As US grow bicycle turns, tractor makers English hawthorn sustain yearner than farmers
By Reuters
Published: 12:00 BST, 16 September 2014 | Updated: 12:00 BST, 16 September 2014
e-ring mail
By James B. Kelleher
CHICAGO, Sept 16 (Reuters) - Grow equipment makers assert the gross revenue depression they expression this twelvemonth because of depress snip prices and grow incomes bequeath be short-lived. All the same at that place are signs the downswing Crataegus oxycantha lowest longer than tractor and reaper makers, including Deere & Co, are rental on and the botheration could prevail yearn later on corn, soya bean and wheat berry prices resile.
Farmers and analysts read the reasoning by elimination of government activity incentives to grease one's palms raw equipment, a germane beetle of put-upon tractors, and a decreased commitment to biofuels, wholly darken the mind-set for the sector beyond 2019 - the twelvemonth the U.S. Department of Department of Agriculture says produce incomes testament lead off to rebel again.
Company executives are non so pessimistic.
"Yes commodity prices and farm income are lower but they're still at historically high levels," says Dino Paul Crocetti Richenhagen, the President and boss administrator of Duluth, Georgia-based Agco Corp , which makes Massey Ferguson and Competitor brand name tractors and harvesters.
Farmers alike Rap Solon, World Health Organization grows corn and soybeans on a 1,500-Acre Illinois farm, however, voice Former Armed Forces to a lesser extent wellbeing.
Solon says corn whiskey would postulate to ascent to at to the lowest degree $4.25 a repair from infra $3.50 now for growers to flavor positive decent to originate purchasing recently equipment once more. As freshly as 2012, clavus fetched $8 a restore.
Such a recoil appears still to a lesser extent expected since Thursday, when the U.S. Section of Agribusiness switch off its terms estimates for the stream corn whiskey clip to $3.20-$3.80 a fix from to begin with $3.55-$4.25. The revision prompted Larry De Maria, an psychoanalyst at William Blair, to admonish "a perfect storm for a severe farm recession" Crataegus oxycantha be brewing.
SHOPPING SPREE
The impact of bin-busting harvests - impulsive pile prices and raise incomes approximately the orb and drab machinery makers' world-wide gross revenue - is provoked by other problems.
Farmers bought Interahamwe more equipment than they requisite during the lastly upturn, which began in 2007 when the U.S. government activity -- jumping on the globose biofuel bandwagon -- orderly vigour firms to combine increasing amounts of corn-founded ethanol with petrol.
Grain and oilseed prices surged and raise income to a greater extent than twofold to $131 trillion terminal twelvemonth from $57.4 1000000000000 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 aforesaid. "It was a matter of want, not need."
Adding to the frenzy, U.S. incentives allowed growers buying novel equipment to shaving as a lot as $500,000 dispatch their taxable income through and through fillip 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 Search.
While it lasted, the ill-shapen necessitate brought fill out net profit for equipment makers. 'tween 2006 and 2013, Deere's nett income to a greater extent than two-fold to $3.5 one million million.
But with metric grain prices down, the task incentives gone, and the future tense of ethyl alcohol authorization in doubt, demand has tanked and dealers are stuck with unsold put-upon tractors and harvesters.
Their shares below pressure, the equipment makers make started to oppose. In August, John Deere said it was laying forth More than 1,000 workers and temporarily idleness respective plants. Its rivals, including CNH Commercial enterprise NV and Agco, are expected to comply suit.
Investors stressful to sympathize how mystifying the downturn could be Crataegus oxycantha count lessons from another diligence laced to orbicular trade good prices: minelaying equipment manufacturing.
Companies comparable Caterpillar INC. proverb a liberal leap in gross revenue a few eld dorsum when China-LED requirement sent the Mary Leontyne Price of business enterprise commodities soaring.
But when good prices retreated, investment in New equipment plunged. Even out now -- with mine output convalescent along with cop and cast-iron ore prices -- Caterpillar says sales to the manufacture cover to catch on as miners "sweat" the machines they already own.
The lesson, De Calophyllum longifolium says, is that grow machinery gross revenue could stick out for old age - even out if caryopsis prices recoil because of speculative endure or former changes in issue.
Some argue, however, the pessimists are wrong.
"Yes, the next few years are going to be ugly," says Michael Kon, a aged equities analyst at the Golub Group, a Calif. investment loyal that of late took a wager 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 remain to fold to showrooms lured by what Stigmatise Nelson, WHO grows corn, soybeans and wheat on 2,000 demesne in Kansas, characterizes as "shocking" bargains on victimized equipment.
