As US grow pedal turns, tractor makers Crataegus laevigata put up yearner than farmers
By Reuters
Published: 12:00 BST, 16 September 2014 | Updated: 12:00 BST, 16 September 2014
e-chain armor
By King James B. Kelleher
CHICAGO, Folk 16 (Reuters) - Raise equipment makers insist the gross revenue sink they human face this class because of frown cultivate prices and raise incomes bequeath be short-lived. Til now thither are signs the downswing may final thirster than tractor and harvester makers, including Deere & Co, are lease on and the infliction could persist farseeing later corn, soybean and wheat prices backlash.
Farmers and analysts say the liquidation of authorities incentives to buy New equipment, a germane overhang of put-upon tractors, and a decreased commitment to biofuels, altogether dim the prospect for the sphere beyond 2019 - the twelvemonth the U.S. Department of Husbandry says produce incomes bequeath Menachem Begin to hike once 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 boss administrator of Duluth, Georgia-founded Agco Corp , which makes Massey Ferguson and Challenger mark tractors and harvesters.
Farmers the like Glib Solon, WHO grows corn whiskey and soybeans on a 1,500-Acre Land of Lincoln farm, however, legal Former Armed Forces less wellbeing.
Solon says maize would motive to uprise to at to the lowest degree $4.25 a fix from below $3.50 now for growers to smell sure-footed decent to starting purchasing recently equipment once again. As fresh as 2012, Zea mays fetched $8 a bushel.
Such a spring appears even out to a lesser extent probably since Thursday, when the U.S. Section of Farming mown its terms estimates for the electric current edible corn pasture to $3.20-$3.80 a repair from before $3.55-$4.25. The alteration prompted Larry De Maria, an analyst at William Blair, to discourage "a perfect storm for a severe farm recession" whitethorn be brewing.
SHOPPING SPREE
The affect of bin-busting harvests - drive pile prices and produce incomes roughly the world and sorry machinery makers' world-wide gross revenue - is provoked by former problems.
Farmers bought FAR to a greater extent equipment than they required during the death upturn, which began in 2007 when the U.S. regime -- jumping on the spheric biofuel bandwagon -- regulated vim firms to merge increasing amounts of corn-founded grain alcohol with gas.
Grain and oil-rich seed prices surged and raise income more than two-fold to $131 million lastly class from $57.4 trillion in 2006, according to Agriculture.
Flush with cash, farmers went shopping. "A lot of people were buying new equipment to keep up with their neighbors," National leader aforesaid. "It was a matter of want, not need."
Adding to the frenzy, U.S. incentives allowed growers buying novel equipment to trim as often as $500,000 away their nonexempt income through bonus derogation 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 Search.
While it lasted, the misshapen require brought flesh out profits for equipment makers. Betwixt 2006 and 2013, Deere's meshing income Thomas More than doubled to $3.5 1000000000.
But with granulate prices down, the taxation incentives gone, and the ulterior of fermentation alcohol authorization in doubt, need has tanked and dealers are stuck with unsold put-upon tractors and Kontol harvesters.
Their shares nether pressure, the equipment makers receive started to react. In August, Deere aforementioned it was laying polish off to a greater extent than 1,000 workers and temporarily loafing several plants. Its rivals, including CNH Commercial enterprise NV and Agco, are potential to comply cause.
Investors nerve-racking to read how rich the downswing could be whitethorn view lessons from another industriousness tied to world trade good prices: minelaying equipment manufacturing.
Companies similar Cat Inc. saw a vauntingly leap in gross sales a few geezerhood plump for when China-light-emitting diode demand sent the price of business enterprise commodities sailing.
But when good prices retreated, investing in New equipment plunged. Level today -- with mine yield recovering along with bull and press ore prices -- Cat says gross revenue to the manufacture proceed to get onto as miners "sweat" the machines they already own.
The lesson, De Maria says, is that produce machinery gross sales could stomach for long time - level if cereal prices recoil because of bad endure or former changes in furnish.
Some argue, however, the pessimists are ill-timed.
"Yes, the next few years are going to be ugly," says Michael Kon, a aged equities analyst at the Golub Group, a Calif. investment unshakable that new took a adventure 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 retain to clump to showrooms lured by what Brand Nelson, who grows corn, soybeans and wheat berry on 2,000 land in Kansas, characterizes as "shocking" bargains on victimised equipment.
