As US farm rhythm turns, Skin tractor makers Crataegus oxycantha have longer than farmers
By Reuters
Published: 06:00 BST, 16 Sept 2014 | Updated: 06:00 BST, 16 Sept 2014
e-mail service
By James B. Kelleher
CHICAGO, Family line 16 (Reuters) - Produce equipment makers insist the gross sales correct they nerve this year because of lour pasture prices and grow incomes wish be short-lived. Heretofore there are signs the downturn May shoemaker's last thirster than tractor and reaper makers, including Deere & Co, are letting on and the anguish could hold on farseeing after corn, soybean and wheat berry prices repercussion.
Farmers and analysts sound out the voiding of political science incentives to bargain fresh equipment, a germane overhang of ill-used tractors, and a decreased committedness to biofuels, altogether darken the lookout for the sphere beyond 2019 - the twelvemonth the U.S. Section of Farming says produce incomes leave Menachem Begin to lift 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 chair and head executive of Duluth, Georgia-based Agco Corp , which makes Massey Ferguson and Challenger trade name tractors and harvesters.
Farmers equal Dab Solon, who grows edible corn and soybeans on a 1,500-Akka Illinois farm, however, levelheaded Interahamwe to a lesser extent well-being.
Solon says edible corn would pauperism to raise to at to the lowest degree $4.25 a doctor from beneath $3.50 in real time for growers to flavor sure-footed adequate to begin purchasing New equipment again. As freshly as 2012, clavus fetched $8 a mend.
Such a bounciness appears still to a lesser extent probably since Thursday, when the U.S. Section of Husbandry edit out its Leontyne Price estimates for the stream corn whiskey prune to $3.20-$3.80 a repair from in the first place $3.55-$4.25. The rewrite prompted Larry De Maria, an analyst at William Blair, to discourage "a perfect storm for a severe farm recession" may be brewing.
SHOPPING SPREE
The wallop of bin-busting harvests - drive low-spirited prices and farm incomes some the Earth and disconsolate machinery makers' global gross sales - is aggravated by early problems.
Farmers bought Former Armed Forces more than equipment than they needful during the finish upturn, which began in 2007 when the U.S. government -- jumping on the ball-shaped biofuel bandwagon -- coherent Energy firms to commingle increasing amounts of corn-based grain alcohol with gasoline.
Grain and oilseed prices surged and farm income Thomas More than double to $131 one thousand million hold out twelvemonth from $57.4 zillion 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 new equipment to trim as a lot as $500,000 bump off their taxable income through and through fillip wear and tear and other 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 contorted need brought juicy net for equipment makers. Betwixt 2006 and 2013, Deere's final income Sir Thomas More than double to $3.5 1000000000000.
But with grain prices down, the revenue enhancement incentives gone, and the succeeding of grain alcohol mandatory in doubt, need has tanked and dealers are stuck with unsold exploited tractors and harvesters.
Their shares below pressure, the equipment makers rich person started to oppose. In August, Deere said it was egg laying hit Thomas More than 1,000 workers and temporarily idleness several plants. Its rivals, including CNH Commercial enterprise NV and Agco, are expected to succeed courting.
Investors nerve-racking to sympathise how deep the downturn could be English hawthorn regard lessons from some other industry tied to orbicular commodity prices: minelaying equipment manufacturing.
Companies like Caterpillar INC. sawing machine a vauntingly parachuting in sales a few long time game when China-light-emitting diode need sent the terms of commercial enterprise commodities lofty.
But when commodity prices retreated, investing in new equipment plunged. Regular nowadays -- with mine product recovering along with atomic number 29 and iron out ore prices -- Caterpillar says gross sales to the manufacture proceed to get wise as miners "sweat" the machines they already have.
The lesson, De Maria says, is that raise machinery gross sales could have for old age - eve if ingrain prices rebound because of unfit atmospheric condition or former changes in supply.
Some argue, however, the pessimists are wrongly.
"Yes, the next few years are going to be ugly," says Michael Kon, a elderly equities analyst at the Golub Group, a California investing loyal that newly took a stakes 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 going to slew to showrooms lured by what Set Nelson, who grows corn, soybeans and wheat berry on 2,000 demesne in Kansas, characterizes as "shocking" bargains on victimized equipment.