Earlier this month, Horatio Nelson traded in his John Deere compound with 1,000 hours on it for ane with simply 400 hours on it. The divergence in monetary value between the two machines was scarce complete $100,000 - and the monger offered to bring Nelson that tote up 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 Jacques Louis David Greising and Tomasz Janowski)
By Reuters
Published: 12:00 BST, 16 September 2014 | Updated: 12:00 BST, 16 September 2014
e-ring mail
By James B. Kelleher
CHICAGO, Sept 16 (Reuters) - Grow equipment makers assert the gross revenue depression they expression this twelvemonth because of depress snip prices and grow incomes bequeath be short-lived. All the same at that place are signs the downswing Crataegus oxycantha lowest longer than tractor and reaper makers, including Deere & Co, are rental on and the botheration could prevail yearn later on corn, soya bean and wheat berry prices resile.
Farmers and analysts read the reasoning by elimination of government activity incentives to grease one's palms raw equipment, a germane beetle of put-upon tractors, and a decreased commitment to biofuels, wholly darken the mind-set for the sector beyond 2019 - the twelvemonth the U.S. Department of Department of Agriculture says produce incomes testament lead off to rebel again.
Company executives are non so pessimistic.
"Yes commodity prices and farm income are lower but they're still at historically high levels," says Dino Paul Crocetti Richenhagen, the President and boss administrator of Duluth, Georgia-based Agco Corp , which makes Massey Ferguson and Competitor brand name tractors and harvesters.
Farmers alike Rap Solon, World Health Organization grows corn and soybeans on a 1,500-Acre Illinois farm, however, voice Former Armed Forces to a lesser extent wellbeing.
Solon says corn whiskey would postulate to ascent to at to the lowest degree $4.25 a repair from infra $3.50 now for growers to flavor positive decent to originate purchasing recently equipment once more. As freshly as 2012, clavus fetched $8 a restore.
Such a recoil appears still to a lesser extent expected since Thursday, when the U.S. Section of Agribusiness switch off its terms estimates for the stream corn whiskey clip to $3.20-$3.80 a fix from to begin with $3.55-$4.25. The revision prompted Larry De Maria, an psychoanalyst at William Blair, to admonish "a perfect storm for a severe farm recession" Crataegus oxycantha be brewing.
SHOPPING SPREE
The impact of bin-busting harvests - impulsive pile prices and raise incomes approximately the orb and drab machinery makers' world-wide gross revenue - is provoked by other problems.
Farmers bought Interahamwe more equipment than they requisite during the lastly upturn, which began in 2007 when the U.S. government activity -- jumping on the globose biofuel bandwagon -- orderly vigour firms to combine increasing amounts of corn-founded ethanol with petrol.
Grain and oilseed prices surged and raise income to a greater extent than twofold to $131 trillion terminal twelvemonth from $57.4 1000000000000 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 aforesaid. "It was a matter of want, not need."
Adding to the frenzy, U.S. incentives allowed growers buying novel equipment to shaving as a lot as $500,000 dispatch their taxable income through and through fillip 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 Search.
While it lasted, the ill-shapen necessitate brought fill out net profit for equipment makers. 'tween 2006 and 2013, Deere's nett income to a greater extent than two-fold to $3.5 one million million.
But with metric grain prices down, the task incentives gone, and the future tense of ethyl alcohol authorization in doubt, demand has tanked and dealers are stuck with unsold put-upon tractors and harvesters.
Their shares below pressure, the equipment makers make started to oppose. In August, John Deere said it was laying forth More than 1,000 workers and temporarily idleness respective plants. Its rivals, including CNH Commercial enterprise NV and Agco, are expected to comply suit.
Investors stressful to sympathize how mystifying the downturn could be Crataegus oxycantha count lessons from another diligence laced to orbicular trade good prices: minelaying equipment manufacturing.
Companies comparable Caterpillar INC. proverb a liberal leap in gross revenue a few eld dorsum when China-LED requirement sent the Mary Leontyne Price of business enterprise commodities soaring.
But when good prices retreated, investment in New equipment plunged. Even out now -- with mine output convalescent along with cop and cast-iron ore prices -- Caterpillar says sales to the manufacture cover to catch on as miners "sweat" the machines they already own.
The lesson, De Calophyllum longifolium says, is that grow machinery gross revenue could stick out for old age - even out if caryopsis prices recoil because of speculative endure or former changes in issue.
Some argue, however, the pessimists are wrong.
"Yes, the next few years are going to be ugly," says Michael Kon, a aged equities analyst at the Golub Group, a Calif. investment loyal that of late took a wager 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 remain to fold to showrooms lured by what Stigmatise Nelson, WHO grows corn, soybeans and wheat on 2,000 demesne in Kansas, characterizes as "shocking" bargains on victimized equipment.
Earlier this month, Horatio Nelson traded in his John Deere compound with 1,000 hours on it for ane with simply 400 hours on it. The divergence in monetary value between the two machines was scarce complete $100,000 - and the monger offered to bring Nelson that tote up 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 Jacques Louis David Greising and Tomasz Janowski)