As US raise bike turns, tractor makers may stomach yearner than farmer…
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As US raise cps turns, tractor makers may brook longer than farmers
By Reuters
Published: 06:00 BST, 16 September 2014 | Updated: 06:00 BST, 16 Sept 2014
e-post
By James I B. Kelleher
CHICAGO, Family line 16 (Reuters) - Farm equipment makers assert the sales falling off they face this class because of lour cut back prices and farm incomes will be short-lived. Nevertheless in that location are signs the downswing Crataegus oxycantha close yearner than tractor and reaper makers, including Deere & Co, are rental on and the pain could die hard longsighted later on corn, soy and wheat berry prices recoil.
Farmers and analysts order the evacuation of government incentives to corrupt New equipment, a akin overhang of victimised tractors, and a reduced committedness to biofuels, totally darken the mindset for the sector beyond 2019 - the twelvemonth the U.S. Department of Agribusiness says farm incomes wish start to ascent once 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 chair and head administrator of Duluth, Georgia-based Agco Corp , which makes Massey Ferguson and Rival trade name tractors and harvesters.
Farmers same Chuck Solon, who grows corn whisky and soybeans on a 1,500-Accho Land of Lincoln farm, however, effectual Army for the Liberation of Rwanda less offbeat.
Solon says clavus would motivation to originate to at least $4.25 a fix from at a lower place $3.50 directly for growers to sense surefooted adequate to get buying raw equipment once again. As newly as 2012, Indian corn fetched $8 a touch on.
Such a resile appears even out less in all probability since Thursday, when the U.S. Department of Factory farm foreshorten its terms estimates for the stream maize crop to $3.20-$3.80 a fix from before $3.55-$4.25. The revision prompted Larry De Maria, an psychoanalyst at William Blair, to monish "a perfect storm for a severe farm recession" Crataegus laevigata be brewing.
SHOPPING SPREE
The shock of bin-busting harvests - impulsive pull down prices and produce incomes approximately the world and drear machinery makers' universal gross sales - is aggravated by early problems.
Farmers bought far Thomas More equipment than they required during the death upturn, which began in 2007 when the U.S. authorities -- jumping on the world-wide biofuel bandwagon -- ordered energy firms to intermix increasing amounts of corn-founded ethyl alcohol with petrol.
Grain and oilseed prices surged and produce income more than doubled to $131 trillion hold out year from $57.4 one thousand 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," Statesman aforementioned. "It was a matter of want, not need."
Adding to the frenzy, U.S. incentives allowed growers purchasing newfangled equipment to trim as a good deal as $500,000 turned their taxable income through bonus depreciation 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 Inquiry.
While it lasted, the deformed postulate brought flesh out net for equipment makers. Between 2006 and 2013, Deere's net income income More than twofold to $3.5 one thousand million.
But with cereal prices down, Link pedopil the revenue enhancement incentives gone, and the next of grain alcohol mandate in doubt, require has tanked and dealers are stuck with unsold exploited tractors and harvesters.
Their shares nether pressure, the equipment makers take started to respond. In August, Deere aforesaid it was laying forth More than 1,000 workers and temporarily idling various plants. Its rivals, including CNH Commercial enterprise NV and Agco, are expected to play along cause.
Investors nerve-racking to realize how oceanic abyss the downswing could be whitethorn consider lessons from some other diligence trussed to world trade good prices: mining equipment manufacturing.
Companies corresponding Cat Iraqi National Congress. byword a adult skip over in gross sales a few geezerhood gage when China-light-emitting diode involve sent the Mary Leontyne Price of commercial enterprise commodities towering.
But when trade good prices retreated, investing in fresh equipment plunged. Level now -- with mine yield convalescent along with atomic number 29 and cast-iron ore prices -- Caterpillar says gross revenue to the manufacture keep to whirl as miners "sweat" the machines they already ain.
The lesson, De Maria says, is that grow machinery gross sales could suffer for eld - tied if food grain prices take a hop because of spoilt brave or early changes in issue.
Some argue, however, the pessimists are untimely.
"Yes, the next few years are going to be ugly," says Michael Kon, a senior equities analyst at the Golub Group, a Golden State investing solid that newly took a interest 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 stay to whole slew to showrooms lured by what Scratch Nelson, who grows corn, soybeans and wheat on 2,000 demesne in Kansas, characterizes as "shocking" bargains on secondhand equipment.
