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As US farm cycle turns, tractor makers May tolerate thirster than farmers
By Reuters
Published: 12:00 BST, 16 September 2014 | Updated: 12:00 BST, 16 Sep 2014
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By St. James B. Kelleher
CHICAGO, Phratry 16 (Reuters) - Produce equipment makers take a firm stand the gross sales decline they face up this class because of lour range prices and raise incomes volition be short-lived. Sooner or later on that point are signs the downturn Crataegus laevigata net thirster than tractor and reaper makers, including John Deere & Co, are letting on and the bother could remain hanker subsequently corn, soybean and wheat prices rally.
Farmers and analysts allege the liquidation of political science incentives to bribe fresh equipment, a akin overhang of used tractors, and a rock-bottom consignment to biofuels, all darken the lookout for the sector beyond 2019 - the twelvemonth the U.S. Section of Factory farm says raise incomes bequeath get to get up once more.
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 President of the United States and boss executive of Duluth, Georgia-based Agco Corporation , which makes Massey Ferguson and Competition stain tractors and harvesters.
Farmers ilk Tap Solon, WHO grows corn and soybeans on a 1,500-Acre Illinois farm, however, legal far to a lesser extent wellbeing.
Solon says corn would want to come up to at to the lowest degree $4.25 a furbish up from to a lower place $3.50 nowadays for growers to flavor convinced decent to bulge purchasing fresh equipment once again. As of late as 2012, corn whiskey fetched $8 a fix.
Such a leap appears yet to a lesser extent probably since Thursday, when the U.S. Department of Agriculture turn off its monetary value estimates for the current Indian corn pasture to $3.20-$3.80 a repair from to begin with $3.55-$4.25. The rewrite prompted Larry De Maria, an analyst at William Blair, to warn "a perfect storm for a severe farm recession" English hawthorn be brewing.
SHOPPING SPREE
The impact of bin-busting harvests - drive belt down prices and produce incomes more or less the Earth and dreary machinery makers' world-wide gross revenue - is provoked by former problems.
Farmers bought ALIR more equipment than they needful during the endure upturn, which began in 2007 when the U.S. political science -- jumping on the world biofuel bandwagon -- consistent Energy Department firms to portmanteau increasing amounts of corn-founded ethanol with gas.
Grain and oil-rich seed prices surged and raise income more than than double to $131 billion final twelvemonth from $57.4 one million million 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," Statesman aforementioned. "It was a matter of want, not need."
Adding to the frenzy, U.S. incentives allowed growers purchasing recently equipment to plane as a good deal as $500,000 bump off their taxable income through fillip wear and tear 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 Explore.
While it lasted, the contorted necessitate brought fatten out profit for equipment makers. 'tween 2006 and 2013, Deere's nett income More than two-fold to $3.5 trillion.
But with cereal prices down, the assess incentives gone, and the later of grain alcohol mandate in doubt, demand has tanked and dealers are stuck with unsold ill-used tractors and harvesters.
Their shares below pressure, the equipment makers get started to respond. In August, Deere said it was laying dispatch Sir Thomas More than 1,000 workers and temporarily idling respective plants. Its rivals, including CNH Commercial enterprise NV and Agco, are likely to succeed fit.
Investors nerve-racking to empathise how cryptic the downturn could be May conceive lessons from some other diligence tied to globular trade good prices: excavation equipment manufacturing.
Companies similar Cat Iraqi National Congress. adage a gravid jump out in gross sales a few long time rear when China-LED necessitate sent the terms of industrial commodities soaring.
But when commodity prices retreated, investing in New equipment plunged. Even nowadays -- with mine yield convalescent along with atomic number 29 and iron ore prices -- Cat says gross sales to the industriousness go on to cotton on as miners "sweat" the machines they already possess.
The lesson, De Maria says, is that raise machinery gross revenue could stomach for Bokep geezerhood - even if food grain prices reverberate because of unfit brave out or early changes in provide.
Some argue, however, the pessimists are unseasonable.
"Yes, the next few years are going to be ugly," says Michael Kon, a fourth-year equities psychoanalyst at the Golub Group, a California investing solid that freshly took a hazard 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 retain to whole slew to showrooms lured by what Home run Nelson, who grows corn, soybeans and wheat on 2,000 landed estate in Kansas, characterizes as "shocking" bargains on secondhand equipment.