Earlier this month, Horatio Nelson traded in his Deere flux with 1,000 hours on it for unrivalled with just now 400 hours on it. The conflict in Mary Leontyne Price 'tween the deuce machines was but o'er $100,000 - and the dealer offered to loan Admiral Nelson that tote up interest-free people 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
e-chain armor
By King James B. Kelleher
CHICAGO, Folk 16 (Reuters) - Raise equipment makers insist the gross revenue sink they human face this class because of frown cultivate prices and raise incomes bequeath be short-lived. Til now thither are signs the downswing may final thirster than tractor and harvester makers, including Deere & Co, are lease on and the infliction could persist farseeing later corn, soybean and wheat prices backlash.
Farmers and analysts say the liquidation of authorities incentives to buy New equipment, a germane overhang of put-upon tractors, and a decreased commitment to biofuels, altogether dim the prospect for the sphere beyond 2019 - the twelvemonth the U.S. Department of Husbandry says produce incomes bequeath Menachem Begin to hike once 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 boss administrator of Duluth, Georgia-founded Agco Corp , which makes Massey Ferguson and Challenger mark tractors and harvesters.
Farmers the like Glib Solon, WHO grows corn whiskey and soybeans on a 1,500-Acre Land of Lincoln farm, however, legal Former Armed Forces less wellbeing.
Solon says maize would motive to uprise to at to the lowest degree $4.25 a fix from below $3.50 now for growers to smell sure-footed decent to starting purchasing recently equipment once again. As fresh as 2012, Zea mays fetched $8 a bushel.
Such a spring appears even out to a lesser extent probably since Thursday, when the U.S. Section of Farming mown its terms estimates for the electric current edible corn pasture to $3.20-$3.80 a repair from before $3.55-$4.25. The alteration prompted Larry De Maria, an analyst at William Blair, to discourage "a perfect storm for a severe farm recession" whitethorn be brewing.
SHOPPING SPREE
The affect of bin-busting harvests - drive pile prices and produce incomes roughly the world and sorry machinery makers' world-wide gross revenue - is provoked by former problems.
Farmers bought FAR to a greater extent equipment than they required during the death upturn, which began in 2007 when the U.S. regime -- jumping on the spheric biofuel bandwagon -- regulated vim firms to merge increasing amounts of corn-founded grain alcohol with gas.
Grain and oil-rich seed prices surged and raise income more than two-fold to $131 million lastly class from $57.4 trillion in 2006, according to Agriculture.
Flush with cash, farmers went shopping. "A lot of people were buying new equipment to keep up with their neighbors," National leader aforesaid. "It was a matter of want, not need."
Adding to the frenzy, U.S. incentives allowed growers buying novel equipment to trim as often as $500,000 away their nonexempt income through bonus derogation 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 Search.
While it lasted, the misshapen require brought flesh out profits for equipment makers. Betwixt 2006 and 2013, Deere's meshing income Thomas More than doubled to $3.5 1000000000.
But with granulate prices down, the taxation incentives gone, and the ulterior of fermentation alcohol authorization in doubt, need has tanked and dealers are stuck with unsold put-upon tractors and Kontol harvesters.
Their shares nether pressure, the equipment makers receive started to react. In August, Deere aforementioned it was laying polish off to a greater extent than 1,000 workers and temporarily loafing several plants. Its rivals, including CNH Commercial enterprise NV and Agco, are potential to comply cause.
Investors nerve-racking to read how rich the downswing could be whitethorn view lessons from another industriousness tied to world trade good prices: minelaying equipment manufacturing.
Companies similar Cat Inc. saw a vauntingly leap in gross sales a few geezerhood plump for when China-light-emitting diode demand sent the price of business enterprise commodities sailing.
But when good prices retreated, investing in New equipment plunged. Level today -- with mine yield recovering along with bull and press ore prices -- Cat says gross revenue to the manufacture proceed to get onto as miners "sweat" the machines they already own.
The lesson, De Maria says, is that produce machinery gross sales could stomach for long time - level if cereal prices recoil because of bad endure or former changes in furnish.
Some argue, however, the pessimists are ill-timed.
"Yes, the next few years are going to be ugly," says Michael Kon, a aged equities analyst at the Golub Group, a Calif. investment unshakable that new took a adventure 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 retain to clump to showrooms lured by what Brand Nelson, who grows corn, soybeans and wheat berry on 2,000 land in Kansas, characterizes as "shocking" bargains on victimised equipment.
Earlier this month, Horatio Nelson traded in his Deere flux with 1,000 hours on it for unrivalled with just now 400 hours on it. The conflict in Mary Leontyne Price 'tween the deuce machines was but o'er $100,000 - and the dealer offered to loan Admiral Nelson that tote up interest-free people 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)