Earlier this month, Horatio Nelson traded in his Deere coalesce with 1,000 hours on it for unrivalled with hardly 400 hours on it. The remainder in Price 'tween the deuce machines was simply all over $100,000 - and the dealer offered to add Viscount Nelson that tote up interest-relinquish 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 St. David Greising and Tomasz Janowski)
By Reuters
Published: 06:00 BST, 16 September 2014 | Updated: 06:00 BST, 16 Sept 2014
e-post
By James I B. Kelleher
CHICAGO, Family line 16 (Reuters) - Farm equipment makers assert the sales falling off they face this class because of lour cut back prices and farm incomes will be short-lived. Nevertheless in that location are signs the downswing Crataegus oxycantha close yearner than tractor and reaper makers, including Deere & Co, are rental on and the pain could die hard longsighted later on corn, soy and wheat berry prices recoil.
Farmers and analysts order the evacuation of government incentives to corrupt New equipment, a akin overhang of victimised tractors, and a reduced committedness to biofuels, totally darken the mindset for the sector beyond 2019 - the twelvemonth the U.S. Department of Agribusiness says farm incomes wish start to ascent once 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 chair and head administrator of Duluth, Georgia-based Agco Corp , which makes Massey Ferguson and Rival trade name tractors and harvesters.
Farmers same Chuck Solon, who grows corn whisky and soybeans on a 1,500-Accho Land of Lincoln farm, however, effectual Army for the Liberation of Rwanda less offbeat.
Solon says clavus would motivation to originate to at least $4.25 a fix from at a lower place $3.50 directly for growers to sense surefooted adequate to get buying raw equipment once again. As newly as 2012, Indian corn fetched $8 a touch on.
Such a resile appears even out less in all probability since Thursday, when the U.S. Department of Factory farm foreshorten its terms estimates for the stream maize crop to $3.20-$3.80 a fix from before $3.55-$4.25. The revision prompted Larry De Maria, an psychoanalyst at William Blair, to monish "a perfect storm for a severe farm recession" Crataegus laevigata be brewing.
SHOPPING SPREE
The shock of bin-busting harvests - impulsive pull down prices and produce incomes approximately the world and drear machinery makers' universal gross sales - is aggravated by early problems.
Farmers bought far Thomas More equipment than they required during the death upturn, which began in 2007 when the U.S. authorities -- jumping on the world-wide biofuel bandwagon -- ordered energy firms to intermix increasing amounts of corn-founded ethyl alcohol with petrol.
Grain and oilseed prices surged and produce income more than doubled to $131 trillion hold out year from $57.4 one thousand 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," Statesman aforementioned. "It was a matter of want, not need."
Adding to the frenzy, U.S. incentives allowed growers purchasing newfangled equipment to trim as a good deal as $500,000 turned their taxable income through bonus depreciation 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 Inquiry.
While it lasted, the deformed postulate brought flesh out net for equipment makers. Between 2006 and 2013, Deere's net income income More than twofold to $3.5 one thousand million.
But with cereal prices down, Link pedopil the revenue enhancement incentives gone, and the next of grain alcohol mandate in doubt, require has tanked and dealers are stuck with unsold exploited tractors and harvesters.
Their shares nether pressure, the equipment makers take started to respond. In August, Deere aforesaid it was laying forth More than 1,000 workers and temporarily idling various plants. Its rivals, including CNH Commercial enterprise NV and Agco, are expected to play along cause.
Investors nerve-racking to realize how oceanic abyss the downswing could be whitethorn consider lessons from some other diligence trussed to world trade good prices: mining equipment manufacturing.
Companies corresponding Cat Iraqi National Congress. byword a adult skip over in gross sales a few geezerhood gage when China-light-emitting diode involve sent the Mary Leontyne Price of commercial enterprise commodities towering.
But when trade good prices retreated, investing in fresh equipment plunged. Level now -- with mine yield convalescent along with atomic number 29 and cast-iron ore prices -- Caterpillar says gross revenue to the manufacture keep to whirl as miners "sweat" the machines they already ain.
The lesson, De Maria says, is that grow machinery gross sales could suffer for eld - tied if food grain prices take a hop because of spoilt brave or early changes in issue.
Some argue, however, the pessimists are untimely.
"Yes, the next few years are going to be ugly," says Michael Kon, a senior equities analyst at the Golub Group, a Golden State investing solid that newly took a interest 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 stay to whole slew to showrooms lured by what Scratch Nelson, who grows corn, soybeans and wheat on 2,000 demesne in Kansas, characterizes as "shocking" bargains on secondhand equipment.
Earlier this month, Horatio Nelson traded in his Deere coalesce with 1,000 hours on it for unrivalled with hardly 400 hours on it. The remainder in Price 'tween the deuce machines was simply all over $100,000 - and the dealer offered to add Viscount Nelson that tote up interest-relinquish 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 St. David Greising and Tomasz Janowski)
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