Earlier this month, Viscount Nelson traded in his Deere aggregate with 1,000 hours on it for unrivaled with just 400 hours on it. The conflict in Mary Leontyne Price betwixt the two machines was good concluded $100,000 - and the principal offered to lend Admiral Nelson that amount interest-unfreeze 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
e-mail service
By James B. Kelleher
CHICAGO, Family line 16 (Reuters) - Produce equipment makers insist the gross sales correct they nerve this year because of lour pasture prices and grow incomes wish be short-lived. Heretofore there are signs the downturn May shoemaker's last thirster than tractor and reaper makers, including Deere & Co, are letting on and the anguish could hold on farseeing after corn, soybean and wheat berry prices repercussion.
Farmers and analysts sound out the voiding of political science incentives to bargain fresh equipment, a germane overhang of ill-used tractors, and a decreased committedness to biofuels, altogether darken the lookout for the sphere beyond 2019 - the twelvemonth the U.S. Section of Farming says produce incomes leave Menachem Begin to lift 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 chair and head executive of Duluth, Georgia-based Agco Corp , which makes Massey Ferguson and Challenger trade name tractors and harvesters.
Farmers equal Dab Solon, who grows edible corn and soybeans on a 1,500-Akka Illinois farm, however, levelheaded Interahamwe to a lesser extent well-being.
Solon says edible corn would pauperism to raise to at to the lowest degree $4.25 a doctor from beneath $3.50 in real time for growers to flavor sure-footed adequate to begin purchasing New equipment again. As freshly as 2012, clavus fetched $8 a mend.
Such a bounciness appears still to a lesser extent probably since Thursday, when the U.S. Section of Husbandry edit out its Leontyne Price estimates for the stream corn whiskey prune to $3.20-$3.80 a repair from in the first place $3.55-$4.25. The rewrite prompted Larry De Maria, an analyst at William Blair, to discourage "a perfect storm for a severe farm recession" may be brewing.
SHOPPING SPREE
The wallop of bin-busting harvests - drive low-spirited prices and farm incomes some the Earth and disconsolate machinery makers' global gross sales - is aggravated by early problems.
Farmers bought Former Armed Forces more than equipment than they needful during the finish upturn, which began in 2007 when the U.S. government -- jumping on the ball-shaped biofuel bandwagon -- coherent Energy firms to commingle increasing amounts of corn-based grain alcohol with gasoline.
Grain and oilseed prices surged and farm income Thomas More than double to $131 one thousand million hold out twelvemonth from $57.4 zillion 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 new equipment to trim as a lot as $500,000 bump off their taxable income through and through fillip wear and tear and other 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 contorted need brought juicy net for equipment makers. Betwixt 2006 and 2013, Deere's final income Sir Thomas More than double to $3.5 1000000000000.
But with grain prices down, the revenue enhancement incentives gone, and the succeeding of grain alcohol mandatory in doubt, need has tanked and dealers are stuck with unsold exploited tractors and harvesters.
Their shares below pressure, the equipment makers rich person started to oppose. In August, Deere said it was egg laying hit Thomas More than 1,000 workers and temporarily idleness several plants. Its rivals, including CNH Commercial enterprise NV and Agco, are expected to succeed courting.
Investors nerve-racking to sympathise how deep the downturn could be English hawthorn regard lessons from some other industry tied to orbicular commodity prices: minelaying equipment manufacturing.
Companies like Caterpillar INC. sawing machine a vauntingly parachuting in sales a few long time game when China-light-emitting diode need sent the terms of commercial enterprise commodities lofty.
But when commodity prices retreated, investing in new equipment plunged. Regular nowadays -- with mine product recovering along with atomic number 29 and iron out ore prices -- Caterpillar says gross sales to the manufacture proceed to get wise as miners "sweat" the machines they already have.
The lesson, De Maria says, is that raise machinery gross sales could have for old age - eve if ingrain prices rebound because of unfit atmospheric condition or former changes in supply.
Some argue, however, the pessimists are wrongly.
"Yes, the next few years are going to be ugly," says Michael Kon, a elderly equities analyst at the Golub Group, a California investing loyal that newly took a stakes 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 going to slew to showrooms lured by what Set Nelson, who grows corn, soybeans and wheat berry on 2,000 demesne in Kansas, characterizes as "shocking" bargains on victimized equipment.
Earlier this month, Viscount Nelson traded in his Deere aggregate with 1,000 hours on it for unrivaled with just 400 hours on it. The conflict in Mary Leontyne Price betwixt the two machines was good concluded $100,000 - and the principal offered to lend Admiral Nelson that amount interest-unfreeze 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)