2010 To Be a Good Year for Ag Industrial Equipment
Written by admin on January 12, 2010 – 7:00 pm -A trifecta of above-trend GDP growth, greater-than-expected inflation and domestic farmers’ strong financial standing should make 2010 a promising year for agricultural industrial equipment manufacturers, as prices for storable commodities stay strong and farmers have the extra cash to update equipment.
“Curves for corn and soybeans, which are two important domestic crops, are still in contango, which means as a farmer, you can still sell forward at pretty attractive relative-to-historical prices to lock in good prices for next year,” said Paul Mammola, an analyst with Sidoti & Company, LLC. “I think that although farmers have spent quite a bit over the past couple of years, the continued trend in strong commodity prices still leads to equipment purchases over the next couple of years.”
With 72 equipment stores across the Corn Belt, Titan Machinery, with a focus on high-horsepower tractors and carbines, will be a likely beneficiary of this trend toward increased farmer spending.
Mammola also points out that government stimulus dollars may play a role in accentuating industry growth in 2010, as more allocations are rolled out for road and public structure construction.
“It does sound like stimulus dollars are making their way to the companies as we speak. So water is certainly a very interesting industrial theme right now,” said Mammola, citing Crane Co. as one company that will receive bids for shovel-ready projects. “You have to break away from value investing to play with some of them given the multiples, but I think that’s going to be warranted over the next 12 months.”
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