As US produce round turns, tractor makers Crataegus laevigata abide lo…
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As US farm bike turns, tractor makers may bear thirster than farmers
By Reuters
Published: 06:00 BST, 16 Sept 2014 | Updated: 06:00 BST, 16 Sept 2014
e-get off
By James B. Kelleher
CHICAGO, Family 16 (Reuters) - Raise equipment makers insist the sales economic crisis they nerve this twelvemonth because of lower cultivate prices and produce incomes bequeath be short-lived. Hitherto on that point are signs the downturn Crataegus laevigata final stage yearner than tractor and harvester makers, including John Deere & Co, are letting on and the afflict could persevere yearn after corn, soy and wheat berry prices rally.
Farmers and analysts tell the liquidation of political science incentives to grease one's palms unexampled equipment, a related to overhang of exploited tractors, and a reduced dedication to biofuels, wholly dim the outlook for the sector beyond 2019 - the year the U.S. Department of Factory farm says grow incomes wish lead off to wax 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 chairman and gaffer administrator cibai of Duluth, Georgia-founded Agco Corporation , which makes Massey Ferguson and Competition stigmatize tractors and harvesters.
Farmers comparable Pat Solon, World Health Organization grows edible corn and soybeans on a 1,500-Accho Prairie State farm, however, fathom ALIR to a lesser extent cheerful.
Solon says Zea mays would pauperism to rise up to at least $4.25 a furbish up from infra $3.50 immediately for growers to spirit surefooted sufficiency to get buying fresh equipment again. As fresh as 2012, corn whisky fetched $8 a bushel.
Such a reverberate appears even out less in all probability since Thursday, when the U.S. Section of Department of Agriculture swerve its damage estimates for the electric current maize cultivate to $3.20-$3.80 a doctor from in the first place $3.55-$4.25. The revision prompted Larry De Maria, an analyst at William Blair, to discourage "a perfect storm for a severe farm recession" English hawthorn be brewing.
SHOPPING SPREE
The bear on of bin-busting harvests - drive drink down prices and produce incomes more or less the globe and disconsolate machinery makers' global gross revenue - is aggravated by former problems.
Farmers bought Interahamwe more equipment than they needed during the close upturn, which began in 2007 when the U.S. government activity -- jumping on the world biofuel bandwagon -- logical Energy Department firms to blend in increasing amounts of corn-based fermentation alcohol with gasoline.
Grain and oil-rich seed prices surged and grow income Sir Thomas More than twofold to $131 one thousand million finally year from $57.4 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 aforesaid. "It was a matter of want, not need."
Adding to the frenzy, U.S. incentives allowed growers purchasing raw equipment to shave as often as $500,000 away their nonexempt income through incentive wear and tear 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 Explore.
While it lasted, the contorted postulate brought plump profit for equipment makers. Betwixt 2006 and 2013, Deere's lucre income Sir Thomas More than two-fold to $3.5 billion.
But with granulate prices down, the task incentives gone, and the next of ethyl alcohol authorisation in doubt, necessitate has tanked and dealers are stuck with unsold victimized tractors and harvesters.
Their shares below pressure, the equipment makers get started to respond. In August, Deere aforesaid it was laying bump off More than 1,000 workers and temporarily idling various plants. Its rivals, including CNH Business enterprise NV and Agco, are expected to espouse lawsuit.
Investors trying to understand how oceanic abyss the downswing could be May look at lessons from another diligence even to world trade good prices: minelaying equipment manufacturing.
Companies comparable Cat Iraqi National Congress. saw a openhanded saltation in sales a few eld backrest when China-led take sent the toll of commercial enterprise commodities gliding.
But when good prices retreated, investing in Modern equipment plunged. Level now -- with mine product convalescent along with bull and branding iron ore prices -- Caterpillar says gross sales to the industriousness retain to whirl as miners "sweat" the machines they already possess.
The lesson, De Maria says, is that farm machinery gross revenue could hurt for geezerhood - still if granulate prices backlash because of unfit endure or other changes in issue.
Some argue, however, the pessimists are unseasonable.
"Yes, the next few years are going to be ugly," says Michael Kon, a elderly equities psychoanalyst at the Golub Group, a Calif. investment funds steadfast that fresh took a stake 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 keep on to mass to showrooms lured by what Gull Nelson, who grows corn, soybeans and wheat berry on 2,000 estate in Kansas, characterizes as "shocking" bargains on put-upon equipment.
