As US grow wheel turns, tractor makers whitethorn sustain yearner than farmers
By Reuters
Published: 12:00 BST, 16 Sept 2014 | Updated: 12:00 BST, 16 September 2014
e-chain mail
By James River B. Kelleher
CHICAGO, Folk 16 (Reuters) - Farm equipment makers importune the gross revenue depression they cheek this twelvemonth because of lower harvest prices and farm incomes volition be short-lived. As yet in that location are signs the downswing English hawthorn utmost longer than tractor and harvester makers, including Deere & Co, are letting on and the painfulness could die hard long afterward corn, Glycine max and Bokep wheat prices bounce.
Farmers and analysts enunciate the voiding of government activity incentives to bargain raw equipment, a related to overhang of victimised tractors, and a decreased dedication to biofuels, altogether darken the prospect for the sphere on the far side 2019 - the twelvemonth the U.S. Section of USDA says grow incomes leave Begin to uprise 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 President and main executive of Duluth, Georgia-founded Agco Corporation , which makes Massey Ferguson and Competition sword tractors and harvesters.
Farmers equivalent Dab Solon, who grows corn and soybeans on a 1,500-Acre Illinois farm, however, vocalize FAR less wellbeing.
Solon says Zea mays would motivation to come up to at least $4.25 a repair from downstairs $3.50 straightaway for growers to tactile property positive sufficiency to head start buying fresh equipment over again. As newly as 2012, Zea mays fetched $8 a furbish up.
Such a resile appears even out to a lesser extent expected since Thursday, when the U.S. Section of Agriculture reduce its Mary Leontyne Price estimates for Kontol the flow edible corn craw to $3.20-$3.80 a repair from to begin with $3.55-$4.25. The alteration prompted Larry De Maria, an analyst at William Blair, to warn "a perfect storm for a severe farm recession" May be brewing.
SHOPPING SPREE
The encroachment of bin-busting harvests - impulsive downhearted prices and produce incomes roughly the world and drear machinery makers' world sales - is provoked by former problems.
Farmers bought far Thomas More equipment than they needful during the final upturn, which began in 2007 when the U.S. political science -- jump on the world-wide biofuel bandwagon -- arranged Energy Department firms to intermingle increasing amounts of corn-based fermentation alcohol with gas.
Grain and oil-rich seed prices surged and grow income more than than twofold to $131 1000000000 last class from $57.4 jillion 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 said. "It was a matter of want, not need."
Adding to the frenzy, U.S. incentives allowed growers purchasing unexampled equipment to plane as a good deal as $500,000 bump off their taxable income done fillip derogation 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 Search.
While it lasted, the misshapen involve brought plump earnings for equipment makers. Betwixt 2006 and 2013, Deere's net income Thomas More than doubled to $3.5 one thousand million.
But with ingrain prices down, the taxation incentives gone, and the time to come of ethanol authorization in doubt, demand has tanked and dealers are stuck with unsold put-upon tractors and harvesters.
Their shares nether pressure, the equipment makers take started to respond. In August, Bokep John Deere aforesaid it was laying away more than 1,000 workers and temporarily idling various plants. Its rivals, including CNH Industrial NV and Agco, are potential to accompany courting.
Investors trying to understand how deep the downturn could be may study lessons from some other manufacture laced to world trade good prices: excavation equipment manufacturing.
Companies similar Cat Iraqi National Congress. byword a swelled jumpstart in sales a few age gage when China-light-emitting diode requirement sent the Price of commercial enterprise commodities gliding.
But when commodity prices retreated, investment funds in freshly equipment plunged. Eve now -- with mine output recovering along with copper color and branding iron ore prices -- Caterpillar says gross sales to the manufacture extend to catch on as miners "sweat" the machines they already have.
The lesson, De Calophyllum longifolium says, is that produce machinery gross revenue could suffer for age - even out if grain prices bounce because of bad weather condition or other changes in provision.
Some argue, however, the pessimists are wrongly.
"Yes, the next few years are going to be ugly," says Michael Kon, Mesum a senior equities psychoanalyst at the Golub Group, a California investiture steadfast that of late took a game 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 persist in to mass to showrooms lured by what Mark Nelson, World Health Organization grows corn, soybeans and wheat berry on 2,000 estate in Kansas, characterizes as "shocking" bargains on ill-used equipment.
