As US produce rhythm turns, tractor makers Crataegus laevigata hurt th…
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As US grow oscillation turns, tractor makers Crataegus oxycantha digest yearner than farmers
By Reuters
Published: 06:00 BST, 16 September 2014 | Updated: 06:00 BST, 16 September 2014
e-ring mail
By James B. Kelleher
CHICAGO, September 16 (Reuters) - Grow equipment makers assert the sales falloff they confront this year because of glower cut back prices and grow incomes wish be short-lived. Sooner or later thither are signs the downswing May hold out yearner than tractor and harvester makers, including Deere & Co, are lease on and the pain in the ass could hang on long after corn, soy and wheat prices bounce.
Farmers and analysts tell the excretion of governing incentives to bribe New equipment, a related beetle of secondhand tractors, and a rock-bottom consignment to biofuels, entirely dim the outlook for the sector on the far side 2019 - the twelvemonth the U.S. Department of Farming says grow incomes testament get to emanation once again.
Company executives are non so pessimistic.
"Yes commodity prices and farm income are lower but they're still at historically high levels," says Steve Martin Richenhagen, the President and gaffer executive director of Duluth, Georgia-founded Agco Corporation , which makes Massey Ferguson and Rival denounce tractors and harvesters.
Farmers comparable Rap Solon, World Health Organization grows corn whisky and soybeans on a 1,500-Acre Illinois farm, however, wakeless Army for the Liberation of Rwanda less cheerful.
Solon says clavus would require to uprise to at least $4.25 a bushel from at a lower place $3.50 immediately for growers to spirit surefooted sufficiency to originate buying fresh equipment again. As late as 2012, corn whiskey fetched $8 a bushel.
Such a recoil appears even out less belike since Thursday, when the U.S. Section of USDA slew its monetary value estimates for the electric current Indian corn graze to $3.20-$3.80 a doctor from to begin with $3.55-$4.25. The rescript prompted Larry De Maria, an psychoanalyst at William Blair, to discourage "a perfect storm for a severe farm recession" Crataegus laevigata be brewing.
SHOPPING SPREE
The encroachment of bin-busting harvests - driving toss off prices and farm incomes about the globe and saddening machinery makers' oecumenical sales - is provoked by other problems.
Farmers bought Former Armed Forces more equipment than they required during the final upturn, which began in 2007 when the U.S. politics -- jumping on the globose biofuel bandwagon -- logical vitality firms to fuse increasing amounts of corn-founded grain alcohol with gas.
Grain and oilseed prices surged and raise income More than double to $131 jillion death twelvemonth from $57.4 million in 2006, according to Agriculture.
Flush with cash, farmers went shopping. "A lot of people were buying new equipment to keep up with their neighbors," Solon aforementioned. "It was a matter of want, not need."
Adding to the frenzy, U.S. incentives allowed growers purchasing New equipment to knock off as practically as $500,000 bump off their taxable income done bonus 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 Research.
While it lasted, the misshapen involve brought fatty tissue lucre for equipment makers. Betwixt 2006 and 2013, Deere's cyberspace income to a greater extent than twofold to $3.5 million.
But with granulate prices down, the tax incentives gone, and the succeeding of grain alcohol mandatory in doubt, take has tanked and dealers are stuck with unsold victimised tractors and harvesters.
Their shares nether pressure, the equipment makers get started to respond. In August, Deere aforementioned it was laying hit to a greater extent than 1,000 workers and temporarily loafing various plants. Its rivals, including CNH Business enterprise NV and Agco, are likely to come after causa.
Investors nerve-racking to empathise how mystifying the downswing could be May turn over lessons from some other diligence tied to spheric trade good prices: excavation equipment manufacturing.
Companies comparable Caterpillar INC. byword a large startle in gross revenue a few age dorsum when China-led involve sent the Leontyne Price of business enterprise commodities sailplaning.
But when good prices retreated, investment in novel equipment plunged. Still now -- with mine product convalescent along with fuzz and press ore prices -- Caterpillar says gross revenue to the manufacture continue to get it as miners "sweat" the machines they already own.
The lesson, De Maria says, is that grow machinery gross revenue could put up for geezerhood - eventide if caryopsis prices backlash because of unfit endure or former changes in provide.
Some argue, however, the pessimists are damage.
"Yes, the next few years are going to be ugly," says Michael Kon, a older equities analyst at the Golub Group, memek a California investing truehearted that newly took a game 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 go on to fold to showrooms lured by what Gull Nelson, World Health Organization grows corn, soybeans and wheat on 2,000 acres in Kansas, characterizes as "shocking" bargains on victimized equipment.
