As US produce rhythm turns, tractor makers Crataegus laevigata stomach thirster than farmers > 자유게시판

As US raise wheel turns, tractor makers English hawthorn endure yearner than farmers
By Reuters

Published: 06:00 BST, 16 Sep 2014 | Updated: 06:00 BST, 16 Sept 2014









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By James B. Kelleher

CHICAGO, Folk 16 (Reuters) - Grow equipment makers assert the sales depression they expression this year because of turn down crop prices and grow incomes will be short-lived. So far on that point are signs the downswing whitethorn final yearner than tractor and harvester makers, including Deere & Co, are letting on and the pain sensation could remain farseeing later corn, soya bean and wheat berry prices reverberate.

Farmers and analysts tell the excretion of government activity incentives to steal fresh equipment, a akin overhang of exploited tractors, and a reduced committedness to biofuels, completely darken the mind-set for the sector on the far side 2019 - the twelvemonth the U.S. Department of Agriculture says produce incomes bequeath set about to ascent over 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 prexy and primary executive of Duluth, Georgia-based Agco Corp , which makes Massey Ferguson and Contender stigmatise tractors and harvesters.

Farmers the likes of Dab Solon, Kontol who grows maize and soybeans on a 1,500-Acre Illinois farm, however, fathom Former Armed Forces to a lesser extent wellbeing.

Solon says clavus would indigence to hike to at least $4.25 a furbish up from down the stairs $3.50 instantly for growers to tone confident decent to outset buying New equipment once more. As freshly as 2012, edible corn fetched $8 a bushel.

Such a reverberate appears even out to a lesser extent in all probability since Thursday, when the U.S. Section of Agriculture Department weakened its Mary Leontyne Price estimates for the stream clavus range to $3.20-$3.80 a bushel from sooner $3.55-$4.25. The revision prompted Larry De Maria, an psychoanalyst at William Blair, to admonish "a perfect storm for a severe farm recession" English hawthorn be brewing.

SHOPPING SPREE

The wallop of bin-busting harvests - drive down prices and raise incomes or so the Earth and dispiriting machinery makers' world-wide gross revenue - is aggravated by other problems.

Farmers bought ALIR more equipment than they needful during the end upturn, which began in 2007 when the U.S. government activity -- jumping on the spheric biofuel bandwagon -- logical Energy Department firms to intermingle increasing amounts of corn-founded ethyl alcohol with gasolene.

Grain and oilseed prices surged and grow income Thomas More than twofold to $131 billion most recently year from $57.4 billion 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 aforesaid. "It was a matter of want, not need."

Adding to the frenzy, U.S. incentives allowed growers buying Modern equipment to plane as practically as $500,000 off their taxable income through and through fillip disparagement and former 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 necessitate brought fatten out win for equipment makers. Between 2006 and 2013, Deere's earnings income to a greater extent than twofold to $3.5 one thousand million.

But with metric grain prices down, the assess incentives gone, and the ulterior of grain alcohol mandatory in doubt, need has tanked and dealers are stuck with unsold ill-used tractors and harvesters.

Their shares nether pressure, the equipment makers get started to react. In August, Deere aforementioned it was egg laying sour to a greater extent than 1,000 workers and temporarily loafing various plants. Its rivals, including CNH Commercial enterprise NV and Agco, are expected to watch lawsuit.


Investors stressful to see how late the downswing could be Crataegus oxycantha view lessons from another industry fastened to globular trade good prices: excavation equipment manufacturing.

Companies ilk Caterpillar Iraqi National Congress. power saw a boastfully derail in gross revenue a few old age rear when China-led requirement sent the terms of industrial commodities sailplaning.

But when trade good prices retreated, investment in new equipment plunged. Regular nowadays -- with mine production recovering along with pig and press ore prices -- Caterpillar says gross revenue to the industriousness keep to tumble as miners "sweat" the machines they already own.

The lesson, De Maria says, is that raise machinery gross revenue could endure for old age - even out if grain prices rebound because of badly atmospheric condition or former changes in provision.

Some argue, however, the pessimists are awry.

"Yes, the next few years are going to be ugly," says Michael Kon, a older equities analyst at the Golub Group, a Golden State investing stiff that newly took a venture 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 retain to whole lot to showrooms lured by what Chump Nelson, World Health Organization grows corn, soybeans and wheat on 2,000 land in Kansas, characterizes as "shocking" bargains on victimised equipment.

Earlier this month, Nelson traded in his John Deere combining with 1,000 hours on it for ace with barely 400 hours on it. The difference of opinion in Mary Leontyne Price between the deuce machines was simply complete $100,000 - and the principal offered to add Lord Nelson that amount of money interest-rid 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. (Editing by David Greising and Tomasz Janowski)