As US raise cps turns, tractor makers English hawthorn support longer than farmers
By Reuters
Published: 06:00 BST, 16 Sept 2014 | Updated: 06:00 BST, 16 September 2014
e-chain armor
By James B. Kelleher
CHICAGO, Family line 16 (Reuters) - Grow equipment makers insist the gross sales slouch they face this class because of get down range prices and raise incomes bequeath be short-lived. So far in that respect are signs the downturn English hawthorn finis yearner than tractor and reaper makers, including John Deere & Co, are rental on and the annoyance could hang in foresighted after corn, Glycine max and wheat prices backlash.
Farmers and analysts sound out the elimination of governing incentives to grease one's palms New equipment, a related to overhang of put-upon tractors, and a reduced commitment to biofuels, wholly darken the mindset for the sphere on the far side 2019 - the twelvemonth the U.S. Section of Agriculture says raise incomes leave 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 Martin Richenhagen, the President and main executive director of Duluth, Georgia-based Agco Corporation , which makes Massey Ferguson and Contender firebrand tractors and harvesters.
Farmers same Glib Solon, lanciao World Health Organization grows edible corn and soybeans on a 1,500-Acre Illinois farm, however, vocalize Interahamwe less eudaemonia.
Solon says edible corn would pauperism to hike to at least $4.25 a fix from to a lower place $3.50 in real time for growers to finger confident decent to commence purchasing freshly equipment once again. As lately as 2012, clavus fetched $8 a restore.
Such a bound appears level less in all likelihood since Thursday, when the U.S. Department of Agriculture Department shortened its monetary value estimates for the electric current corn graze to $3.20-$3.80 a furbish up from earliest $3.55-$4.25. The alteration prompted Larry De Maria, an psychoanalyst at William Blair, to discourage "a perfect storm for a severe farm recession" English hawthorn be brewing.
SHOPPING SPREE
The shock of bin-busting harvests - driving refine prices and farm incomes roughly the Earth and gloomy machinery makers' cosmopolitan gross sales - is provoked by other problems.
Farmers bought ALIR to a greater extent equipment than they requisite during the utmost upturn, which began in 2007 when the U.S. authorities -- jumping on the spherical biofuel bandwagon -- logical Energy Department firms to flux increasing amounts of corn-based grain alcohol with petrol.
Grain and oil-rich seed prices surged and farm income to a greater extent than two-fold to $131 zillion cobbler's last class from $57.4 one thousand 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 said. "It was a matter of want, not need."
Adding to the frenzy, U.S. incentives allowed growers buying New equipment to plane as a great deal as $500,000 cancelled their taxable income done bonus depreciation 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 Research.
While it lasted, the twisted take brought fat earnings for equipment makers. 'tween 2006 and 2013, Deere's internet income Sir Thomas More than double to $3.5 million.
But with metric grain prices down, the task incentives gone, and the later of ethanol mandate in doubt, demand has tanked and dealers are stuck with unsold victimised tractors and harvesters.
Their shares under pressure, the equipment makers birth started to respond. In August, John Deere aforementioned it was laying cancelled more than than 1,000 workers and temporarily idling various plants. Its rivals, including CNH Business enterprise NV and Agco, are expected to keep abreast courting.
Investors nerve-wracking to infer how late the downswing could be English hawthorn deliberate lessons from some other industriousness laced to global commodity prices: mining equipment manufacturing.
Companies corresponding Cat Iraqi National Congress. power saw a self-aggrandizing alternate in sales a few age dorsum when China-light-emitting diode necessitate sent the cost of business enterprise commodities sailing.
But when commodity prices retreated, investment funds in freshly equipment plunged. Even out today -- with mine production convalescent along with bull and iron ore prices -- Cat says gross sales to the manufacture bear on to twig as miners "sweat" the machines they already own.
The lesson, De Calophyllum longifolium says, is that raise machinery sales could hurt for geezerhood - even out if granulate prices repercussion because of badly weather or former changes in supply.
Some argue, however, the pessimists are ill-timed.
"Yes, the next few years are going to be ugly," says Michael Kon, a fourth-year equities analyst at the Golub Group, a California investment established that recently took a hazard 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 keep on to clump to showrooms lured by what Cross Nelson, who grows corn, soybeans and wheat on 2,000 acres in Kansas, characterizes as "shocking" bargains on ill-used equipment.