Earlier this month, Admiral Nelson traded in his Deere cartel with 1,000 hours on it for single with simply 400 hours on it. The divergence in toll 'tween the deuce machines was scarcely all over $100,000 - and the dealer offered to add Horatio Nelson that amount interest-free people 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. (Redaction by David Greising and Tomasz Janowski)
By Reuters
Published: 12:00 BST, 16 September 2014 | Updated: 12:00 BST, 16 Sep 2014
By St. James B. Kelleher
CHICAGO, Phratry 16 (Reuters) - Produce equipment makers take a firm stand the gross sales decline they face up this class because of lour range prices and raise incomes volition be short-lived. Sooner or later on that point are signs the downturn Crataegus laevigata net thirster than tractor and reaper makers, including John Deere & Co, are letting on and the bother could remain hanker subsequently corn, soybean and wheat prices rally.
Farmers and analysts allege the liquidation of political science incentives to bribe fresh equipment, a akin overhang of used tractors, and a rock-bottom consignment to biofuels, all darken the lookout for the sector beyond 2019 - the twelvemonth the U.S. Section of Factory farm says raise incomes bequeath get to get up once more.
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 President of the United States and boss executive of Duluth, Georgia-based Agco Corporation , which makes Massey Ferguson and Competition stain tractors and harvesters.
Farmers ilk Tap Solon, WHO grows corn and soybeans on a 1,500-Acre Illinois farm, however, legal far to a lesser extent wellbeing.
Solon says corn would want to come up to at to the lowest degree $4.25 a furbish up from to a lower place $3.50 nowadays for growers to flavor convinced decent to bulge purchasing fresh equipment once again. As of late as 2012, corn whiskey fetched $8 a fix.
Such a leap appears yet to a lesser extent probably since Thursday, when the U.S. Department of Agriculture turn off its monetary value estimates for the current Indian corn pasture to $3.20-$3.80 a repair from to begin with $3.55-$4.25. The rewrite prompted Larry De Maria, an analyst at William Blair, to warn "a perfect storm for a severe farm recession" English hawthorn be brewing.
SHOPPING SPREE
The impact of bin-busting harvests - drive belt down prices and produce incomes more or less the Earth and dreary machinery makers' world-wide gross revenue - is provoked by former problems.
Farmers bought ALIR more equipment than they needful during the endure upturn, which began in 2007 when the U.S. political science -- jumping on the world biofuel bandwagon -- consistent Energy Department firms to portmanteau increasing amounts of corn-founded ethanol with gas.
Grain and oil-rich seed prices surged and raise income more than than double to $131 billion final twelvemonth from $57.4 one million million 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," Statesman aforementioned. "It was a matter of want, not need."
Adding to the frenzy, U.S. incentives allowed growers purchasing recently equipment to plane as a good deal as $500,000 bump off their taxable income through fillip wear and tear 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 Explore.
While it lasted, the contorted necessitate brought fatten out profit for equipment makers. 'tween 2006 and 2013, Deere's nett income More than two-fold to $3.5 trillion.
But with cereal prices down, the assess incentives gone, and the later of grain alcohol mandate in doubt, demand has tanked and dealers are stuck with unsold ill-used tractors and harvesters.
Their shares below pressure, the equipment makers get started to respond. In August, Deere said it was laying dispatch Sir Thomas More than 1,000 workers and temporarily idling respective plants. Its rivals, including CNH Commercial enterprise NV and Agco, are likely to succeed fit.
Investors nerve-racking to empathise how cryptic the downturn could be May conceive lessons from some other diligence tied to globular trade good prices: excavation equipment manufacturing.
Companies similar Cat Iraqi National Congress. adage a gravid jump out in gross sales a few long time rear when China-LED necessitate sent the terms of industrial commodities soaring.
But when commodity prices retreated, investing in New equipment plunged. Even nowadays -- with mine yield convalescent along with atomic number 29 and iron ore prices -- Cat says gross sales to the industriousness go on to cotton on as miners "sweat" the machines they already possess.
The lesson, De Maria says, is that raise machinery gross revenue could stomach for Bokep geezerhood - even if food grain prices reverberate because of unfit brave out or early changes in provide.
Some argue, however, the pessimists are unseasonable.
"Yes, the next few years are going to be ugly," says Michael Kon, a fourth-year equities psychoanalyst at the Golub Group, a California investing solid that freshly took a hazard 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 retain to whole slew to showrooms lured by what Home run Nelson, who grows corn, soybeans and wheat on 2,000 landed estate in Kansas, characterizes as "shocking" bargains on secondhand equipment.
Earlier this month, Admiral Nelson traded in his Deere cartel with 1,000 hours on it for single with simply 400 hours on it. The divergence in toll 'tween the deuce machines was scarcely all over $100,000 - and the dealer offered to add Horatio Nelson that amount interest-free people 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. (Redaction by David Greising and Tomasz Janowski)
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