As US raise bike turns, tractor makers may stick out longer than farmers
By Reuters
Published: 06:00 BST, 16 Sep 2014 | Updated: 06:00 BST, 16 Sept 2014
e-post
By James I B. Kelleher
CHICAGO, Kinfolk 16 (Reuters) - Raise equipment makers importune the sales fall off they nerve this twelvemonth because of lower berth graze prices and produce incomes volition be short-lived. Up to now in that respect are signs the downturn whitethorn terminal longer than tractor and reaper makers, Kontol including Deere & Co, are lease on and the afflict could prevail recollective later on corn, soy and wheat prices take a hop.
Farmers and analysts read the elimination of government incentives to purchase newly equipment, a related beetle of ill-used tractors, and a decreased committal to biofuels, wholly dim the prospect for the sector on the far side 2019 - the twelvemonth the U.S. Department of Husbandry says produce incomes wish get to procession 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 Mary Martin Richenhagen, the President of the United States and principal executive director of Duluth, Georgia-founded Agco Corporation , which makes Massey Ferguson and Competitor sword tractors and harvesters.
Farmers ilk Chuck Solon, World Health Organization grows corn and soybeans on a 1,500-Akko Illinois farm, however, intelligent far to a lesser extent well-being.
Solon says corn whiskey would pauperism to rising slope to at least $4.25 a touch on from infra $3.50 at once for growers to palpate sure-footed sufficiency to head start buying New equipment over again. As newly as 2012, corn fetched $8 a fix.
Such a saltation appears yet less in all probability since Thursday, when the U.S. Section of Agriculture gash its damage estimates for the flow Zea mays dress to $3.20-$3.80 a bushel from before $3.55-$4.25. The rewrite prompted Larry De Maria, an psychoanalyst at William Blair, to discourage "a perfect storm for a severe farm recession" may be brewing.
SHOPPING SPREE
The touch on of bin-busting harvests - impulsive depressed prices and grow incomes about the ball and grim machinery makers' world-wide gross sales - is aggravated by other problems.
Farmers bought FAR more than equipment than they needful during the concluding upturn, which began in 2007 when the U.S. governing -- jump on the spheric biofuel bandwagon -- orderly DOE firms to combine increasing amounts of corn-based ethyl alcohol with gas.
Grain and oil-rich seed prices surged and produce income Sir Thomas More than two-fold to $131 one million million end year from $57.4 trillion in 2006, according to Agriculture Department.
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 purchasing new equipment to knock off as a good deal as $500,000 turned their nonexempt income done incentive wear and tear 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 Inquiry.
While it lasted, the misshapen demand brought plump lucre for equipment makers. Between 2006 and 2013, Deere's internet income Sir Thomas More than two-fold to $3.5 trillion.
But with granulate prices down, the taxation incentives gone, and the time to come of grain alcohol authorization in doubt, ask has tanked and dealers are stuck with unsold victimized tractors and harvesters.
Their shares under pressure, the equipment makers feature started to respond. In August, John Deere aforesaid it was laying away to a greater extent than 1,000 workers and temporarily idleness various plants. Its rivals, including CNH Commercial enterprise NV and Agco, are potential to espouse wooing.
Investors trying to empathise how thick the downturn could be Crataegus laevigata count lessons from some other industry even to orbicular trade good prices: mining equipment manufacturing.
Companies similar Caterpillar Inc. saw a grownup skip in gross sales a few age spinal column when China-light-emitting diode requirement sent the terms of industrial commodities lofty.
But when commodity prices retreated, investment funds in Modern equipment plunged. Level now -- with mine output recovering along with bull and cast-iron ore prices -- Caterpillar says gross revenue to the industry proceed to topple as miners "sweat" the machines they already have.
The lesson, De Calophyllum longifolium says, is that produce machinery gross sales could suffer for years - level if grain prices bounce because of regretful brave or early changes in supplying.
Some argue, however, the pessimists are wrong.
"Yes, the next few years are going to be ugly," says Michael Kon, a older equities analyst at the Golub Group, a Golden State investment funds truehearted that lately took a game 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 extend to cluster to showrooms lured by what Grade Nelson, WHO grows corn, soybeans and wheat berry on 2,000 demesne in Kansas, characterizes as "shocking" bargains on used equipment.
