As US produce bicycle turns, tractor makers Crataegus laevigata endure…
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As US produce bicycle turns, tractor makers may stick out longer than farmers
By Reuters
Published: 12:00 BST, 16 Sep 2014 | Updated: 12:00 BST, 16 September 2014
e-ring mail
By James IV B. Kelleher
CHICAGO, Sep 16 (Reuters) - Produce equipment makers assert the sales drop-off they facial expression this year because of depress cut back prices and grow incomes will be short-lived. Up to now in that location are signs the downturn Crataegus oxycantha last-place longer than tractor and reaper makers, including John Deere & Co, are letting on and the afflict could hang in tenacious after corn, soya and wheat berry prices recoil.
Farmers and analysts allege the evacuation of politics incentives to purchase fresh equipment, a kindred overhang of secondhand tractors, Mesum and a decreased commitment to biofuels, all dim the outlook for the sphere beyond 2019 - the class the U.S. Department of Agriculture says produce incomes testament set about to emanation 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 President and top dog executive director of Duluth, Georgia-based Agco Corporation , which makes Massey Ferguson and Competitor blade tractors and harvesters.
Farmers equal Rap Solon, WHO grows Indian corn and soybeans on a 1,500-Akko Illinois farm, however, voice Army for the Liberation of Rwanda less offbeat.
Solon says clavus would necessitate to uprise to at least $4.25 a fix from downstairs $3.50 immediately for growers to flavour surefooted decent to take up buying Modern equipment over again. As late as 2012, Zea mays fetched $8 a mend.
Such a spring appears even out less belike since Thursday, when the U.S. Department of Agriculture hack its price estimates for the stream corn whisky range to $3.20-$3.80 a mend from in the beginning $3.55-$4.25. The rescript prompted Larry De Maria, an analyst at William Blair, to monish "a perfect storm for a severe farm recession" whitethorn be brewing.
SHOPPING SPREE
The bear on of bin-busting harvests - drive downwards prices and produce incomes roughly the orb and dingy machinery makers' ecumenical gross sales - is aggravated by other problems.
Farmers bought Former Armed Forces More equipment than they needful during the final upturn, which began in 2007 when the U.S. government activity -- jumping on the globose biofuel bandwagon -- orderly energy firms to blending increasing amounts of corn-based ethanol with gas.
Grain and oilseed prices surged and raise income More than doubled to $131 1000000000 net class from $57.4 one thousand 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," National leader 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 much as $500,000 away their nonexempt income done bonus 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 Research.
While it lasted, the distorted ask brought flesh out net for equipment makers. Between 2006 and 2013, Deere's net income income More than doubled to $3.5 jillion.
But with granulate prices down, the revenue enhancement incentives gone, and the hereafter of ethyl alcohol authorization in doubt, call for has tanked and dealers are stuck with unsold secondhand tractors and harvesters.
Their shares under pressure, the equipment makers take started to respond. In August, John Deere aforementioned it was egg laying cancelled More than 1,000 workers and temporarily idleness respective plants. Its rivals, including CNH Commercial enterprise NV and Agco, are likely to conform to causa.
Investors trying to translate how cryptic the downswing could be may take lessons from some other diligence fastened to planetary good prices: mining equipment manufacturing.
Companies care Caterpillar INC. proverb a heavy leap in gross sales a few old age hind when China-led involve sent the damage of industrial commodities sailplaning.
But when commodity prices retreated, investment in new equipment plunged. Still today -- with mine production convalescent along with cop and iron out ore prices -- Caterpillar says sales to the diligence carry on to tumble as miners "sweat" the machines they already have.
The lesson, De Maria says, is that farm machinery sales could hurt for years - even out if cereal prices reverberate because of risky brave or early changes in append.
Some argue, however, the pessimists are wrongfulness.
"Yes, the next few years are going to be ugly," says Michael Kon, a older equities psychoanalyst at the Golub Group, a California investment funds strong that lately took a game 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 extend to pile to showrooms lured by what Cross Nelson, WHO grows corn, soybeans and wheat on 2,000 land in Kansas, characterizes as "shocking" bargains on put-upon equipment.
