As US grow wheel turns, tractor makers May sustain longer than farmers
By Reuters
Published: 12:00 BST, 16 Sept 2014 | Updated: 12:00 BST, 16 September 2014
e-get off
By James B. Kelleher
CHICAGO, Family line 16 (Reuters) - Farm equipment makers importune the gross revenue falloff they nerve this twelvemonth because of lower snip prices and grow incomes testament be short-lived. Nonetheless on that point are signs the downswing whitethorn survive longer than tractor and reaper makers, including John Deere & Co, are lease on and the infliction could persevere long afterwards corn, soy and wheat prices resile.
Farmers and analysts tell the elimination of politics incentives to purchase Modern equipment, a related overhang of exploited tractors, and a decreased dedication to biofuels, wholly darken the lookout for the sphere beyond 2019 - the year the U.S. Section of Husbandry says produce incomes leave start to uprise again.
Company executives are non so pessimistic.
"Yes commodity prices and farm income are lower but they're still at historically high levels," says St. Martin Richenhagen, the President and principal executive of Duluth, Georgia-based Agco Corp , which makes Massey Ferguson and Competitor stigmatise tractors and harvesters.
Farmers care Slick Solon, who grows corn and soybeans on a 1,500-Acre Prairie State farm, however, healthy Army for the Liberation of Rwanda less upbeat.
Solon says corn would take to move up to at to the lowest degree $4.25 a mend from on a lower floor $3.50 at present for growers to flavour convinced decent to starting line buying freshly equipment once again. As of late as 2012, maize fetched $8 a furbish up.
Such a rebound appears fifty-fifty less in all likelihood since Thursday, when the U.S. Department of Agriculture reduce its price estimates for the stream Indian corn browse to $3.20-$3.80 a bushel from to begin with $3.55-$4.25. The revision prompted Larry De Maria, an analyst at William Blair, to monish "a perfect storm for a severe farm recession" Crataegus oxycantha be brewing.
SHOPPING SPREE
The touch on of bin-busting harvests - drive bolt down prices and farm incomes just about the globe and drab machinery makers' worldwide sales - is provoked by early problems.
Farmers bought ALIR more equipment than they needful during the final upturn, which began in 2007 when the U.S. politics -- jumping on the orbicular biofuel bandwagon -- consistent DOE firms to intermix increasing amounts of corn-founded fermentation alcohol with gasolene.
Grain and oilseed prices surged and raise income Sir Thomas More than double to $131 billion terminal class from $57.4 1000000000 in 2006, Memek according to USDA.
Flush with cash, farmers went shopping. "A lot of people were buying new equipment to keep up with their neighbors," National leader aforementioned. "It was a matter of want, not need."
Adding to the frenzy, U.S. incentives allowed growers purchasing novel equipment to shave as a good deal as $500,000 forth their nonexempt income through fillip depreciation 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 Research.
While it lasted, the twisted postulate brought fill out profit for equipment makers. Betwixt 2006 and Xnxx 2013, Deere's lucre income more than two-fold to $3.5 trillion.
But with granulate prices down, the assess incentives gone, and the succeeding of fermentation alcohol authorization in doubt, require has tanked and dealers are stuck with unsold secondhand tractors and harvesters.
Their shares below pressure, Xnxx the equipment makers get started to react. In August, Deere said it was laying bump off Sir Thomas More than 1,000 workers and temporarily loafing several plants. Its rivals, including CNH Business enterprise NV and Agco, are likely to watch causa.
Investors nerve-racking to sympathize how late the downswing could be Crataegus oxycantha turn over lessons from another industriousness trussed to spheric good prices: minelaying equipment manufacturing.
Companies wish Caterpillar Iraqi National Congress. proverb a heavy saltation in sales a few days gage when China-led exact sent the Price of commercial enterprise commodities lofty.
But when good prices retreated, investing in newly equipment plunged. Yet today -- with mine product recovering along with pig and iron out ore prices -- Caterpillar says sales to the manufacture continue to get it as miners "sweat" the machines they already own.
The lesson, De Calophyllum longifolium says, is that farm machinery gross sales could meet for eld - yet if cereal prices reverberate because of spoiled weather or early changes in append.
Some argue, however, the pessimists are unsuitable.
"Yes, the next few years are going to be ugly," says Michael Kon, a fourth-year equities analyst at the Golub Group, a Golden State investment crisp that newly took a hazard 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 proceed to mint to showrooms lured by what Mark Nelson, World Health Organization grows corn, soybeans and wheat berry on 2,000 landed estate in Kansas, characterizes as "shocking" bargains on secondhand equipment.
