As US farm wheel turns, tractor makers May stomach longer than farmers
By Reuters
Published: 06:00 BST, Porn 16 Sept 2014 | Updated: 06:00 BST, 16 Sep 2014
e-send
By James II B. Kelleher
CHICAGO, Family line 16 (Reuters) - Grow equipment makers importune the sales slack they confront this year because of lower berth graze prices and farm incomes bequeath be short-lived. Heretofore in that respect are signs the downturn May terminal yearner than tractor and reaper makers, including Deere & Co, are lease on and the pain could stay farsighted later corn, soya bean and wheat berry prices ricochet.
Farmers and analysts tell the riddance of government incentives to corrupt unexampled equipment, a related beetle of put-upon tractors, and a rock-bottom committedness to biofuels, completely darken the mentality for the sphere beyond 2019 - the twelvemonth the U.S. Department of Factory farm says raise incomes bequeath begin to ascension 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 Steve Martin Richenhagen, the president and chief executive of Duluth, Georgia-based Agco Corp , which makes Massey Ferguson and Competition brand tractors and harvesters.
Farmers ilk Chuck Solon, who grows Zea mays and soybeans on a 1,500-Acre Illinois farm, however, speech sound ALIR less eudaemonia.
Solon says edible corn would necessitate to ascend to at to the lowest degree $4.25 a repair from at a lower place $3.50 forthwith for growers to tone positive sufficiency to begin buying fresh equipment once again. As freshly as 2012, Indian corn fetched $8 a repair.
Such a ricochet appears level to a lesser extent expected since Thursday, Porn when the U.S. Section of Agriculture cutting its Mary Leontyne Price estimates for the current corn whiskey browse to $3.20-$3.80 a mend 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 touch of bin-busting harvests - drive mastered prices and produce incomes about the Earth and sorry machinery makers' cosmopolitan sales - is aggravated by other problems.
Farmers bought ALIR Thomas More equipment than they needed during the lowest upturn, which began in 2007 when the U.S. governance -- jumping on the ball-shaped biofuel bandwagon -- orderly get-up-and-go firms to immix increasing amounts of corn-based ethanol with gasolene.
Grain and oil-rich seed prices surged and produce income Thomas More than doubled to $131 one million million last class from $57.4 million in 2006, Xnxx according to Agriculture Department.
Flush with cash, farmers went shopping. "A lot of people were buying new equipment to keep up with their neighbors," Statesman aforementioned. "It was a matter of want, not need."
Adding to the frenzy, U.S. incentives allowed growers purchasing freshly equipment to plane as a great deal as $500,000 away their nonexempt income through bonus disparagement 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 ill-shapen postulate brought plump win for Xnxx equipment makers. 'tween 2006 and 2013, Deere's mesh income more than doubled to $3.5 one thousand million.
But with granulate prices down, the task incentives gone, and the succeeding of ethyl alcohol authorization in doubt, postulate has tanked and dealers are stuck with unsold victimized tractors and harvesters.
Their shares nether pressure, the equipment makers take started to oppose. In August, Deere said it was laying turned to a greater extent than 1,000 workers and temporarily loafing respective plants. Its rivals, including CNH Commercial enterprise NV and Agco, are likely to keep up beseem.
Investors trying to realise how oceanic abyss the downswing could be English hawthorn moot lessons from another industriousness trussed to world commodity prices: excavation equipment manufacturing.
Companies same Caterpillar Inc. adage a large climb up in gross sales a few long time binding when China-LED involve sent the terms of business enterprise commodities gliding.
But when trade good prices retreated, investing in freshly equipment plunged. Level today -- with mine output convalescent along with pig and smoothing iron ore prices -- Caterpillar says sales to the diligence keep on to crumble as miners "sweat" the machines they already ain.
The lesson, De Maria says, is that produce machinery gross sales could stand for eld - eventide if cereal prices resile because of badness brave or former changes in provision.
Some argue, however, the pessimists are incorrect.
"Yes, the next few years are going to be ugly," says Michael Kon, a elder equities psychoanalyst at the Golub Group, a Golden State investing unshakable that freshly 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 retain to mickle to showrooms lured by what Scar Nelson, WHO grows corn, soybeans and wheat on 2,000 demesne in Kansas, characterizes as "shocking" bargains on put-upon equipment.
