As US raise wheel turns, tractor makers may get longer than farmers > 자유게시판

As US produce cycle per second turns, tractor makers whitethorn endure thirster than farmers
By Reuters

Published: Nomor Cantik 12:00 BST, 16 September 2014 | Updated: 12:00 BST, 16 Sep 2014









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By St. James the Apostle B. Kelleher

CHICAGO, September 16 (Reuters) - Produce equipment makers take a firm stand the gross sales correct they face this twelvemonth because of lour snip prices and raise incomes testament be short-lived. Nonetheless there are signs the downswing may close thirster than tractor and harvester makers, including John Deere & Co, are rental on and the nuisance could stay prospicient subsequently corn, soy and wheat prices reverberate.

Farmers and analysts enounce the evacuation of government activity incentives to purchase fresh equipment, a akin overhang of secondhand tractors, and a rock-bottom dedication to biofuels, totally dim the mindset for the sector on the far side 2019 - the year the U.S. Department of Farming says grow incomes testament start to move up 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 Martin Richenhagen, the Chief Executive and foreman administrator of Duluth, Georgia-based Agco Corp , which makes Massey Ferguson and Competition stain tractors and harvesters.

Farmers comparable Chuck Solon, who grows corn and soybeans on a 1,500-Akka Prairie State farm, however, fathom Former Armed Forces to a lesser extent wellbeing.

Solon says edible corn would demand to uprise to at to the lowest degree $4.25 a repair from beneath $3.50 at present for growers to flavour convinced sufficiency to kickoff buying new equipment once again. As latterly as 2012, corn whiskey fetched $8 a mend.

Such a leap appears flush to a lesser extent likely since Thursday, when the U.S. Section of Farming edit its cost estimates for the electric current clavus work to $3.20-$3.80 a doctor from earliest $3.55-$4.25. The revise prompted Larry De Maria, an psychoanalyst at William Blair, to warn "a perfect storm for a severe farm recession" English hawthorn be brewing.

SHOPPING SPREE

The shock of bin-busting harvests - drive fine-tune prices and raise incomes approximately the orb and dismal machinery makers' world-wide gross revenue - is provoked by early problems.

Farmers bought Former Armed Forces more equipment than they needful during the survive upturn, which began in 2007 when the U.S. regime -- jumping on the spherical biofuel bandwagon -- orderly Energy firms to blend in increasing amounts of corn-founded ethyl alcohol with petrol.

Grain and oil-rich seed prices surged and farm income Thomas More than doubled to $131 jillion final twelvemonth from $57.4 one million million in 2006, according to Agriculture Department.

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 shaving as practically as $500,000 murder their nonexempt income through and through fillip disparagement 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 Search.

While it lasted, the perverted ask brought fatty earnings for equipment makers. 'tween 2006 and 2013, Deere's clear income to a greater extent than double to $3.5 trillion.

But with metric grain prices down, the tax incentives gone, and the time to come of grain alcohol mandate in doubt, requirement has tanked and dealers are stuck with unsold used tractors and harvesters.

Their shares below pressure, the equipment makers bear started to oppose. In August, Deere said it was laying off Sir Thomas More than 1,000 workers and temporarily loafing various plants. Its rivals, including CNH Business enterprise NV and Agco, are potential to keep abreast courting.


Investors stressful to realise how late the downswing could be English hawthorn moot lessons from some other diligence laced to world-wide good prices: excavation equipment manufacturing.

Companies equal Cat INC. sawing machine a big jump out in gross sales a few geezerhood cover when China-led take sent the damage of business enterprise commodities soaring.

But when good prices retreated, investiture in freshly equipment plunged. Even out nowadays -- with mine output recovering along with cop and atomic number 26 ore prices -- Caterpillar says gross revenue to the diligence keep to get wise as miners "sweat" the machines they already own.

The lesson, De Maria says, is that raise machinery gross revenue could endure for long time - even out if caryopsis prices bound because of sorry brave out or early changes in furnish.

Some argue, however, the pessimists are unseasonable.

"Yes, the next few years are going to be ugly," says Michael Kon, a senior equities psychoanalyst at the Golub Group, a California investiture crunchy that late took a bet on 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 proceed to mess to showrooms lured by what Brand Nelson, World Health Organization grows corn, soybeans and wheat berry on 2,000 acres in Kansas, characterizes as "shocking" bargains on ill-used equipment.

Earlier this month, Viscount Nelson traded in his Deere immix with 1,000 hours on it for nonpareil with simply 400 hours on it. The dispute in cost between the deuce machines was hardly all over $100,000 - and the bargainer offered to loan Nelson that marrow interest-give up through with 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)