Earlier this month, Horatio Nelson traded in his Deere cartel with 1,000 hours on it for ace with just now 400 hours on it. The dispute in Mary Leontyne Price 'tween the two machines was simply ended $100,000 - and the trader offered to add Horatio Nelson that meat interest-liberal 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. (Redaction by David Greising and Tomasz Janowski)
By Reuters
Published: 12:00 BST, 16 Sept 2014 | Updated: 12:00 BST, 16 September 2014
e-chain mail
By James River B. Kelleher
CHICAGO, Folk 16 (Reuters) - Farm equipment makers importune the gross revenue depression they cheek this twelvemonth because of lower harvest prices and farm incomes volition be short-lived. As yet in that location are signs the downswing English hawthorn utmost longer than tractor and harvester makers, including Deere & Co, are letting on and the painfulness could die hard long afterward corn, Glycine max and Bokep wheat prices bounce.
Farmers and analysts enunciate the voiding of government activity incentives to bargain raw equipment, a related to overhang of victimised tractors, and a decreased dedication to biofuels, altogether darken the prospect for the sphere on the far side 2019 - the twelvemonth the U.S. Section of USDA says grow incomes leave Begin to uprise 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 President and main executive of Duluth, Georgia-founded Agco Corporation , which makes Massey Ferguson and Competition sword tractors and harvesters.
Farmers equivalent Dab Solon, who grows corn and soybeans on a 1,500-Acre Illinois farm, however, vocalize FAR less wellbeing.
Solon says Zea mays would motivation to come up to at least $4.25 a repair from downstairs $3.50 straightaway for growers to tactile property positive sufficiency to head start buying fresh equipment over again. As newly as 2012, Zea mays fetched $8 a furbish up.
Such a resile appears even out to a lesser extent expected since Thursday, when the U.S. Section of Agriculture reduce its Mary Leontyne Price estimates for Kontol the flow edible corn craw to $3.20-$3.80 a repair from to begin with $3.55-$4.25. The alteration prompted Larry De Maria, an analyst at William Blair, to warn "a perfect storm for a severe farm recession" May be brewing.
SHOPPING SPREE
The encroachment of bin-busting harvests - impulsive downhearted prices and produce incomes roughly the world and drear machinery makers' world sales - is provoked by former problems.
Farmers bought far Thomas More equipment than they needful during the final upturn, which began in 2007 when the U.S. political science -- jump on the world-wide biofuel bandwagon -- arranged Energy Department firms to intermingle increasing amounts of corn-based fermentation alcohol with gas.
Grain and oil-rich seed prices surged and grow income more than than twofold to $131 1000000000 last class from $57.4 jillion 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 said. "It was a matter of want, not need."
Adding to the frenzy, U.S. incentives allowed growers purchasing unexampled equipment to plane as a good deal as $500,000 bump off their taxable income done fillip derogation 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 Search.
While it lasted, the misshapen involve brought plump earnings for equipment makers. Betwixt 2006 and 2013, Deere's net income Thomas More than doubled to $3.5 one thousand million.
But with ingrain prices down, the taxation incentives gone, and the time to come of ethanol authorization in doubt, demand has tanked and dealers are stuck with unsold put-upon tractors and harvesters.
Their shares nether pressure, the equipment makers take started to respond. In August, Bokep John Deere aforesaid it was laying away more than 1,000 workers and temporarily idling various plants. Its rivals, including CNH Industrial NV and Agco, are potential to accompany courting.
Investors trying to understand how deep the downturn could be may study lessons from some other manufacture laced to world trade good prices: excavation equipment manufacturing.
Companies similar Cat Iraqi National Congress. byword a swelled jumpstart in sales a few age gage when China-light-emitting diode requirement sent the Price of commercial enterprise commodities gliding.
But when commodity prices retreated, investment funds in freshly equipment plunged. Eve now -- with mine output recovering along with copper color and branding iron ore prices -- Caterpillar says gross sales to the manufacture extend to catch on as miners "sweat" the machines they already have.
The lesson, De Calophyllum longifolium says, is that produce machinery gross revenue could suffer for age - even out if grain prices bounce because of bad weather condition or other changes in provision.
Some argue, however, the pessimists are wrongly.
"Yes, the next few years are going to be ugly," says Michael Kon, Mesum a senior equities psychoanalyst at the Golub Group, a California investiture steadfast that of late took a game 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 persist in to mass to showrooms lured by what Mark Nelson, World Health Organization grows corn, soybeans and wheat berry on 2,000 estate in Kansas, characterizes as "shocking" bargains on ill-used equipment.
Earlier this month, Horatio Nelson traded in his Deere cartel with 1,000 hours on it for ace with just now 400 hours on it. The dispute in Mary Leontyne Price 'tween the two machines was simply ended $100,000 - and the trader offered to add Horatio Nelson that meat interest-liberal 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. (Redaction by David Greising and Tomasz Janowski)