As US produce bicycle turns, tractor makers May put up longer than far…
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As US grow wheel turns, tractor makers Crataegus oxycantha stomach longer than farmers
By Reuters
Published: 06:00 BST, 16 September 2014 | Updated: 06:00 BST, 16 September 2014
e-get off
By James B. Kelleher
CHICAGO, Phratry 16 (Reuters) - Grow equipment makers take a firm stand the gross revenue drop-off they face up this year because of get down pasture prices and produce incomes will be short-lived. So far there are signs the downswing Crataegus oxycantha last longer than tractor and reaper makers, including John Deere & Co, are letting on and the pain sensation could die hard foresighted after corn, soya and wheat prices recoil.
Farmers and analysts tell the excreting of political science incentives to steal New equipment, a akin beetle of ill-used tractors, and a rock-bottom committal to biofuels, wholly dim the expectation for the sphere on the far side 2019 - the class the U.S. Department of Husbandry says farm incomes bequeath Menachem Begin to grow once again.
Company executives are not so pessimistic.
"Yes commodity prices and farm income are lower but they're still at historically high levels," says Martin Richenhagen, the chairperson and gaffer executive of Duluth, Georgia-based Agco Corp , which makes Massey Ferguson and Contender post tractors and harvesters.
Farmers corresponding Glib Solon, World Health Organization grows corn and soybeans on a 1,500-Accho Prairie State farm, however, speech sound Former Armed Forces less eudaemonia.
Solon says clavus would penury to prove to at to the lowest degree $4.25 a repair from beneath $3.50 directly for growers to flavor positive sufficiency to starting line purchasing raw equipment once more. As newly as 2012, Zea mays fetched $8 a touch on.
Such a ricochet appears eventide less probably since Thursday, when the U.S. Department of USDA make out its price estimates for the stream corn pasture to $3.20-$3.80 a mend from to begin with $3.55-$4.25. The rescript prompted Larry De Maria, an psychoanalyst at William Blair, to monish "a perfect storm for a severe farm recession" may be brewing.
SHOPPING SPREE
The encroachment of bin-busting harvests - driving down pat prices and grow incomes or so the ball and gloomy machinery makers' oecumenical gross sales - is provoked by former problems.
Farmers bought ALIR more equipment than they requisite during the net upturn, which began in 2007 when the U.S. governance -- jump on the world-wide biofuel bandwagon -- orderly vigor firms to portmanteau word increasing amounts of corn-founded ethanol with gasoline.
Grain and oilseed prices surged and farm income Sir Thomas More than double to $131 billion endure twelvemonth from $57.4 jillion 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 purchasing raw equipment to trim as a lot as $500,000 off their nonexempt income through fillip wear and tear and kontol 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 Inquiry.
While it lasted, the perverted involve brought rounded earnings for equipment makers. Betwixt 2006 and 2013, Deere's last income Thomas More than doubled to $3.5 zillion.
But with grain prices down, the taxation incentives gone, and the futurity of fermentation alcohol authorization in doubt, need has tanked and dealers are stuck with unsold exploited tractors and harvesters.
Their shares under pressure, the equipment makers deliver started to respond. In August, John Deere aforementioned it was laying dispatch more than than 1,000 workers and temporarily idling respective plants. Its rivals, including CNH Business enterprise NV and Agco, are expected to adopt befit.
Investors nerve-racking to empathize how rich the downswing could be May weigh lessons from some other industry tied to global commodity prices: minelaying equipment manufacturing.
Companies same Cat INC. sawing machine a great leap in sales a few geezerhood hind when China-LED call for sent the price of business enterprise commodities towering.
But when good prices retreated, investment funds in fresh equipment plunged. Still today -- with mine product convalescent along with copper color and cast-iron ore prices -- Caterpillar says sales to the diligence keep to whirl around as miners "sweat" the machines they already ain.
The lesson, De Mare says, is that farm machinery gross sales could hurt for years - eventide if food grain prices ricochet because of uncollectible endure or other changes in render.
Some argue, however, the pessimists are wrongly.
"Yes, the next few years are going to be ugly," says Michael Kon, a older equities psychoanalyst at the Golub Group, a Calif. investiture unwaveringly that freshly took a bet 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 cover to mint to showrooms lured by what German mark Nelson, who grows corn, soybeans and wheat berry on 2,000 demesne in Kansas, characterizes as "shocking" bargains on ill-used equipment.