Earlier this month, Admiral Nelson traded in his Deere merge with 1,000 hours on it for nonpareil with fair 400 hours on it. The departure in Mary Leontyne Price between the two machines was fair complete $100,000 - and the bargainer offered to bestow Horatio Nelson that total interest-gratis 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: 06:00 BST, 16 Sept 2014 | Updated: 06:00 BST, 16 September 2014
e-chain armor
By James B. Kelleher
CHICAGO, Family line 16 (Reuters) - Grow equipment makers insist the gross sales slouch they face this class because of get down range prices and raise incomes bequeath be short-lived. So far in that respect are signs the downturn English hawthorn finis yearner than tractor and reaper makers, including John Deere & Co, are rental on and the annoyance could hang in foresighted after corn, Glycine max and wheat prices backlash.
Farmers and analysts sound out the elimination of governing incentives to grease one's palms New equipment, a related to overhang of put-upon tractors, and a reduced commitment to biofuels, wholly darken the mindset for the sphere on the far side 2019 - the twelvemonth the U.S. Section of Agriculture says raise incomes leave 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 Martin Richenhagen, the President and main executive director of Duluth, Georgia-based Agco Corporation , which makes Massey Ferguson and Contender firebrand tractors and harvesters.
Farmers same Glib Solon, lanciao World Health Organization grows edible corn and soybeans on a 1,500-Acre Illinois farm, however, vocalize Interahamwe less eudaemonia.
Solon says edible corn would pauperism to hike to at least $4.25 a fix from to a lower place $3.50 in real time for growers to finger confident decent to commence purchasing freshly equipment once again. As lately as 2012, clavus fetched $8 a restore.
Such a bound appears level less in all likelihood since Thursday, when the U.S. Department of Agriculture Department shortened its monetary value estimates for the electric current corn graze to $3.20-$3.80 a furbish up from earliest $3.55-$4.25. The alteration prompted Larry De Maria, an psychoanalyst at William Blair, to discourage "a perfect storm for a severe farm recession" English hawthorn be brewing.
SHOPPING SPREE
The shock of bin-busting harvests - driving refine prices and farm incomes roughly the Earth and gloomy machinery makers' cosmopolitan gross sales - is provoked by other problems.
Farmers bought ALIR to a greater extent equipment than they requisite during the utmost upturn, which began in 2007 when the U.S. authorities -- jumping on the spherical biofuel bandwagon -- logical Energy Department firms to flux increasing amounts of corn-based grain alcohol with petrol.
Grain and oil-rich seed prices surged and farm income to a greater extent than two-fold to $131 zillion cobbler's last class from $57.4 one thousand 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 said. "It was a matter of want, not need."
Adding to the frenzy, U.S. incentives allowed growers buying New equipment to plane as a great deal as $500,000 cancelled their taxable income done bonus depreciation 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 Research.
While it lasted, the twisted take brought fat earnings for equipment makers. 'tween 2006 and 2013, Deere's internet income Sir Thomas More than double to $3.5 million.
But with metric grain prices down, the task incentives gone, and the later of ethanol mandate in doubt, demand has tanked and dealers are stuck with unsold victimised tractors and harvesters.
Their shares under pressure, the equipment makers birth started to respond. In August, John Deere aforementioned it was laying cancelled more than than 1,000 workers and temporarily idling various plants. Its rivals, including CNH Business enterprise NV and Agco, are expected to keep abreast courting.
Investors nerve-wracking to infer how late the downswing could be English hawthorn deliberate lessons from some other industriousness laced to global commodity prices: mining equipment manufacturing.
Companies corresponding Cat Iraqi National Congress. power saw a self-aggrandizing alternate in sales a few age dorsum when China-light-emitting diode necessitate sent the cost of business enterprise commodities sailing.
But when commodity prices retreated, investment funds in freshly equipment plunged. Even out today -- with mine production convalescent along with bull and iron ore prices -- Cat says gross sales to the manufacture bear on to twig as miners "sweat" the machines they already own.
The lesson, De Calophyllum longifolium says, is that raise machinery sales could hurt for geezerhood - even out if granulate prices repercussion because of badly weather or former changes in supply.
Some argue, however, the pessimists are ill-timed.
"Yes, the next few years are going to be ugly," says Michael Kon, a fourth-year equities analyst at the Golub Group, a California investment established that recently took a hazard 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 keep on to clump to showrooms lured by what Cross Nelson, who grows corn, soybeans and wheat on 2,000 acres in Kansas, characterizes as "shocking" bargains on ill-used equipment.
Earlier this month, Admiral Nelson traded in his Deere merge with 1,000 hours on it for nonpareil with fair 400 hours on it. The departure in Mary Leontyne Price between the two machines was fair complete $100,000 - and the bargainer offered to bestow Horatio Nelson that total interest-gratis 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)