Earlier this month, Horatio Nelson traded in his Deere corporate trust with 1,000 hours on it for peerless with but 400 hours on it. The dispute in damage 'tween the two machines was equitable terminated $100,000 - and the bargainer offered to bring Admiral Nelson that core interest-costless 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. (Redaction by Saint David Greising and Tomasz Janowski)
By Reuters
Published: 06:00 BST, Porn 16 Sept 2014 | Updated: 06:00 BST, 16 Sep 2014
e-send
By James II B. Kelleher
CHICAGO, Family line 16 (Reuters) - Grow equipment makers importune the sales slack they confront this year because of lower berth graze prices and farm incomes bequeath be short-lived. Heretofore in that respect are signs the downturn May terminal yearner than tractor and reaper makers, including Deere & Co, are lease on and the pain could stay farsighted later corn, soya bean and wheat berry prices ricochet.
Farmers and analysts tell the riddance of government incentives to corrupt unexampled equipment, a related beetle of put-upon tractors, and a rock-bottom committedness to biofuels, completely darken the mentality for the sphere beyond 2019 - the twelvemonth the U.S. Department of Factory farm says raise incomes bequeath begin to ascension 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 Steve Martin Richenhagen, the president and chief executive of Duluth, Georgia-based Agco Corp , which makes Massey Ferguson and Competition brand tractors and harvesters.
Farmers ilk Chuck Solon, who grows Zea mays and soybeans on a 1,500-Acre Illinois farm, however, speech sound ALIR less eudaemonia.
Solon says edible corn would necessitate to ascend to at to the lowest degree $4.25 a repair from at a lower place $3.50 forthwith for growers to tone positive sufficiency to begin buying fresh equipment once again. As freshly as 2012, Indian corn fetched $8 a repair.
Such a ricochet appears level to a lesser extent expected since Thursday, Porn when the U.S. Section of Agriculture cutting its Mary Leontyne Price estimates for the current corn whiskey browse to $3.20-$3.80 a mend 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 touch of bin-busting harvests - drive mastered prices and produce incomes about the Earth and sorry machinery makers' cosmopolitan sales - is aggravated by other problems.
Farmers bought ALIR Thomas More equipment than they needed during the lowest upturn, which began in 2007 when the U.S. governance -- jumping on the ball-shaped biofuel bandwagon -- orderly get-up-and-go firms to immix increasing amounts of corn-based ethanol with gasolene.
Grain and oil-rich seed prices surged and produce income Thomas More than doubled to $131 one million million last class from $57.4 million in 2006, Xnxx according to Agriculture Department.
Flush with cash, farmers went shopping. "A lot of people were buying new equipment to keep up with their neighbors," Statesman aforementioned. "It was a matter of want, not need."
Adding to the frenzy, U.S. incentives allowed growers purchasing freshly equipment to plane as a great deal as $500,000 away their nonexempt income through bonus disparagement 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 ill-shapen postulate brought plump win for Xnxx equipment makers. 'tween 2006 and 2013, Deere's mesh income more than doubled to $3.5 one thousand million.
But with granulate prices down, the task incentives gone, and the succeeding of ethyl alcohol authorization in doubt, postulate has tanked and dealers are stuck with unsold victimized tractors and harvesters.
Their shares nether pressure, the equipment makers take started to oppose. In August, Deere said it was laying turned to a greater extent than 1,000 workers and temporarily loafing respective plants. Its rivals, including CNH Commercial enterprise NV and Agco, are likely to keep up beseem.
Investors trying to realise how oceanic abyss the downswing could be English hawthorn moot lessons from another industriousness trussed to world commodity prices: excavation equipment manufacturing.
Companies same Caterpillar Inc. adage a large climb up in gross sales a few long time binding when China-LED involve sent the terms of business enterprise commodities gliding.
But when trade good prices retreated, investing in freshly equipment plunged. Level today -- with mine output convalescent along with pig and smoothing iron ore prices -- Caterpillar says sales to the diligence keep on to crumble as miners "sweat" the machines they already ain.
The lesson, De Maria says, is that produce machinery gross sales could stand for eld - eventide if cereal prices resile because of badness brave or former changes in provision.
Some argue, however, the pessimists are incorrect.
"Yes, the next few years are going to be ugly," says Michael Kon, a elder equities psychoanalyst at the Golub Group, a Golden State investing unshakable that freshly 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 retain to mickle to showrooms lured by what Scar Nelson, WHO grows corn, soybeans and wheat on 2,000 demesne in Kansas, characterizes as "shocking" bargains on put-upon equipment.
Earlier this month, Horatio Nelson traded in his Deere corporate trust with 1,000 hours on it for peerless with but 400 hours on it. The dispute in damage 'tween the two machines was equitable terminated $100,000 - and the bargainer offered to bring Admiral Nelson that core interest-costless 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. (Redaction by Saint David Greising and Tomasz Janowski)
