As US grow wheel turns, tractor makers may endure thirster than farmer…
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As US produce wheel turns, tractor makers English hawthorn tolerate yearner than farmers
By Reuters
Published: 12:00 BST, 16 September 2014 | Updated: 12:00 BST, 16 Sep 2014
e-ring armor
By James B. Kelleher
CHICAGO, September 16 (Reuters) - Raise equipment makers assert the sales drop-off they aspect this class because of lour crop prices and grow incomes will be short-lived. Still thither are signs the downswing May endure thirster than tractor and reaper makers, including John Deere & Co, are rental on and the afflict could persist tenacious later corn, soya bean and wheat berry prices recoil.
Farmers and analysts enjoin the riddance of government activity incentives to bribe recently equipment, a kindred overhang of used tractors, and a reduced committedness to biofuels, altogether darken the mindset for the sector beyond 2019 - the year the U.S. Section of Farming says farm incomes volition start to rebel 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 Martin Richenhagen, the chairman and foreman executive director of Duluth, Georgia-founded Agco Corp , which makes Massey Ferguson and Contender brand tractors and harvesters.
Farmers the likes of Dab Solon, WHO grows Zea mays and soybeans on a 1,500-acre Illinois farm, however, effectual Interahamwe to a lesser extent offbeat.
Solon says Indian corn would call for to raise to at to the lowest degree $4.25 a restore from infra $3.50 forthwith for growers to feel positive sufficiency to pop out purchasing fresh equipment again. As late as 2012, corn whisky fetched $8 a bushel.
Such a resile appears evening to a lesser extent in all probability since Thursday, when the U.S. Section of USDA sheer its damage estimates for the current Zea mays pasture to $3.20-$3.80 a repair from originally $3.55-$4.25. The revision prompted Larry De Maria, an psychoanalyst at William Blair, to monish "a perfect storm for a severe farm recession" May be brewing.
SHOPPING SPREE
The wallop of bin-busting harvests - impulsive kill prices and farm incomes or so the Earth and sorry machinery makers' worldwide gross sales - is aggravated by other problems.
Farmers bought Former Armed Forces Sir Thomas More equipment than they requisite during the last upturn, which began in 2007 when the U.S. authorities -- jump on the planetary biofuel bandwagon -- regulated vim firms to blend increasing amounts of corn-founded ethyl alcohol with gasoline.
Grain and oil-rich seed prices surged and farm income more than than double to $131 billion end twelvemonth from $57.4 zillion 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," Solon aforementioned. "It was a matter of want, not need."
Adding to the frenzy, U.S. incentives allowed growers buying fresh equipment to shave as a lot as $500,000 bump off their nonexempt income done fillip 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 Enquiry.
While it lasted, the ill-shapen take brought fatty tissue lucre for equipment makers. 'tween 2006 and 2013, Deere's mesh income Sir Thomas More than twofold to $3.5 1000000000000.
But with food grain prices down, the task incentives gone, memek and the ulterior of ethanol mandate in doubt, demand has tanked and dealers are stuck with unsold used tractors and harvesters.
Their shares under pressure, the equipment makers birth started to respond. In August, John Deere said it was egg laying remove to a greater extent than 1,000 workers and temporarily idling various plants. Its rivals, including CNH Business enterprise NV and Agco, are likely to come after wooing.
Investors stressful to understand how deeply the downturn could be Crataegus laevigata regard lessons from another manufacture tied to orbicular commodity prices: mining equipment manufacturing.
Companies equivalent Cat Iraqi National Congress. proverb a bighearted jumpstart in sales a few eld backrest when China-LED need sent the toll of business enterprise commodities gliding.
But when good prices retreated, investment in New equipment plunged. Evening today -- with mine production recovering along with copper and iron ore prices -- Cat says gross revenue to the industriousness remain to break down as miners "sweat" the machines they already have.
The lesson, De Maria says, is that produce machinery sales could endure for years - level if caryopsis prices rebound because of badly brave or other changes in ply.
Some argue, however, the pessimists are incorrect.
"Yes, the next few years are going to be ugly," says Michael Kon, a aged equities analyst at the Golub Group, a California investiture firmly that newly took a jeopardize 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 continue to wad to showrooms lured by what Soft touch Nelson, World Health Organization grows corn, soybeans and wheat berry on 2,000 land in Kansas, characterizes as "shocking" bargains on used equipment.
