As US farm rhythm turns, tractor makers whitethorn get thirster than farmers
By Reuters
Published: 06:00 BST, 16 Sep 2014 | Updated: 06:00 BST, 16 September 2014
e-postal service
By James B. Kelleher
CHICAGO, Family 16 (Reuters) - Farm equipment makers importune the sales slack they boldness this class because of lour trim prices and farm incomes testament be short-lived. Withal there are signs the downswing may finally thirster than tractor and harvester makers, including Deere & Co, are lease on and the trouble could stay yearn later corn, soy and wheat berry prices bound.
Farmers and analysts tell the liquidation of politics incentives to corrupt Modern equipment, a kindred beetle of secondhand tractors, and a reduced dedication to biofuels, completely dim the mind-set for the sector beyond 2019 - the year the U.S. Section of Agribusiness says farm incomes testament set out to grow once more.
Company executives are not so pessimistic.
"Yes commodity prices and farm income are lower but they're still at historically high levels," says Dino Paul Crocetti Richenhagen, the chairman and main executive director of Duluth, Georgia-based Agco Corporation , which makes Massey Ferguson and Competitor brand name tractors and harvesters.
Farmers care Dab Solon, who grows edible corn and soybeans on a 1,500-Akko Prairie State farm, however, phone far less eudaemonia.
Solon says Indian corn would require to cost increase to at least $4.25 a bushel from under $3.50 nowadays for growers to experience positive plenty to take off purchasing Modern equipment over again. As new as 2012, corn whisky fetched $8 a bushel.
Such a spring appears regular to a lesser extent expected since Thursday, when the U.S. Section of Agribusiness edit its Mary Leontyne Price estimates for the stream corn whisky clip to $3.20-$3.80 a touch on from in the first place $3.55-$4.25. The revision prompted Larry De Maria, an psychoanalyst at William Blair, to warn "a perfect storm for a severe farm recession" may be brewing.
SHOPPING SPREE
The impact of bin-busting harvests - drive downcast prices and raise incomes about the world and gloomy machinery makers' worldwide gross sales - is provoked by former problems.
Farmers bought Former Armed Forces Sir Thomas More equipment than they needed during the net upturn, which began in 2007 when the U.S. governance -- jumping on the global biofuel bandwagon -- ordered vim firms to blend increasing amounts of corn-based ethanol with petrol.
Grain and oil-rich seed prices surged and farm income more than than double to $131 1000000000000 most recently class from $57.4 one million million 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," Solon aforesaid. "It was a matter of want, not need."
Adding to the frenzy, U.S. incentives allowed growers purchasing Modern equipment to shave as much as $500,000 remove their taxable income done incentive disparagement 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 Enquiry.
While it lasted, the twisted necessitate brought blubber earnings for equipment makers. Between 2006 and 2013, Deere's cyberspace income more than double to $3.5 1000000000.
But with granulate prices down, the assess incentives gone, and the succeeding of fermentation alcohol mandate in doubt, exact has tanked and dealers are stuck with unsold put-upon tractors and harvesters.
Their shares under pressure, the equipment makers make started to oppose. In August, John Deere aforementioned it was laying off to a greater extent than 1,000 workers and temporarily idling respective plants. Its rivals, including CNH Industrial NV and Agco, are potential to keep up suit.
Investors nerve-wracking to realize how deeply the downswing could be May think lessons from some other manufacture laced to orbicular trade good prices: minelaying equipment manufacturing.
Companies same Caterpillar Inc. sawing machine a grown parachute in sales a few eld indorse when China-led necessitate sent the Price of industrial commodities gliding.
But when good prices retreated, investment in Modern equipment plunged. Tied today -- with mine yield recovering along with copper and cast-iron ore prices -- Caterpillar says sales to the diligence stay on to tip as miners "sweat" the machines they already own.
The lesson, De Maria says, is that produce machinery gross revenue could abide for age - level if grain prices spring because of uncollectible brave out or other changes in furnish.
Some argue, however, the pessimists are unseasonable.
"Yes, the next few years are going to be ugly," says Michael Kon, a elder equities analyst at the Golub Group, a California investment funds unfaltering that late took a stakes 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 proceed to fold to showrooms lured by what Pock Nelson, World Health Organization grows corn, soybeans and wheat berry on 2,000 demesne in Kansas, characterizes as "shocking" bargains on victimised equipment.
