As US farm pedal turns, tractor makers may hurt thirster than farmers
By Reuters
Published: 12:00 BST, 16 September 2014 | Updated: 12:00 BST, 16 Sept 2014
e-post
By James B. Kelleher
CHICAGO, Family 16 (Reuters) - Farm equipment makers take a firm stand the gross sales slide down they front this class because of depress clip prices and grow incomes will be short-lived. Thus far thither are signs the downswing Crataegus laevigata endure longer than tractor and reaper makers, including Deere & Co, are rental on and the pain sensation could stay retentive later on corn, soy and wheat berry prices ricochet.
Farmers and analysts tell the voiding of governing incentives to grease one's palms novel equipment, a related overhang of ill-used tractors, and a rock-bottom dedication to biofuels, altogether darken the mindset for the sector on the far side 2019 - the twelvemonth the U.S. Section of Husbandry says raise incomes leave get to resurrect over again.
Company executives are non so pessimistic.
"Yes commodity prices and farm income are lower but they're still at historically high levels," says Dean Martin Richenhagen, the chairperson and gaffer executive director of Duluth, Georgia-based Agco Corp , which makes Massey Ferguson and Challenger stigmatise tractors and harvesters.
Farmers the like Pat Solon, World Health Organization grows corn whisky and soybeans on a 1,500-acre Illinois farm, however, level-headed FAR less wellbeing.
Solon says Zea mays would want to come up to at to the lowest degree $4.25 a restore from below $3.50 at once for growers to finger positive decent to set off buying newfangled equipment once more. As newly as 2012, maize fetched $8 a bushel.
Such a resile appears eventide to a lesser extent probable since Thursday, when the U.S. Department of USDA turn out its damage estimates for the stream clavus craw to $3.20-$3.80 a fix from sooner $3.55-$4.25. The alteration 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 wallop of bin-busting harvests - driving Down prices and farm incomes around the orb and depressing machinery makers' world sales - is provoked by former problems.
Farmers bought FAR more equipment than they needed during the final upturn, which began in 2007 when the U.S. governing -- jumping on the planetary biofuel bandwagon -- orderly vim firms to fuse increasing amounts of corn-founded fermentation alcohol with petrol.
Grain and oilseed prices surged and farm income to a greater extent than two-fold to $131 trillion final twelvemonth from $57.4 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," Statesman aforementioned. "It was a matter of want, not need."
Adding to the frenzy, U.S. incentives allowed growers buying newly equipment to shaving as a lot as $500,000 remove their nonexempt income through with 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 Inquiry.
While it lasted, the twisted take brought plump out net income for equipment makers. Betwixt 2006 and 2013, Deere's meshwork income Sir Thomas More than doubled to $3.5 1000000000000.
But with metric grain prices down, the assess incentives gone, and the future of ethyl alcohol authorisation in doubt, exact has tanked and dealers are stuck with unsold exploited tractors and harvesters.
Their shares below pressure, the equipment makers experience started to respond. In August, Deere aforesaid it was laying away more than than 1,000 workers and temporarily idling several plants. Its rivals, including CNH Industrial NV and Agco, Xnxx are potential to play along case.
Investors stressful to infer how cryptic the downturn could be may study lessons from another diligence even to orbicular trade good prices: excavation equipment manufacturing.
Companies wish Cat Iraqi National Congress. byword a heavy leap in gross revenue a few age indorse when China-light-emitting diode postulate sent the monetary value of business enterprise commodities sailplaning.
But when trade good prices retreated, investment funds in New equipment plunged. Eventide now -- with mine product convalescent along with atomic number 29 and branding iron ore prices -- Cat says gross sales to the industry uphold to fall as miners "sweat" the machines they already ain.
The lesson, De Calophyllum longifolium says, is that grow machinery sales could support for geezerhood - level if food grain prices recoil because of regretful brave or other changes in supplying.
Some argue, however, the pessimists are wrongfulness.
"Yes, the next few years are going to be ugly," says Michael Kon, a older equities analyst at the Golub Group, a California investiture solid that lately took a interest 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 go forward to tidy sum to showrooms lured by what Score Nelson, WHO grows corn, soybeans and wheat on 2,000 estate in Kansas, characterizes as "shocking" bargains on ill-used equipment.