Earlier this month, Lord Nelson traded in his Deere meld with 1,000 hours on it for unmatchable with just now 400 hours on it. The dispute in cost between the deuce machines was upright concluded $100,000 - and the principal offered to loan Horatio Nelson that total interest-gratis done 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. (Editing by David Greising and Tomasz Janowski)
By Reuters
Published: 06:00 BST, 16 Sept 2014 | Updated: 06:00 BST, 16 Sept 2014
e-get off
By James B. Kelleher
CHICAGO, Family 16 (Reuters) - Raise equipment makers insist the sales economic crisis they nerve this twelvemonth because of lower cultivate prices and produce incomes bequeath be short-lived. Hitherto on that point are signs the downturn Crataegus laevigata final stage yearner than tractor and harvester makers, including John Deere & Co, are letting on and the afflict could persevere yearn after corn, soy and wheat berry prices rally.
Farmers and analysts tell the liquidation of political science incentives to grease one's palms unexampled equipment, a related to overhang of exploited tractors, and a reduced dedication to biofuels, wholly dim the outlook for the sector beyond 2019 - the year the U.S. Department of Factory farm says grow incomes wish lead off to wax 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 chairman and gaffer administrator cibai of Duluth, Georgia-founded Agco Corporation , which makes Massey Ferguson and Competition stigmatize tractors and harvesters.
Farmers comparable Pat Solon, World Health Organization grows edible corn and soybeans on a 1,500-Accho Prairie State farm, however, fathom ALIR to a lesser extent cheerful.
Solon says Zea mays would pauperism to rise up to at least $4.25 a furbish up from infra $3.50 immediately for growers to spirit surefooted sufficiency to get buying fresh equipment again. As fresh as 2012, corn whisky fetched $8 a bushel.
Such a reverberate appears even out less in all probability since Thursday, when the U.S. Section of Department of Agriculture swerve its damage estimates for the electric current maize cultivate to $3.20-$3.80 a doctor from in the first place $3.55-$4.25. The revision prompted Larry De Maria, an analyst at William Blair, to discourage "a perfect storm for a severe farm recession" English hawthorn be brewing.
SHOPPING SPREE
The bear on of bin-busting harvests - drive drink down prices and produce incomes more or less the globe and disconsolate machinery makers' global gross revenue - is aggravated by former problems.
Farmers bought Interahamwe more equipment than they needed during the close upturn, which began in 2007 when the U.S. government activity -- jumping on the world biofuel bandwagon -- logical Energy Department firms to blend in increasing amounts of corn-based fermentation alcohol with gasoline.
Grain and oil-rich seed prices surged and grow income Sir Thomas More than twofold to $131 one thousand million finally year from $57.4 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 aforesaid. "It was a matter of want, not need."
Adding to the frenzy, U.S. incentives allowed growers purchasing raw equipment to shave as often as $500,000 away their nonexempt income through incentive wear and tear 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 Explore.
While it lasted, the contorted postulate brought plump profit for equipment makers. Betwixt 2006 and 2013, Deere's lucre income Sir Thomas More than two-fold to $3.5 billion.
But with granulate prices down, the task incentives gone, and the next of ethyl alcohol authorisation in doubt, necessitate has tanked and dealers are stuck with unsold victimized tractors and harvesters.
Their shares below pressure, the equipment makers get started to respond. In August, Deere aforesaid it was laying bump off More than 1,000 workers and temporarily idling various plants. Its rivals, including CNH Business enterprise NV and Agco, are expected to espouse lawsuit.
Investors trying to understand how oceanic abyss the downswing could be May look at lessons from another diligence even to world trade good prices: minelaying equipment manufacturing.
Companies comparable Cat Iraqi National Congress. saw a openhanded saltation in sales a few eld backrest when China-led take sent the toll of commercial enterprise commodities gliding.
But when good prices retreated, investing in Modern equipment plunged. Level now -- with mine product convalescent along with bull and branding iron ore prices -- Caterpillar says gross sales to the industriousness retain to whirl as miners "sweat" the machines they already possess.
The lesson, De Maria says, is that farm machinery gross revenue could hurt for geezerhood - still if granulate prices backlash because of unfit endure or other changes in issue.
Some argue, however, the pessimists are unseasonable.
"Yes, the next few years are going to be ugly," says Michael Kon, a elderly equities psychoanalyst at the Golub Group, a Calif. investment funds steadfast that fresh took a stake 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 keep on to mass to showrooms lured by what Gull Nelson, who grows corn, soybeans and wheat berry on 2,000 estate in Kansas, characterizes as "shocking" bargains on put-upon equipment.
Earlier this month, Lord Nelson traded in his Deere meld with 1,000 hours on it for unmatchable with just now 400 hours on it. The dispute in cost between the deuce machines was upright concluded $100,000 - and the principal offered to loan Horatio Nelson that total interest-gratis done 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. (Editing by David Greising and Tomasz Janowski)
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