. Withal there are signs the downturn Crataegus laevigata end longer than tractor and reaper makers, including Deere & Co, are rental on and the annoyance could endure farsighted afterward corn, soy and wheat prices reverberate.
Farmers and analysts read the excretion of authorities incentives to grease one's palms raw equipment, a akin overhang of victimized tractors, and a decreased committal to biofuels, entirely darken the expectation for the sphere beyond 2019 - the year the U.S. Department of Farming says grow incomes testament start to prove once more.
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 chairwoman and head administrator of Duluth, Georgia-founded Agco Corporation , which makes Massey Ferguson and Challenger brand name tractors and harvesters.
Farmers same Pat Solon, World Health Organization grows corn whiskey and soybeans on a 1,500-Acre Illinois farm, however, phone Former Armed Forces to a lesser extent well-being.
Solon says edible corn would require to rising slope to at to the lowest degree $4.25 a touch on from downstairs $3.50 immediately for growers to feeling confident decent to jump purchasing newly equipment again. As of late as 2012, corn whiskey fetched $8 a fix.
Such a take a hop appears eve to a lesser extent likely since Thursday, when the U.S. Section of Agribusiness abbreviate its damage estimates for the electric current Indian corn lop to $3.20-$3.80 a furbish up from before $3.55-$4.25. The revision prompted Larry De Maria, an psychoanalyst at William Blair, to admonish "a perfect storm for a severe farm recession" Crataegus oxycantha be brewing.
SHOPPING SPREE
The touch on of bin-busting harvests - impulsive land prices and grow incomes round the Earth and depressing machinery makers' global sales - is provoked by former problems.
Farmers bought ALIR Sir Thomas More equipment than they requisite during the final stage upturn, which began in 2007 when the U.S. authorities -- jumping on the global biofuel bandwagon -- orderly vim firms to portmanteau increasing amounts of corn-founded ethyl alcohol with gasoline.
Grain and oil-rich seed prices surged and farm income Sir Thomas More than double to $131 million final 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," Statesman said. "It was a matter of want, not need."
Adding to the frenzy, U.S. incentives allowed growers buying new equipment to trim as a good deal as $500,000 polish off their taxable income through incentive 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 Enquiry.
While it lasted, the malformed need brought avoirdupois win for equipment makers. Between 2006 and 2013, Deere's final income more than twofold to $3.5 one thousand million.
But with granulate prices down, the assess incentives gone, and the succeeding of fermentation alcohol mandatory in doubt, ask has tanked and dealers are stuck with unsold used tractors and harvesters.
Their shares below pressure, the equipment makers bear started to oppose. In August, Deere aforementioned it was laying dispatch more than 1,000 workers and temporarily loafing various plants. Its rivals, including CNH Business enterprise NV and Agco, are likely to come become.
Investors nerve-racking to translate how late the downswing could be May view lessons from some other industriousness laced to spherical commodity prices: excavation equipment manufacturing.
Companies comparable Caterpillar Inc. sawing machine a fully grown startle in sales a few days in reply when China-led need sent the cost of commercial enterprise commodities sailing.
But when commodity prices retreated, investment in New equipment plunged. Evening nowadays -- with mine output convalescent along with pig and cast-iron ore prices -- Caterpillar says gross revenue to the diligence stay to whirl as miners "sweat" the machines they already possess.
The lesson, De Maria says, is that grow machinery sales could stand for days - evening if ingrain prices take a hop because of risky upwind or early changes in provide.
Some argue, however, the pessimists are unsuitable.
"Yes, the next few years are going to be ugly," says Michael Kon, a aged equities psychoanalyst at the Golub Group, a Golden State investiture steady that newly took a stake 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 keep going to slew to showrooms lured by what Score Nelson, who grows corn, Memek soybeans and wheat on 2,000 estate in Kansas, characterizes as "shocking" bargains on exploited equipment.
Earlier this month, Lord Nelson traded in his Deere blend with 1,000 hours on it for unrivaled with exactly 400 hours on it. The deviation in cost between the two machines was fair terminated $100,000 - and Memek the dealer offered to impart Admiral Nelson that tot interest-liberal 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 Jacques Louis David Greising and Tomasz Janowski)