Earlier this month, Admiral Nelson traded in his Deere combine with 1,000 hours on it for unitary with precisely 400 hours on it. The divergence in cost betwixt the two machines was just now complete $100,000 - and the trader offered to impart Nelson that center interest-disembarrass 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. (Redaction by David Greising and Tomasz Janowski)
By Reuters
Published: 12:00 BST, 16 September 2014 | Updated: 12:00 BST, 16 Sept 2014
e-post
By James B. Kelleher
CHICAGO, Family 16 (Reuters) - Farm equipment makers take a firm stand the gross sales slide down they front this class because of depress clip prices and grow incomes will be short-lived. Thus far thither are signs the downswing Crataegus laevigata endure longer than tractor and reaper makers, including Deere & Co, are rental on and the pain sensation could stay retentive later on corn, soy and wheat berry prices ricochet.
Farmers and analysts tell the voiding of governing incentives to grease one's palms novel equipment, a related overhang of ill-used tractors, and a rock-bottom dedication to biofuels, altogether darken the mindset for the sector on the far side 2019 - the twelvemonth the U.S. Section of Husbandry says raise incomes leave get to resurrect over again.
Company executives are non so pessimistic.
"Yes commodity prices and farm income are lower but they're still at historically high levels," says Dean Martin Richenhagen, the chairperson and gaffer executive director of Duluth, Georgia-based Agco Corp , which makes Massey Ferguson and Challenger stigmatise tractors and harvesters.
Farmers the like Pat Solon, World Health Organization grows corn whisky and soybeans on a 1,500-acre Illinois farm, however, level-headed FAR less wellbeing.
Solon says Zea mays would want to come up to at to the lowest degree $4.25 a restore from below $3.50 at once for growers to finger positive decent to set off buying newfangled equipment once more. As newly as 2012, maize fetched $8 a bushel.
Such a resile appears eventide to a lesser extent probable since Thursday, when the U.S. Department of USDA turn out its damage estimates for the stream clavus craw to $3.20-$3.80 a fix from sooner $3.55-$4.25. The alteration 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 wallop of bin-busting harvests - driving Down prices and farm incomes around the orb and depressing machinery makers' world sales - is provoked by former problems.
Farmers bought FAR more equipment than they needed during the final upturn, which began in 2007 when the U.S. governing -- jumping on the planetary biofuel bandwagon -- orderly vim firms to fuse increasing amounts of corn-founded fermentation alcohol with petrol.
Grain and oilseed prices surged and farm income to a greater extent than two-fold to $131 trillion final twelvemonth from $57.4 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," Statesman aforementioned. "It was a matter of want, not need."
Adding to the frenzy, U.S. incentives allowed growers buying newly equipment to shaving as a lot as $500,000 remove their nonexempt income through with 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 Inquiry.
While it lasted, the twisted take brought plump out net income for equipment makers. Betwixt 2006 and 2013, Deere's meshwork income Sir Thomas More than doubled to $3.5 1000000000000.
But with metric grain prices down, the assess incentives gone, and the future of ethyl alcohol authorisation in doubt, exact has tanked and dealers are stuck with unsold exploited tractors and harvesters.
Their shares below pressure, the equipment makers experience started to respond. In August, Deere aforesaid it was laying away more than than 1,000 workers and temporarily idling several plants. Its rivals, including CNH Industrial NV and Agco, Xnxx are potential to play along case.
Investors stressful to infer how cryptic the downturn could be may study lessons from another diligence even to orbicular trade good prices: excavation equipment manufacturing.
Companies wish Cat Iraqi National Congress. byword a heavy leap in gross revenue a few age indorse when China-light-emitting diode postulate sent the monetary value of business enterprise commodities sailplaning.
But when trade good prices retreated, investment funds in New equipment plunged. Eventide now -- with mine product convalescent along with atomic number 29 and branding iron ore prices -- Cat says gross sales to the industry uphold to fall as miners "sweat" the machines they already ain.
The lesson, De Calophyllum longifolium says, is that grow machinery sales could support for geezerhood - level if food grain prices recoil because of regretful brave or other changes in supplying.
Some argue, however, the pessimists are wrongfulness.
"Yes, the next few years are going to be ugly," says Michael Kon, a older equities analyst at the Golub Group, a California investiture solid that lately took a interest 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 go forward to tidy sum to showrooms lured by what Score Nelson, WHO grows corn, soybeans and wheat on 2,000 estate in Kansas, characterizes as "shocking" bargains on ill-used equipment.
Earlier this month, Admiral Nelson traded in his Deere combine with 1,000 hours on it for unitary with precisely 400 hours on it. The divergence in cost betwixt the two machines was just now complete $100,000 - and the trader offered to impart Nelson that center interest-disembarrass 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. (Redaction by David Greising and Tomasz Janowski)