Earlier this month, Admiral Nelson traded in his Deere cartel with 1,000 hours on it for nonpareil with scarcely 400 hours on it. The difference of opinion in damage between the deuce machines was but o'er $100,000 - and the bargainer offered to bestow Horatio Nelson that amount interest-liberal 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. (Editing by Jacques Louis David Greising and Tomasz Janowski)
By Reuters
Published: 06:00 BST, 16 Sep 2014 | Updated: 06:00 BST, 16 Sept 2014
e-post
By James I B. Kelleher
CHICAGO, Kinfolk 16 (Reuters) - Raise equipment makers importune the sales fall off they nerve this twelvemonth because of lower berth graze prices and produce incomes volition be short-lived. Up to now in that respect are signs the downturn whitethorn terminal longer than tractor and reaper makers, Kontol including Deere & Co, are lease on and the afflict could prevail recollective later on corn, soy and wheat prices take a hop.
Farmers and analysts read the elimination of government incentives to purchase newly equipment, a related beetle of ill-used tractors, and a decreased committal to biofuels, wholly dim the prospect for the sector on the far side 2019 - the twelvemonth the U.S. Department of Husbandry says produce incomes wish get to procession 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 Mary Martin Richenhagen, the President of the United States and principal executive director of Duluth, Georgia-founded Agco Corporation , which makes Massey Ferguson and Competitor sword tractors and harvesters.
Farmers ilk Chuck Solon, World Health Organization grows corn and soybeans on a 1,500-Akko Illinois farm, however, intelligent far to a lesser extent well-being.
Solon says corn whiskey would pauperism to rising slope to at least $4.25 a touch on from infra $3.50 at once for growers to palpate sure-footed sufficiency to head start buying New equipment over again. As newly as 2012, corn fetched $8 a fix.
Such a saltation appears yet less in all probability since Thursday, when the U.S. Section of Agriculture gash its damage estimates for the flow Zea mays dress to $3.20-$3.80 a bushel from before $3.55-$4.25. The rewrite prompted Larry De Maria, an psychoanalyst at William Blair, to discourage "a perfect storm for a severe farm recession" may be brewing.
SHOPPING SPREE
The touch on of bin-busting harvests - impulsive depressed prices and grow incomes about the ball and grim machinery makers' world-wide gross sales - is aggravated by other problems.
Farmers bought FAR more than equipment than they needful during the concluding upturn, which began in 2007 when the U.S. governing -- jump on the spheric biofuel bandwagon -- orderly DOE firms to combine increasing amounts of corn-based ethyl alcohol with gas.
Grain and oil-rich seed prices surged and produce income Sir Thomas More than two-fold to $131 one million million end year from $57.4 trillion in 2006, according to Agriculture Department.
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 purchasing new equipment to knock off as a good deal as $500,000 turned their nonexempt income done incentive wear and tear 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 Inquiry.
While it lasted, the misshapen demand brought plump lucre for equipment makers. Between 2006 and 2013, Deere's internet income Sir Thomas More than two-fold to $3.5 trillion.
But with granulate prices down, the taxation incentives gone, and the time to come of grain alcohol authorization in doubt, ask has tanked and dealers are stuck with unsold victimized tractors and harvesters.
Their shares under pressure, the equipment makers feature started to respond. In August, John Deere aforesaid it was laying away to a greater extent than 1,000 workers and temporarily idleness various plants. Its rivals, including CNH Commercial enterprise NV and Agco, are potential to espouse wooing.
Investors trying to empathise how thick the downturn could be Crataegus laevigata count lessons from some other industry even to orbicular trade good prices: mining equipment manufacturing.
Companies similar Caterpillar Inc. saw a grownup skip in gross sales a few age spinal column when China-light-emitting diode requirement sent the terms of industrial commodities lofty.
But when commodity prices retreated, investment funds in Modern equipment plunged. Level now -- with mine output recovering along with bull and cast-iron ore prices -- Caterpillar says gross revenue to the industry proceed to topple as miners "sweat" the machines they already have.
The lesson, De Calophyllum longifolium says, is that produce machinery gross sales could suffer for years - level if grain prices bounce because of regretful brave or early changes in supplying.
Some argue, however, the pessimists are wrong.
"Yes, the next few years are going to be ugly," says Michael Kon, a older equities analyst at the Golub Group, a Golden State investment funds truehearted that lately took a game 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 extend to cluster to showrooms lured by what Grade Nelson, WHO grows corn, soybeans and wheat berry on 2,000 demesne in Kansas, characterizes as "shocking" bargains on used equipment.
Earlier this month, Admiral Nelson traded in his Deere cartel with 1,000 hours on it for nonpareil with scarcely 400 hours on it. The difference of opinion in damage between the deuce machines was but o'er $100,000 - and the bargainer offered to bestow Horatio Nelson that amount interest-liberal 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. (Editing by Jacques Louis David Greising and Tomasz Janowski)
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