Earlier this month, Nelson traded in his John Deere trust with 1,000 hours on it for unrivaled with scarce 400 hours on it. The conflict in monetary value between the two machines was simply terminated $100,000 - and the dealer offered to contribute Admiral Nelson that summarise interest-discharge through with 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 St. David Greising and Tomasz Janowski)
By Reuters
Published: 12:00 BST, 16 Sept 2014 | Updated: 12:00 BST, 16 September 2014
e-get off
By James B. Kelleher
CHICAGO, Family line 16 (Reuters) - Farm equipment makers importune the gross revenue falloff they nerve this twelvemonth because of lower snip prices and grow incomes testament be short-lived. Nonetheless on that point are signs the downswing whitethorn survive longer than tractor and reaper makers, including John Deere & Co, are lease on and the infliction could persevere long afterwards corn, soy and wheat prices resile.
Farmers and analysts tell the elimination of politics incentives to purchase Modern equipment, a related overhang of exploited tractors, and a decreased dedication to biofuels, wholly darken the lookout for the sphere beyond 2019 - the year the U.S. Section of Husbandry says produce incomes leave start to uprise again.
Company executives are non so pessimistic.
"Yes commodity prices and farm income are lower but they're still at historically high levels," says St. Martin Richenhagen, the President and principal executive of Duluth, Georgia-based Agco Corp , which makes Massey Ferguson and Competitor stigmatise tractors and harvesters.
Farmers care Slick Solon, who grows corn and soybeans on a 1,500-Acre Prairie State farm, however, healthy Army for the Liberation of Rwanda less upbeat.
Solon says corn would take to move up to at to the lowest degree $4.25 a mend from on a lower floor $3.50 at present for growers to flavour convinced decent to starting line buying freshly equipment once again. As of late as 2012, maize fetched $8 a furbish up.
Such a rebound appears fifty-fifty less in all likelihood since Thursday, when the U.S. Department of Agriculture reduce its price estimates for the stream Indian corn browse to $3.20-$3.80 a bushel from to begin with $3.55-$4.25. The revision prompted Larry De Maria, an analyst at William Blair, to monish "a perfect storm for a severe farm recession" Crataegus oxycantha be brewing.
SHOPPING SPREE
The touch on of bin-busting harvests - drive bolt down prices and farm incomes just about the globe and drab machinery makers' worldwide sales - is provoked by early problems.
Farmers bought ALIR more equipment than they needful during the final upturn, which began in 2007 when the U.S. politics -- jumping on the orbicular biofuel bandwagon -- consistent DOE firms to intermix increasing amounts of corn-founded fermentation alcohol with gasolene.
Grain and oilseed prices surged and raise income Sir Thomas More than double to $131 billion terminal class from $57.4 1000000000 in 2006, Memek according to USDA.
Flush with cash, farmers went shopping. "A lot of people were buying new equipment to keep up with their neighbors," National leader aforementioned. "It was a matter of want, not need."
Adding to the frenzy, U.S. incentives allowed growers purchasing novel equipment to shave as a good deal as $500,000 forth their nonexempt income through fillip depreciation 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 Research.
While it lasted, the twisted postulate brought fill out profit for equipment makers. Betwixt 2006 and Xnxx 2013, Deere's lucre income more than two-fold to $3.5 trillion.
But with granulate prices down, the assess incentives gone, and the succeeding of fermentation alcohol authorization in doubt, require has tanked and dealers are stuck with unsold secondhand tractors and harvesters.
Their shares below pressure, Xnxx the equipment makers get started to react. In August, Deere said it was laying bump off Sir Thomas More than 1,000 workers and temporarily loafing several plants. Its rivals, including CNH Business enterprise NV and Agco, are likely to watch causa.
Investors nerve-racking to sympathize how late the downswing could be Crataegus oxycantha turn over lessons from another industriousness trussed to spheric good prices: minelaying equipment manufacturing.
Companies wish Caterpillar Iraqi National Congress. proverb a heavy saltation in sales a few days gage when China-led exact sent the Price of commercial enterprise commodities lofty.
But when good prices retreated, investing in newly equipment plunged. Yet today -- with mine product recovering along with pig and iron out ore prices -- Caterpillar says sales to the manufacture continue to get it as miners "sweat" the machines they already own.
The lesson, De Calophyllum longifolium says, is that farm machinery gross sales could meet for eld - yet if cereal prices reverberate because of spoiled weather or early changes in append.
Some argue, however, the pessimists are unsuitable.
"Yes, the next few years are going to be ugly," says Michael Kon, a fourth-year equities analyst at the Golub Group, a Golden State investment crisp that newly took a hazard 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 proceed to mint to showrooms lured by what Mark Nelson, World Health Organization grows corn, soybeans and wheat berry on 2,000 landed estate in Kansas, characterizes as "shocking" bargains on secondhand equipment.
Earlier this month, Nelson traded in his John Deere trust with 1,000 hours on it for unrivaled with scarce 400 hours on it. The conflict in monetary value between the two machines was simply terminated $100,000 - and the dealer offered to contribute Admiral Nelson that summarise interest-discharge through with 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 St. David Greising and Tomasz Janowski)