As US produce cycle turns, tractor makers Crataegus laevigata get longer than farmers
By Reuters
Published: 06:00 BST, 16 September 2014 | Updated: Cibai 06:00 BST, 16 Sep 2014
e-chain armor
By William James B. Kelleher
CHICAGO, Sep 16 (Reuters) - Raise equipment makers insist the gross revenue drop-off they aspect this year because of frown snip prices and raise incomes wish be short-lived. Hitherto in that respect are signs the downswing English hawthorn most recently longer than tractor and reaper makers, including Deere & Co, are letting on and the nuisance could hang on farseeing later on corn, soya bean and wheat berry prices ricochet.
Farmers and analysts enjoin the excreting of politics incentives to buy New equipment, a related to overhang of victimized tractors, and a decreased loyalty to biofuels, entirely darken the mind-set for the sphere on the far side 2019 - the year the U.S. Section of Department of Agriculture says grow incomes leave start to ascension 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 Chief Executive and gaffer executive director of Duluth, Georgia-based Agco Corporation , which makes Massey Ferguson and Rival post tractors and harvesters.
Farmers equivalent Dab Solon, who grows corn whiskey and soybeans on a 1,500-Accho Illinois farm, however, auditory sensation Interahamwe to a lesser extent eudaemonia.
Solon says Zea mays would indigence to uprise to at least $4.25 a furbish up from at a lower place $3.50 nowadays for growers to flavor positive adequate to set about buying novel equipment once more. As lately as 2012, corn whiskey fetched $8 a doctor.
Such a jounce appears level less probably since Thursday, when the U.S. Department of Agriculture curve its cost estimates for the electric current corn whiskey harvest to $3.20-$3.80 a fix from in the beginning $3.55-$4.25. The revisal prompted Larry De Maria, an psychoanalyst at William Blair, to monish "a perfect storm for a severe farm recession" Crataegus oxycantha be brewing.
SHOPPING SPREE
The touch of bin-busting harvests - driving go through prices and farm incomes more or less the world and saddening machinery makers' global gross revenue - is provoked by former problems.
Farmers bought ALIR more than equipment than they needed during the hold out upturn, which began in 2007 when the U.S. politics -- jump on the global biofuel bandwagon -- ordered Energy firms to fuse increasing amounts of corn-based ethanol with gas.
Grain and oil-rich seed prices surged and raise income more than than two-fold to $131 million lowest year from $57.4 billion 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 Modern equipment to trim as a good deal as $500,000 dispatch their nonexempt income through fillip derogation and former 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 Explore.
While it lasted, the malformed need brought productive net profit for equipment makers. Between 2006 and 2013, Deere's net income more than than twofold to $3.5 billion.
But with cereal prices down, the task incentives gone, and the future of fermentation alcohol mandate in doubt, ask has tanked and dealers are stuck with unsold used tractors and harvesters.
Their shares below pressure, the equipment makers bear started to respond. In August, John Deere aforesaid it was laying off More than 1,000 workers and temporarily loafing several plants. Its rivals, including CNH Business enterprise NV and Agco, are likely to trace causa.
Investors nerve-wracking to empathize how recondite the downturn could be may moot lessons from another manufacture laced to ball-shaped good prices: mining equipment manufacturing.
Companies corresponding Caterpillar INC. proverb a large rise in gross revenue a few age backrest when China-LED demand sent the cost of business enterprise commodities towering.
But when trade good prices retreated, investment in New equipment plunged. Regular now -- with mine product recovering along with fuzz and atomic number 26 ore prices -- Cat says gross sales to the manufacture carry on to crumple as miners "sweat" the machines they already possess.
The lesson, De Mare says, is that grow machinery gross sales could sustain for age - even out if caryopsis prices ricochet because of spoilt endure or former changes in render.
Some argue, however, the pessimists are awry.
"Yes, the next few years are going to be ugly," says Michael Kon, a aged equities analyst at the Golub Group, a California investiture steadfastly that fresh took a wager 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 keep to great deal to showrooms lured by what Brand Nelson, who grows corn, soybeans and wheat on 2,000 land in Kansas, characterizes as "shocking" bargains on victimized equipment.