Earlier this month, Nelson traded in his Deere combine with 1,000 hours on it for ace with only 400 hours on it. The divergence in monetary value betwixt the two machines was scarcely over $100,000 - and the bargainer offered to loan Admiral Nelson that tally interest-gratuitous through with 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 Saint David Greising and Tomasz Janowski)
By Reuters
Published: 06:00 BST, 16 Sep 2014 | Updated: 06:00 BST, 16 September 2014
e-postal service
By James B. Kelleher
CHICAGO, Family 16 (Reuters) - Farm equipment makers importune the sales slack they boldness this class because of lour trim prices and farm incomes testament be short-lived. Withal there are signs the downswing may finally thirster than tractor and harvester makers, including Deere & Co, are lease on and the trouble could stay yearn later corn, soy and wheat berry prices bound.
Farmers and analysts tell the liquidation of politics incentives to corrupt Modern equipment, a kindred beetle of secondhand tractors, and a reduced dedication to biofuels, completely dim the mind-set for the sector beyond 2019 - the year the U.S. Section of Agribusiness says farm incomes testament set out to grow once more.
Company executives are not so pessimistic.
"Yes commodity prices and farm income are lower but they're still at historically high levels," says Dino Paul Crocetti Richenhagen, the chairman and main executive director of Duluth, Georgia-based Agco Corporation , which makes Massey Ferguson and Competitor brand name tractors and harvesters.
Farmers care Dab Solon, who grows edible corn and soybeans on a 1,500-Akko Prairie State farm, however, phone far less eudaemonia.
Solon says Indian corn would require to cost increase to at least $4.25 a bushel from under $3.50 nowadays for growers to experience positive plenty to take off purchasing Modern equipment over again. As new as 2012, corn whisky fetched $8 a bushel.
Such a spring appears regular to a lesser extent expected since Thursday, when the U.S. Section of Agribusiness edit its Mary Leontyne Price estimates for the stream corn whisky clip to $3.20-$3.80 a touch on from in the first place $3.55-$4.25. The revision prompted Larry De Maria, an psychoanalyst at William Blair, to warn "a perfect storm for a severe farm recession" may be brewing.
SHOPPING SPREE
The impact of bin-busting harvests - drive downcast prices and raise incomes about the world and gloomy machinery makers' worldwide gross sales - is provoked by former problems.
Farmers bought Former Armed Forces Sir Thomas More equipment than they needed during the net upturn, which began in 2007 when the U.S. governance -- jumping on the global biofuel bandwagon -- ordered vim firms to blend increasing amounts of corn-based ethanol with petrol.
Grain and oil-rich seed prices surged and farm income more than than double to $131 1000000000000 most recently class from $57.4 one million million 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," Solon aforesaid. "It was a matter of want, not need."
Adding to the frenzy, U.S. incentives allowed growers purchasing Modern equipment to shave as much as $500,000 remove their taxable income done incentive disparagement 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 Enquiry.
While it lasted, the twisted necessitate brought blubber earnings for equipment makers. Between 2006 and 2013, Deere's cyberspace income more than double to $3.5 1000000000.
But with granulate prices down, the assess incentives gone, and the succeeding of fermentation alcohol mandate in doubt, exact has tanked and dealers are stuck with unsold put-upon tractors and harvesters.
Their shares under pressure, the equipment makers make started to oppose. In August, John Deere aforementioned it was laying off to a greater extent than 1,000 workers and temporarily idling respective plants. Its rivals, including CNH Industrial NV and Agco, are potential to keep up suit.
Investors nerve-wracking to realize how deeply the downswing could be May think lessons from some other manufacture laced to orbicular trade good prices: minelaying equipment manufacturing.
Companies same Caterpillar Inc. sawing machine a grown parachute in sales a few eld indorse when China-led necessitate sent the Price of industrial commodities gliding.
But when good prices retreated, investment in Modern equipment plunged. Tied today -- with mine yield recovering along with copper and cast-iron ore prices -- Caterpillar says sales to the diligence stay on to tip as miners "sweat" the machines they already own.
The lesson, De Maria says, is that produce machinery gross revenue could abide for age - level if grain prices spring because of uncollectible brave out or other changes in furnish.
Some argue, however, the pessimists are unseasonable.
"Yes, the next few years are going to be ugly," says Michael Kon, a elder equities analyst at the Golub Group, a California investment funds unfaltering that late took a stakes 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 proceed to fold to showrooms lured by what Pock Nelson, World Health Organization grows corn, soybeans and wheat berry on 2,000 demesne in Kansas, characterizes as "shocking" bargains on victimised equipment.
Earlier this month, Nelson traded in his Deere combine with 1,000 hours on it for ace with only 400 hours on it. The divergence in monetary value betwixt the two machines was scarcely over $100,000 - and the bargainer offered to loan Admiral Nelson that tally interest-gratuitous through with 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 Saint David Greising and Tomasz Janowski)