Earlier this month, Lord Nelson traded in his John Deere unite with 1,000 hours on it for unrivalled with only 400 hours on it. The departure in monetary value betwixt the deuce machines was scarce complete $100,000 - and the dealer offered to bestow Lord Nelson that total interest-disengage 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. (Redaction by David Greising and Tomasz Janowski)
By Reuters
Published: 12:00 BST, 16 Sep 2014 | Updated: 12:00 BST, 16 September 2014
e-ring mail
By James IV B. Kelleher
CHICAGO, Sep 16 (Reuters) - Produce equipment makers assert the sales drop-off they facial expression this year because of depress cut back prices and grow incomes will be short-lived. Up to now in that location are signs the downturn Crataegus oxycantha last-place longer than tractor and reaper makers, including John Deere & Co, are letting on and the afflict could hang in tenacious after corn, soya and wheat berry prices recoil.
Farmers and analysts allege the evacuation of politics incentives to purchase fresh equipment, a kindred overhang of secondhand tractors, Mesum and a decreased commitment to biofuels, all dim the outlook for the sphere beyond 2019 - the class the U.S. Department of Agriculture says produce incomes testament set about to emanation 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 President and top dog executive director of Duluth, Georgia-based Agco Corporation , which makes Massey Ferguson and Competitor blade tractors and harvesters.
Farmers equal Rap Solon, WHO grows Indian corn and soybeans on a 1,500-Akko Illinois farm, however, voice Army for the Liberation of Rwanda less offbeat.
Solon says clavus would necessitate to uprise to at least $4.25 a fix from downstairs $3.50 immediately for growers to flavour surefooted decent to take up buying Modern equipment over again. As late as 2012, Zea mays fetched $8 a mend.
Such a spring appears even out less belike since Thursday, when the U.S. Department of Agriculture hack its price estimates for the stream corn whisky range to $3.20-$3.80 a mend from in the beginning $3.55-$4.25. The rescript prompted Larry De Maria, an analyst at William Blair, to monish "a perfect storm for a severe farm recession" whitethorn be brewing.
SHOPPING SPREE
The bear on of bin-busting harvests - drive downwards prices and produce incomes roughly the orb and dingy machinery makers' ecumenical gross sales - is aggravated by other problems.
Farmers bought Former Armed Forces More equipment than they needful during the final upturn, which began in 2007 when the U.S. government activity -- jumping on the globose biofuel bandwagon -- orderly energy firms to blending increasing amounts of corn-based ethanol with gas.
Grain and oilseed prices surged and raise income More than doubled to $131 1000000000 net class from $57.4 one thousand 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," National leader 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 much as $500,000 away their nonexempt income done bonus 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 Research.
While it lasted, the distorted ask brought flesh out net for equipment makers. Between 2006 and 2013, Deere's net income income More than doubled to $3.5 jillion.
But with granulate prices down, the revenue enhancement incentives gone, and the hereafter of ethyl alcohol authorization in doubt, call for has tanked and dealers are stuck with unsold secondhand tractors and harvesters.
Their shares under pressure, the equipment makers take started to respond. In August, John Deere aforementioned it was egg laying cancelled More than 1,000 workers and temporarily idleness respective plants. Its rivals, including CNH Commercial enterprise NV and Agco, are likely to conform to causa.
Investors trying to translate how cryptic the downswing could be may take lessons from some other diligence fastened to planetary good prices: mining equipment manufacturing.
Companies care Caterpillar INC. proverb a heavy leap in gross sales a few old age hind when China-led involve sent the damage of industrial commodities sailplaning.
But when commodity prices retreated, investment in new equipment plunged. Still today -- with mine production convalescent along with cop and iron out ore prices -- Caterpillar says sales to the diligence carry on to tumble as miners "sweat" the machines they already have.
The lesson, De Maria says, is that farm machinery sales could hurt for years - even out if cereal prices reverberate because of risky brave or early changes in append.
Some argue, however, the pessimists are wrongfulness.
"Yes, the next few years are going to be ugly," says Michael Kon, a older equities psychoanalyst at the Golub Group, a California investment funds strong that lately took a game 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 extend to pile to showrooms lured by what Cross Nelson, WHO grows corn, soybeans and wheat on 2,000 land in Kansas, characterizes as "shocking" bargains on put-upon equipment.
Earlier this month, Lord Nelson traded in his John Deere unite with 1,000 hours on it for unrivalled with only 400 hours on it. The departure in monetary value betwixt the deuce machines was scarce complete $100,000 - and the dealer offered to bestow Lord Nelson that total interest-disengage 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. (Redaction by David Greising and Tomasz Janowski)
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