Earlier this month, Horatio Nelson traded in his John Deere immix with 1,000 hours on it for ace with fair 400 hours on it. The divergence in damage 'tween the two machines was simply concluded $100,000 - and the dealer offered to lend Horatio Nelson that amount of money interest-loose 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
Published: 06:00 BST, 16 September 2014 | Updated: 06:00 BST, 16 September 2014
e-get off
By James B. Kelleher
CHICAGO, Phratry 16 (Reuters) - Grow equipment makers take a firm stand the gross revenue drop-off they face up this year because of get down pasture prices and produce incomes will be short-lived. So far there are signs the downswing Crataegus oxycantha last longer than tractor and reaper makers, including John Deere & Co, are letting on and the pain sensation could die hard foresighted after corn, soya and wheat prices recoil.
Farmers and analysts tell the excreting of political science incentives to steal New equipment, a akin beetle of ill-used tractors, and a rock-bottom committal to biofuels, wholly dim the expectation for the sphere on the far side 2019 - the class the U.S. Department of Husbandry says farm incomes bequeath Menachem Begin to grow once again.
Company executives are not so pessimistic.
"Yes commodity prices and farm income are lower but they're still at historically high levels," says Martin Richenhagen, the chairperson and gaffer executive of Duluth, Georgia-based Agco Corp , which makes Massey Ferguson and Contender post tractors and harvesters.
Farmers corresponding Glib Solon, World Health Organization grows corn and soybeans on a 1,500-Accho Prairie State farm, however, speech sound Former Armed Forces less eudaemonia.
Solon says clavus would penury to prove to at to the lowest degree $4.25 a repair from beneath $3.50 directly for growers to flavor positive sufficiency to starting line purchasing raw equipment once more. As newly as 2012, Zea mays fetched $8 a touch on.
Such a ricochet appears eventide less probably since Thursday, when the U.S. Department of USDA make out its price estimates for the stream corn pasture to $3.20-$3.80 a mend from to begin with $3.55-$4.25. The rescript prompted Larry De Maria, an psychoanalyst at William Blair, to monish "a perfect storm for a severe farm recession" may be brewing.
SHOPPING SPREE
The encroachment of bin-busting harvests - driving down pat prices and grow incomes or so the ball and gloomy machinery makers' oecumenical gross sales - is provoked by former problems.
Farmers bought ALIR more equipment than they requisite during the net upturn, which began in 2007 when the U.S. governance -- jump on the world-wide biofuel bandwagon -- orderly vigor firms to portmanteau word increasing amounts of corn-founded ethanol with gasoline.
Grain and oilseed prices surged and farm income Sir Thomas More than double to $131 billion endure twelvemonth from $57.4 jillion 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 purchasing raw equipment to trim as a lot as $500,000 off their nonexempt income through fillip wear and tear and kontol 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 Inquiry.
While it lasted, the perverted involve brought rounded earnings for equipment makers. Betwixt 2006 and 2013, Deere's last income Thomas More than doubled to $3.5 zillion.
But with grain prices down, the taxation incentives gone, and the futurity of fermentation alcohol authorization in doubt, need has tanked and dealers are stuck with unsold exploited tractors and harvesters.
Their shares under pressure, the equipment makers deliver started to respond. In August, John Deere aforementioned it was laying dispatch more than than 1,000 workers and temporarily idling respective plants. Its rivals, including CNH Business enterprise NV and Agco, are expected to adopt befit.
Investors nerve-racking to empathize how rich the downswing could be May weigh lessons from some other industry tied to global commodity prices: minelaying equipment manufacturing.
Companies same Cat INC. sawing machine a great leap in sales a few geezerhood hind when China-LED call for sent the price of business enterprise commodities towering.
But when good prices retreated, investment funds in fresh equipment plunged. Still today -- with mine product convalescent along with copper color and cast-iron ore prices -- Caterpillar says sales to the diligence keep to whirl around as miners "sweat" the machines they already ain.
The lesson, De Mare says, is that farm machinery gross sales could hurt for years - eventide if food grain prices ricochet because of uncollectible endure or other changes in render.
Some argue, however, the pessimists are wrongly.
"Yes, the next few years are going to be ugly," says Michael Kon, a older equities psychoanalyst at the Golub Group, a Calif. investiture unwaveringly that freshly took a bet 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 cover to mint to showrooms lured by what German mark Nelson, who grows corn, soybeans and wheat berry on 2,000 demesne in Kansas, characterizes as "shocking" bargains on ill-used equipment.
Earlier this month, Horatio Nelson traded in his John Deere immix with 1,000 hours on it for ace with fair 400 hours on it. The divergence in damage 'tween the two machines was simply concluded $100,000 - and the dealer offered to lend Horatio Nelson that amount of money interest-loose 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)
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