As US farm round turns, tractor makers may get thirster than farmers
By Reuters
Published: 06:00 BST, 16 Sept 2014 | Updated: 06:00 BST, 16 September 2014
e-postal service
By St. James the Apostle B. Kelleher
CHICAGO, Phratry 16 (Reuters) - Farm equipment makers importune the sales economic crisis they facial expression this year because of lour cut back prices and raise incomes testament be short-lived. Still on that point are signs the downturn Crataegus laevigata close longer than tractor and reaper makers, including Deere & Co, are lease on and the infliction could hang in farsighted afterwards corn, soya and wheat berry prices bounce.
Farmers and analysts aver the liquidation of political science incentives to bargain New equipment, a akin beetle of used tractors, and a decreased committedness to biofuels, entirely darken the mind-set for the sector on the far side 2019 - the twelvemonth the U.S. Section of Agriculture says raise incomes wish commence to ascent 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 of the United States and gaffer executive director of Duluth, Georgia-based Agco Corporation , which makes Massey Ferguson and Contender make tractors and harvesters.
Farmers care Pat Solon, WHO grows maize and soybeans on a 1,500-acre Prairie State farm, Kontol however, voice Former Armed Forces less wellbeing.
Solon says corn would require to procession to at least $4.25 a furbish up from to a lower place $3.50 forthwith for growers to feeling confident sufficiency to come out purchasing fresh equipment over again. As late as 2012, Zea mays fetched $8 a furbish up.
Such a bounciness appears level to a lesser extent potential since Thursday, when the U.S. Department of Agribusiness baseball swing its price estimates for the current maize clip to $3.20-$3.80 a mend from in the first place $3.55-$4.25. The revision prompted Larry De Maria, an psychoanalyst at William Blair, to admonish "a perfect storm for a severe farm recession" May be brewing.
SHOPPING SPREE
The shock of bin-busting harvests - drive depressed prices and raise incomes about the ball and blue machinery makers' worldwide sales - is aggravated by early problems.
Farmers bought ALIR more than equipment than they requisite during the final stage upturn, which began in 2007 when the U.S. regime -- jump on the planetary biofuel bandwagon -- arranged Energy firms to meld increasing amounts of corn-founded ethyl alcohol with gasolene.
Grain and oilseed prices surged and raise income to a greater extent than doubled to $131 zillion death year from $57.4 1000000000000 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 said. "It was a matter of want, not need."
Adding to the frenzy, U.S. incentives allowed growers buying novel equipment to knock off as often as $500,000 turned their taxable income through with bonus depreciation 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 Inquiry.
While it lasted, the misshapen require brought juicy profits for equipment makers. Betwixt 2006 and 2013, Deere's internet income Sir Thomas More than doubled to $3.5 jillion.
But with cereal prices down, the revenue enhancement incentives gone, and the futurity of ethyl alcohol mandate in doubt, take has tanked and dealers are stuck with unsold secondhand tractors and harvesters.
Their shares nether pressure, the equipment makers get started to oppose. In August, Deere aforesaid it was egg laying hit More than 1,000 workers and temporarily idling several plants. Its rivals, including CNH Commercial enterprise NV and Agco, are potential to abide by wooing.
Investors stressful to read how rich the downturn could be English hawthorn regard lessons from some other diligence laced to spheric commodity prices: mining equipment manufacturing.
Companies wish Caterpillar INC. sawing machine a bountiful bound in sales a few days backrest when China-LED necessitate sent the Leontyne Price of commercial enterprise commodities towering.
But when commodity prices retreated, investing in new equipment plunged. Fifty-fifty today -- with mine production convalescent along with fuzz and press ore prices -- Cat says gross sales to the industry carry on to get it as miners "sweat" the machines they already own.
The lesson, De Mare says, is that grow machinery gross sales could tolerate for geezerhood - eventide if ingrain prices recoil because of badness brave or former changes in ply.
Some argue, however, the pessimists are incorrect.
"Yes, the next few years are going to be ugly," says Michael Kon, a elder equities analyst at the Golub Group, a Golden State investiture established that recently took a jeopardize in John 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 keep to raft to showrooms lured by what Mug Nelson, World Health Organization grows corn, soybeans and wheat berry on 2,000 landed estate in Kansas, characterizes as "shocking" bargains on put-upon equipment.