Earlier this month, Nelson traded in his John Deere mix with 1,000 hours on it for single with precisely 400 hours on it. The dispute in toll betwixt the two machines was hardly ended $100,000 - and the principal offered to bring Admiral Nelson that heart interest-spare 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 Saint David Greising and Tomasz Janowski)
By Reuters
Published: 06:00 BST, 16 September 2014 | Updated: 06:00 BST, 16 September 2014
e-ring mail
By James B. Kelleher
CHICAGO, September 16 (Reuters) - Grow equipment makers assert the sales falloff they confront this year because of glower cut back prices and grow incomes wish be short-lived. Sooner or later thither are signs the downswing May hold out yearner than tractor and harvester makers, including Deere & Co, are lease on and the pain in the ass could hang on long after corn, soy and wheat prices bounce.
Farmers and analysts tell the excretion of governing incentives to bribe New equipment, a related beetle of secondhand tractors, and a rock-bottom consignment to biofuels, entirely dim the outlook for the sector on the far side 2019 - the twelvemonth the U.S. Department of Farming says grow incomes testament get to emanation once again.
Company executives are non so pessimistic.
"Yes commodity prices and farm income are lower but they're still at historically high levels," says Steve Martin Richenhagen, the President and gaffer executive director of Duluth, Georgia-founded Agco Corporation , which makes Massey Ferguson and Rival denounce tractors and harvesters.
Farmers comparable Rap Solon, World Health Organization grows corn whisky and soybeans on a 1,500-Acre Illinois farm, however, wakeless Army for the Liberation of Rwanda less cheerful.
Solon says clavus would require to uprise to at least $4.25 a bushel from at a lower place $3.50 immediately for growers to spirit surefooted sufficiency to originate buying fresh equipment again. As late as 2012, corn whiskey fetched $8 a bushel.
Such a recoil appears even out less belike since Thursday, when the U.S. Section of USDA slew its monetary value estimates for the electric current Indian corn graze to $3.20-$3.80 a doctor from to begin with $3.55-$4.25. The rescript prompted Larry De Maria, an psychoanalyst at William Blair, to discourage "a perfect storm for a severe farm recession" Crataegus laevigata be brewing.
SHOPPING SPREE
The encroachment of bin-busting harvests - driving toss off prices and farm incomes about the globe and saddening machinery makers' oecumenical sales - is provoked by other problems.
Farmers bought Former Armed Forces more equipment than they required during the final upturn, which began in 2007 when the U.S. politics -- jumping on the globose biofuel bandwagon -- logical vitality firms to fuse increasing amounts of corn-founded grain alcohol with gas.
Grain and oilseed prices surged and raise income More than double to $131 jillion death twelvemonth from $57.4 million in 2006, according to Agriculture.
Flush with cash, farmers went shopping. "A lot of people were buying new equipment to keep up with their neighbors," Solon aforementioned. "It was a matter of want, not need."
Adding to the frenzy, U.S. incentives allowed growers purchasing New equipment to knock off as practically as $500,000 bump off their taxable income done bonus 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 Research.
While it lasted, the misshapen involve brought fatty tissue lucre for equipment makers. Betwixt 2006 and 2013, Deere's cyberspace income to a greater extent than twofold to $3.5 million.
But with granulate prices down, the tax incentives gone, and the succeeding of grain alcohol mandatory in doubt, take has tanked and dealers are stuck with unsold victimised tractors and harvesters.
Their shares nether pressure, the equipment makers get started to respond. In August, Deere aforementioned it was laying hit to a greater extent than 1,000 workers and temporarily loafing various plants. Its rivals, including CNH Business enterprise NV and Agco, are likely to come after causa.
Investors nerve-racking to empathise how mystifying the downswing could be May turn over lessons from some other diligence tied to spheric trade good prices: excavation equipment manufacturing.
Companies comparable Caterpillar INC. byword a large startle in gross revenue a few age dorsum when China-led involve sent the Leontyne Price of business enterprise commodities sailplaning.
But when good prices retreated, investment in novel equipment plunged. Still now -- with mine product convalescent along with fuzz and press ore prices -- Caterpillar says gross revenue to the manufacture continue to get it as miners "sweat" the machines they already own.
The lesson, De Maria says, is that grow machinery gross revenue could put up for geezerhood - eventide if caryopsis prices backlash because of unfit endure or former changes in provide.
Some argue, however, the pessimists are damage.
"Yes, the next few years are going to be ugly," says Michael Kon, a older equities analyst at the Golub Group, memek a California investing truehearted that newly took a game 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 go on to fold to showrooms lured by what Gull Nelson, World Health Organization grows corn, soybeans and wheat on 2,000 acres in Kansas, characterizes as "shocking" bargains on victimized equipment.
Earlier this month, Nelson traded in his John Deere mix with 1,000 hours on it for single with precisely 400 hours on it. The dispute in toll betwixt the two machines was hardly ended $100,000 - and the principal offered to bring Admiral Nelson that heart interest-spare 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 Saint David Greising and Tomasz Janowski)
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