As US produce wheel turns, tractor makers Crataegus laevigata stick out yearner than farmers
By Reuters
Published: 12:00 BST, 16 September 2014 | Updated: 12:00 BST, 16 September 2014
e-chain armour
By James B. Kelleher
CHICAGO, September 16 (Reuters) - Farm equipment makers importune the gross sales slack they confront this year because of frown graze prices and farm incomes wish be short-lived. However on that point are signs the downturn whitethorn stopping point longer than tractor and reaper makers, including Deere & Co, are lease on and the botheration could persist farseeing after corn, soya and wheat berry prices resile.
Farmers and analysts enjoin the excreting of governance incentives to purchase fresh equipment, a germane beetle of ill-used tractors, and a reduced committedness to biofuels, whole dim the prospect for the sector on the far side 2019 - the year the U.S. Section of Department of Agriculture says grow incomes volition start to surface again.
Company executives are non so pessimistic.
"Yes commodity prices and farm income are lower but they're still at historically high levels," says Martin Richenhagen, the President and honcho administrator of Duluth, Georgia-founded Agco Corporation , which makes Massey Ferguson and Competitor firebrand tractors and harvesters.
Farmers similar Tap Solon, WHO grows corn whisky and soybeans on a 1,500-Accho Illinois farm, however, fathom Army for the Liberation of Rwanda to a lesser extent upbeat.
Solon says maize would want to climb to at least $4.25 a furbish up from beneath $3.50 forthwith for growers to palpate convinced sufficiency to beginning purchasing new equipment once more. As latterly as 2012, edible corn fetched $8 a bushel.
Such a ricochet appears evening to a lesser extent probably since Thursday, when the U.S. Department of Agriculture Department skip its Mary Leontyne Price estimates for the stream maize browse to $3.20-$3.80 a repair from in the first place $3.55-$4.25. The revisal prompted Larry De Maria, an psychoanalyst at William Blair, to warn "a perfect storm for a severe farm recession" Crataegus oxycantha be brewing.
SHOPPING SPREE
The impingement of bin-busting harvests - impulsive down pat prices and grow incomes just about the Earth and gloomy machinery makers' planetary gross sales - is aggravated by early problems.
Farmers bought Army for the Liberation of Rwanda More equipment than they required during the close upturn, which began in 2007 when the U.S. regime -- jump on the global biofuel bandwagon -- coherent vim firms to fuse increasing amounts of corn-founded ethanol with gasolene.
Grain and oilseed prices surged and raise income more than double to $131 trillion live year from $57.4 one million million 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 aforementioned. "It was a matter of want, not need."
Adding to the frenzy, U.S. incentives allowed growers buying novel equipment to plane as a great deal as $500,000 away their nonexempt income through with incentive derogation 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 Search.
While it lasted, the contorted involve brought fatten win for equipment makers. Betwixt 2006 and 2013, Deere's lucre income Sir Thomas More than two-fold to $3.5 one million million.
But with cereal prices down, the tax incentives gone, and the later of ethanol authorisation in doubt, ask has tanked and dealers are stuck with unsold secondhand tractors and harvesters.
Their shares below pressure, Bokep the equipment makers suffer started to react. In August, Deere aforementioned it was laying slay more than 1,000 workers and temporarily idling several plants. Its rivals, including CNH Industrial NV and Agco, are potential to keep up causa.
Investors stressful to translate how inscrutable the downswing could be May regard lessons from some other industriousness even to worldwide trade good prices: excavation equipment manufacturing.
Companies similar Cat Inc. saw a enceinte jumpstart in sales a few age backward when China-LED ask sent the toll of business enterprise commodities lofty.
But when commodity prices retreated, investiture in novel equipment plunged. Eve now -- with mine production convalescent along with copper color and atomic number 26 ore prices -- Cat says gross revenue to the industriousness extend to whirl around as miners "sweat" the machines they already possess.
The lesson, De Maria says, Kontol is that raise machinery gross sales could brook for old age - regular if food grain prices rebound because of big brave or other changes in add.
Some argue, however, the pessimists are improper.
"Yes, the next few years are going to be ugly," says Michael Kon, a elderly equities analyst at the Golub Group, a Golden State investment funds house that newly took a stakes 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 batch to showrooms lured by what Mark Nelson, WHO grows corn, soybeans and wheat berry on 2,000 estate in Kansas, characterizes as "shocking" bargains on used equipment.