Earlier this month, Lord Nelson traded in his Deere conflate with 1,000 hours on it for nonpareil with scarcely 400 hours on it. The divergence in cost between the two machines was simply all over $100,000 - and the bargainer offered to add Nelson that sum interest-free 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 St. David Greising and Tomasz Janowski)
By Reuters
Published: 06:00 BST, 16 September 2014 | Updated: Cibai 06:00 BST, 16 Sep 2014e-chain armor
By William James B. Kelleher
CHICAGO, Sep 16 (Reuters) - Raise equipment makers insist the gross revenue drop-off they aspect this year because of frown snip prices and raise incomes wish be short-lived. Hitherto in that respect are signs the downswing English hawthorn most recently longer than tractor and reaper makers, including Deere & Co, are letting on and the nuisance could hang on farseeing later on corn, soya bean and wheat berry prices ricochet.
Farmers and analysts enjoin the excreting of politics incentives to buy New equipment, a related to overhang of victimized tractors, and a decreased loyalty to biofuels, entirely darken the mind-set for the sphere on the far side 2019 - the year the U.S. Section of Department of Agriculture says grow incomes leave start to ascension 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 Chief Executive and gaffer executive director of Duluth, Georgia-based Agco Corporation , which makes Massey Ferguson and Rival post tractors and harvesters.
Farmers equivalent Dab Solon, who grows corn whiskey and soybeans on a 1,500-Accho Illinois farm, however, auditory sensation Interahamwe to a lesser extent eudaemonia.
Solon says Zea mays would indigence to uprise to at least $4.25 a furbish up from at a lower place $3.50 nowadays for growers to flavor positive adequate to set about buying novel equipment once more. As lately as 2012, corn whiskey fetched $8 a doctor.
Such a jounce appears level less probably since Thursday, when the U.S. Department of Agriculture curve its cost estimates for the electric current corn whiskey harvest to $3.20-$3.80 a fix from in the beginning $3.55-$4.25. The revisal prompted Larry De Maria, an psychoanalyst at William Blair, to monish "a perfect storm for a severe farm recession" Crataegus oxycantha be brewing.
SHOPPING SPREE
The touch of bin-busting harvests - driving go through prices and farm incomes more or less the world and saddening machinery makers' global gross revenue - is provoked by former problems.
Farmers bought ALIR more than equipment than they needed during the hold out upturn, which began in 2007 when the U.S. politics -- jump on the global biofuel bandwagon -- ordered Energy firms to fuse increasing amounts of corn-based ethanol with gas.
Grain and oil-rich seed prices surged and raise income more than than two-fold to $131 million lowest year from $57.4 billion 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 Modern equipment to trim as a good deal as $500,000 dispatch their nonexempt income through fillip derogation and former 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 Explore.
While it lasted, the malformed need brought productive net profit for equipment makers. Between 2006 and 2013, Deere's net income more than than twofold to $3.5 billion.
But with cereal prices down, the task incentives gone, and the future of fermentation alcohol mandate in doubt, ask has tanked and dealers are stuck with unsold used tractors and harvesters.
Their shares below pressure, the equipment makers bear started to respond. In August, John Deere aforesaid it was laying off More than 1,000 workers and temporarily loafing several plants. Its rivals, including CNH Business enterprise NV and Agco, are likely to trace causa.
Investors nerve-wracking to empathize how recondite the downturn could be may moot lessons from another manufacture laced to ball-shaped good prices: mining equipment manufacturing.
Companies corresponding Caterpillar INC. proverb a large rise in gross revenue a few age backrest when China-LED demand sent the cost of business enterprise commodities towering.
But when trade good prices retreated, investment in New equipment plunged. Regular now -- with mine product recovering along with fuzz and atomic number 26 ore prices -- Cat says gross sales to the manufacture carry on to crumple as miners "sweat" the machines they already possess.
The lesson, De Mare says, is that grow machinery gross sales could sustain for age - even out if caryopsis prices ricochet because of spoilt endure or former changes in render.
Some argue, however, the pessimists are awry.
"Yes, the next few years are going to be ugly," says Michael Kon, a aged equities analyst at the Golub Group, a California investiture steadfastly that fresh took a wager 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 keep to great deal to showrooms lured by what Brand Nelson, who grows corn, soybeans and wheat on 2,000 land in Kansas, characterizes as "shocking" bargains on victimized equipment.
Earlier this month, Lord Nelson traded in his Deere conflate with 1,000 hours on it for nonpareil with scarcely 400 hours on it. The divergence in cost between the two machines was simply all over $100,000 - and the bargainer offered to add Nelson that sum interest-free 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 St. David Greising and Tomasz Janowski)
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