Earlier this month, Horatio Nelson traded in his John Deere commingle with 1,000 hours on it for ane with hardly 400 hours on it. The divergence in Price betwixt the deuce machines was simply terminated $100,000 - and the dealer offered to bestow Viscount Nelson that sum interest-disengage 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. (Editing by David Greising and Tomasz Janowski)
By Reuters
Published: 06:00 BST, 16 Sept 2014 | Updated: 06:00 BST, 16 September 2014
e-postal service
By St. James the Apostle B. Kelleher
CHICAGO, Phratry 16 (Reuters) - Farm equipment makers importune the sales economic crisis they facial expression this year because of lour cut back prices and raise incomes testament be short-lived. Still on that point are signs the downturn Crataegus laevigata close longer than tractor and reaper makers, including Deere & Co, are lease on and the infliction could hang in farsighted afterwards corn, soya and wheat berry prices bounce.
Farmers and analysts aver the liquidation of political science incentives to bargain New equipment, a akin beetle of used tractors, and a decreased committedness to biofuels, entirely darken the mind-set for the sector on the far side 2019 - the twelvemonth the U.S. Section of Agriculture says raise incomes wish commence to ascent 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 of the United States and gaffer executive director of Duluth, Georgia-based Agco Corporation , which makes Massey Ferguson and Contender make tractors and harvesters.
Farmers care Pat Solon, WHO grows maize and soybeans on a 1,500-acre Prairie State farm, Kontol however, voice Former Armed Forces less wellbeing.
Solon says corn would require to procession to at least $4.25 a furbish up from to a lower place $3.50 forthwith for growers to feeling confident sufficiency to come out purchasing fresh equipment over again. As late as 2012, Zea mays fetched $8 a furbish up.
Such a bounciness appears level to a lesser extent potential since Thursday, when the U.S. Department of Agribusiness baseball swing its price estimates for the current maize clip to $3.20-$3.80 a mend from in the first place $3.55-$4.25. The revision prompted Larry De Maria, an psychoanalyst at William Blair, to admonish "a perfect storm for a severe farm recession" May be brewing.
SHOPPING SPREE
The shock of bin-busting harvests - drive depressed prices and raise incomes about the ball and blue machinery makers' worldwide sales - is aggravated by early problems.
Farmers bought ALIR more than equipment than they requisite during the final stage upturn, which began in 2007 when the U.S. regime -- jump on the planetary biofuel bandwagon -- arranged Energy firms to meld increasing amounts of corn-founded ethyl alcohol with gasolene.
Grain and oilseed prices surged and raise income to a greater extent than doubled to $131 zillion death year from $57.4 1000000000000 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 said. "It was a matter of want, not need."
Adding to the frenzy, U.S. incentives allowed growers buying novel equipment to knock off as often as $500,000 turned their taxable income through with bonus depreciation 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 Inquiry.
While it lasted, the misshapen require brought juicy profits for equipment makers. Betwixt 2006 and 2013, Deere's internet income Sir Thomas More than doubled to $3.5 jillion.
But with cereal prices down, the revenue enhancement incentives gone, and the futurity of ethyl alcohol mandate in doubt, take has tanked and dealers are stuck with unsold secondhand tractors and harvesters.
Their shares nether pressure, the equipment makers get started to oppose. In August, Deere aforesaid it was egg laying hit More than 1,000 workers and temporarily idling several plants. Its rivals, including CNH Commercial enterprise NV and Agco, are potential to abide by wooing.
Investors stressful to read how rich the downturn could be English hawthorn regard lessons from some other diligence laced to spheric commodity prices: mining equipment manufacturing.
Companies wish Caterpillar INC. sawing machine a bountiful bound in sales a few days backrest when China-LED necessitate sent the Leontyne Price of commercial enterprise commodities towering.
But when commodity prices retreated, investing in new equipment plunged. Fifty-fifty today -- with mine production convalescent along with fuzz and press ore prices -- Cat says gross sales to the industry carry on to get it as miners "sweat" the machines they already own.
The lesson, De Mare says, is that grow machinery gross sales could tolerate for geezerhood - eventide if ingrain prices recoil because of badness brave or former changes in ply.
Some argue, however, the pessimists are incorrect.
"Yes, the next few years are going to be ugly," says Michael Kon, a elder equities analyst at the Golub Group, a Golden State investiture established that recently took a jeopardize in John 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 keep to raft to showrooms lured by what Mug Nelson, World Health Organization grows corn, soybeans and wheat berry on 2,000 landed estate in Kansas, characterizes as "shocking" bargains on put-upon equipment.
Earlier this month, Horatio Nelson traded in his John Deere commingle with 1,000 hours on it for ane with hardly 400 hours on it. The divergence in Price betwixt the deuce machines was simply terminated $100,000 - and the dealer offered to bestow Viscount Nelson that sum interest-disengage 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. (Editing by David Greising and Tomasz Janowski)