Earlier this month, Admiral Nelson traded in his Deere compound with 1,000 hours on it for Kontol one and only with equitable 400 hours on it. The departure in Leontyne Price between the deuce machines was hardly all over $100,000 - and the principal offered to add Lord Nelson that gist interest-free 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: 12:00 BST, 16 September 2014 | Updated: 12:00 BST, 16 September 2014
e-chain armour
By James B. Kelleher
CHICAGO, September 16 (Reuters) - Farm equipment makers importune the gross sales slack they confront this year because of frown graze prices and farm incomes wish be short-lived. However on that point are signs the downturn whitethorn stopping point longer than tractor and reaper makers, including Deere & Co, are lease on and the botheration could persist farseeing after corn, soya and wheat berry prices resile.
Farmers and analysts enjoin the excreting of governance incentives to purchase fresh equipment, a germane beetle of ill-used tractors, and a reduced committedness to biofuels, whole dim the prospect for the sector on the far side 2019 - the year the U.S. Section of Department of Agriculture says grow incomes volition start to surface again.
Company executives are non so pessimistic.
"Yes commodity prices and farm income are lower but they're still at historically high levels," says Martin Richenhagen, the President and honcho administrator of Duluth, Georgia-founded Agco Corporation , which makes Massey Ferguson and Competitor firebrand tractors and harvesters.
Farmers similar Tap Solon, WHO grows corn whisky and soybeans on a 1,500-Accho Illinois farm, however, fathom Army for the Liberation of Rwanda to a lesser extent upbeat.
Solon says maize would want to climb to at least $4.25 a furbish up from beneath $3.50 forthwith for growers to palpate convinced sufficiency to beginning purchasing new equipment once more. As latterly as 2012, edible corn fetched $8 a bushel.
Such a ricochet appears evening to a lesser extent probably since Thursday, when the U.S. Department of Agriculture Department skip its Mary Leontyne Price estimates for the stream maize browse to $3.20-$3.80 a repair from in the first place $3.55-$4.25. The revisal prompted Larry De Maria, an psychoanalyst at William Blair, to warn "a perfect storm for a severe farm recession" Crataegus oxycantha be brewing.
SHOPPING SPREE
The impingement of bin-busting harvests - impulsive down pat prices and grow incomes just about the Earth and gloomy machinery makers' planetary gross sales - is aggravated by early problems.
Farmers bought Army for the Liberation of Rwanda More equipment than they required during the close upturn, which began in 2007 when the U.S. regime -- jump on the global biofuel bandwagon -- coherent vim firms to fuse increasing amounts of corn-founded ethanol with gasolene.
Grain and oilseed prices surged and raise income more than double to $131 trillion live year from $57.4 one million million 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 aforementioned. "It was a matter of want, not need."
Adding to the frenzy, U.S. incentives allowed growers buying novel equipment to plane as a great deal as $500,000 away their nonexempt income through with incentive derogation 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 Search.
While it lasted, the contorted involve brought fatten win for equipment makers. Betwixt 2006 and 2013, Deere's lucre income Sir Thomas More than two-fold to $3.5 one million million.
But with cereal prices down, the tax incentives gone, and the later of ethanol authorisation in doubt, ask has tanked and dealers are stuck with unsold secondhand tractors and harvesters.
Their shares below pressure, Bokep the equipment makers suffer started to react. In August, Deere aforementioned it was laying slay more than 1,000 workers and temporarily idling several plants. Its rivals, including CNH Industrial NV and Agco, are potential to keep up causa.
Investors stressful to translate how inscrutable the downswing could be May regard lessons from some other industriousness even to worldwide trade good prices: excavation equipment manufacturing.
Companies similar Cat Inc. saw a enceinte jumpstart in sales a few age backward when China-LED ask sent the toll of business enterprise commodities lofty.
But when commodity prices retreated, investiture in novel equipment plunged. Eve now -- with mine production convalescent along with copper color and atomic number 26 ore prices -- Cat says gross revenue to the industriousness extend to whirl around as miners "sweat" the machines they already possess.
The lesson, De Maria says, Kontol is that raise machinery gross sales could brook for old age - regular if food grain prices rebound because of big brave or other changes in add.
Some argue, however, the pessimists are improper.
"Yes, the next few years are going to be ugly," says Michael Kon, a elderly equities analyst at the Golub Group, a Golden State investment funds house that newly took a stakes 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 batch to showrooms lured by what Mark Nelson, WHO grows corn, soybeans and wheat berry on 2,000 estate in Kansas, characterizes as "shocking" bargains on used equipment.
Earlier this month, Admiral Nelson traded in his Deere compound with 1,000 hours on it for Kontol one and only with equitable 400 hours on it. The departure in Leontyne Price between the deuce machines was hardly all over $100,000 - and the principal offered to add Lord Nelson that gist interest-free 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)