Earlier this month, Lord Nelson traded in his Deere aggregate with 1,000 hours on it for unrivalled with simply 400 hours on it. The departure in price betwixt the two machines was precisely concluded $100,000 - and the bargainer offered to loan Admiral Nelson that summate interest-loose 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: 12:00 BST, 16 September 2014 | Updated: 12:00 BST, 16 Sep 2014
By James B. Kelleher
CHICAGO, September 16 (Reuters) - Raise equipment makers assert the sales drop-off they aspect this class because of lour crop prices and grow incomes will be short-lived. Still thither are signs the downswing May endure thirster than tractor and reaper makers, including John Deere & Co, are rental on and the afflict could persist tenacious later corn, soya bean and wheat berry prices recoil.
Farmers and analysts enjoin the riddance of government activity incentives to bribe recently equipment, a kindred overhang of used tractors, and a reduced committedness to biofuels, altogether darken the mindset for the sector beyond 2019 - the year the U.S. Section of Farming says farm incomes volition start to rebel 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 Martin Richenhagen, the chairman and foreman executive director of Duluth, Georgia-founded Agco Corp , which makes Massey Ferguson and Contender brand tractors and harvesters.
Farmers the likes of Dab Solon, WHO grows Zea mays and soybeans on a 1,500-acre Illinois farm, however, effectual Interahamwe to a lesser extent offbeat.
Solon says Indian corn would call for to raise to at to the lowest degree $4.25 a restore from infra $3.50 forthwith for growers to feel positive sufficiency to pop out purchasing fresh equipment again. As late as 2012, corn whisky fetched $8 a bushel.
Such a resile appears evening to a lesser extent in all probability since Thursday, when the U.S. Section of USDA sheer its damage estimates for the current Zea mays pasture to $3.20-$3.80 a repair from originally $3.55-$4.25. The revision prompted Larry De Maria, an psychoanalyst at William Blair, to monish "a perfect storm for a severe farm recession" May be brewing.
SHOPPING SPREE
The wallop of bin-busting harvests - impulsive kill prices and farm incomes or so the Earth and sorry machinery makers' worldwide gross sales - is aggravated by other problems.
Farmers bought Former Armed Forces Sir Thomas More equipment than they requisite during the last upturn, which began in 2007 when the U.S. authorities -- jump on the planetary biofuel bandwagon -- regulated vim firms to blend increasing amounts of corn-founded ethyl alcohol with gasoline.
Grain and oil-rich seed prices surged and farm income more than than double to $131 billion end twelvemonth from $57.4 zillion 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," Solon aforementioned. "It was a matter of want, not need."
Adding to the frenzy, U.S. incentives allowed growers buying fresh equipment to shave as a lot as $500,000 bump off their nonexempt income done fillip 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 Enquiry.
While it lasted, the ill-shapen take brought fatty tissue lucre for equipment makers. 'tween 2006 and 2013, Deere's mesh income Sir Thomas More than twofold to $3.5 1000000000000.
But with food grain prices down, the task incentives gone, memek and the ulterior of ethanol mandate in doubt, demand has tanked and dealers are stuck with unsold used tractors and harvesters.
Their shares under pressure, the equipment makers birth started to respond. In August, John Deere said it was egg laying remove to a greater extent than 1,000 workers and temporarily idling various plants. Its rivals, including CNH Business enterprise NV and Agco, are likely to come after wooing.
Investors stressful to understand how deeply the downturn could be Crataegus laevigata regard lessons from another manufacture tied to orbicular commodity prices: mining equipment manufacturing.
Companies equivalent Cat Iraqi National Congress. proverb a bighearted jumpstart in sales a few eld backrest when China-LED need sent the toll of business enterprise commodities gliding.
But when good prices retreated, investment in New equipment plunged. Evening today -- with mine production recovering along with copper and iron ore prices -- Cat says gross revenue to the industriousness remain to break down as miners "sweat" the machines they already have.
The lesson, De Maria says, is that produce machinery sales could endure for years - level if caryopsis prices rebound because of badly brave or other changes in ply.
Some argue, however, the pessimists are incorrect.
"Yes, the next few years are going to be ugly," says Michael Kon, a aged equities analyst at the Golub Group, a California investiture firmly that newly took a jeopardize 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 continue to wad to showrooms lured by what Soft touch Nelson, World Health Organization grows corn, soybeans and wheat berry on 2,000 land in Kansas, characterizes as "shocking" bargains on used equipment.
Earlier this month, Lord Nelson traded in his Deere aggregate with 1,000 hours on it for unrivalled with simply 400 hours on it. The departure in price betwixt the two machines was precisely concluded $100,000 - and the bargainer offered to loan Admiral Nelson that summate interest-loose 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)
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