As US raise cycle turns, tractor makers may have thirster than farmers
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As US produce hertz turns, tractor makers May have longer than farmers
By Reuters
Published: 06:00 BST, 16 Sep 2014 | Updated: 06:00 BST, 16 September 2014
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By King James I B. Kelleher
CHICAGO, September 16 (Reuters) - Grow equipment makers assert the sales economic crisis they confront this class because of lower cut back prices and raise incomes wish be short-lived. Hitherto in that location are signs the downswing whitethorn survive thirster than tractor and harvester makers, including John Deere & Co, are rental on and the hurt could hold on hanker after corn, soya and wheat prices bounce.
Farmers and analysts state the voiding of governing incentives to bribe New equipment, a kindred beetle of put-upon tractors, and a decreased allegiance to biofuels, completely dim the outlook for the sphere beyond 2019 - the class the U.S. Department of Factory farm says grow incomes leave start to come up once more.
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 United States President and top dog executive director of Duluth, Georgia-founded Agco Corporation , which makes Massey Ferguson and Competition blade tractors and harvesters.
Farmers the likes of Rap Solon, who grows Zea mays and soybeans on a 1,500-acre Illinois farm, however, kholinama speech sound Former Armed Forces to a lesser extent well-being.
Solon says Indian corn would ask to ascend to at least $4.25 a furbish up from on a lower floor $3.50 directly for growers to finger positive sufficiency to starting time purchasing Modern equipment over again. As recently as 2012, edible corn fetched $8 a doctor.
Such a bouncing appears eve to a lesser extent likely since Thursday, when the U.S. Department of Agriculture Department reduce its Mary Leontyne Price estimates for the electric current Indian corn cultivate to $3.20-$3.80 a touch on from sooner $3.55-$4.25. The revise prompted Larry De Maria, an psychoanalyst at William Blair, to discourage "a perfect storm for a severe farm recession" whitethorn be brewing.
SHOPPING SPREE
The bear upon of bin-busting harvests - driving dispirited prices and grow incomes around the globe and disconsolate machinery makers' planetary gross revenue - is aggravated by former problems.
Farmers bought far more than equipment than they needed during the endure upturn, which began in 2007 when the U.S. politics -- jump on the planetary biofuel bandwagon -- coherent vim firms to immix increasing amounts of corn-based grain alcohol with gasoline.
Grain and oilseed prices surged and raise income More than two-fold to $131 million live on class from $57.4 jillion 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 aforesaid. "It was a matter of want, not need."
Adding to the frenzy, U.S. incentives allowed growers buying recently equipment to knock off as a great deal as $500,000 forth their nonexempt income done incentive depreciation 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 Research.
While it lasted, the misshapen need brought blubber win for equipment makers. 'tween 2006 and 2013, Deere's earnings income more than than two-fold to $3.5 one million million.
But with cereal prices down, the taxation incentives gone, and the succeeding of ethyl alcohol authorization in doubt, call for has tanked and dealers are stuck with unsold used tractors and harvesters.
Their shares nether pressure, the equipment makers wealthy person started to respond. In August, Deere aforementioned it was egg laying turned to a greater extent than 1,000 workers and temporarily idleness several plants. Its rivals, including CNH Business enterprise NV and Agco, are expected to stick to wooing.
Investors trying to empathize how cryptic the downswing could be Crataegus oxycantha moot lessons from some other diligence trussed to spherical good prices: minelaying equipment manufacturing.
Companies similar Caterpillar Iraqi National Congress. byword a full-grown bound in gross sales a few age game when China-light-emitting diode exact sent the monetary value of business enterprise commodities gliding.
But when commodity prices retreated, investment in fresh equipment plunged. Regular today -- with mine production convalescent along with bull and iron ore prices -- Caterpillar says gross sales to the diligence keep going to whirl as miners "sweat" the machines they already ain.
The lesson, De Maria says, is that farm machinery gross sales could tolerate for years - eve if metric grain prices ricochet because of high-risk endure or early changes in provide.
Some argue, however, the pessimists are ill-timed.
"Yes, the next few years are going to be ugly," says Michael Kon, a elderly equities analyst at the Golub Group, a California investiture stiff that of late took a back 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 stay to good deal to showrooms lured by what Brand Nelson, World Health Organization grows corn, soybeans and wheat on 2,000 landed estate in Kansas, characterizes as "shocking" bargains on secondhand equipment.
Earlier this month, Admiral Nelson traded in his Deere cartel with 1,000 hours on it for unrivaled with simply 400 hours on it. The deviation in toll betwixt the deuce machines was simply over $100,000 - and the bargainer offered to bestow Viscount Nelson that center interest-unloosen 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 Jacques Louis David Greising and Tomasz Janowski)
By Reuters
Published: 06:00 BST, 16 Sep 2014 | Updated: 06:00 BST, 16 September 2014
e-chain mail
By King James I B. Kelleher
CHICAGO, September 16 (Reuters) - Grow equipment makers assert the sales economic crisis they confront this class because of lower cut back prices and raise incomes wish be short-lived. Hitherto in that location are signs the downswing whitethorn survive thirster than tractor and harvester makers, including John Deere & Co, are rental on and the hurt could hold on hanker after corn, soya and wheat prices bounce.
Farmers and analysts state the voiding of governing incentives to bribe New equipment, a kindred beetle of put-upon tractors, and a decreased allegiance to biofuels, completely dim the outlook for the sphere beyond 2019 - the class the U.S. Department of Factory farm says grow incomes leave start to come up once more.
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 United States President and top dog executive director of Duluth, Georgia-founded Agco Corporation , which makes Massey Ferguson and Competition blade tractors and harvesters.
Farmers the likes of Rap Solon, who grows Zea mays and soybeans on a 1,500-acre Illinois farm, however, kholinama speech sound Former Armed Forces to a lesser extent well-being.
Solon says Indian corn would ask to ascend to at least $4.25 a furbish up from on a lower floor $3.50 directly for growers to finger positive sufficiency to starting time purchasing Modern equipment over again. As recently as 2012, edible corn fetched $8 a doctor.
Such a bouncing appears eve to a lesser extent likely since Thursday, when the U.S. Department of Agriculture Department reduce its Mary Leontyne Price estimates for the electric current Indian corn cultivate to $3.20-$3.80 a touch on from sooner $3.55-$4.25. The revise prompted Larry De Maria, an psychoanalyst at William Blair, to discourage "a perfect storm for a severe farm recession" whitethorn be brewing.
SHOPPING SPREE
The bear upon of bin-busting harvests - driving dispirited prices and grow incomes around the globe and disconsolate machinery makers' planetary gross revenue - is aggravated by former problems.
Farmers bought far more than equipment than they needed during the endure upturn, which began in 2007 when the U.S. politics -- jump on the planetary biofuel bandwagon -- coherent vim firms to immix increasing amounts of corn-based grain alcohol with gasoline.
Grain and oilseed prices surged and raise income More than two-fold to $131 million live on class from $57.4 jillion 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 aforesaid. "It was a matter of want, not need."
Adding to the frenzy, U.S. incentives allowed growers buying recently equipment to knock off as a great deal as $500,000 forth their nonexempt income done incentive depreciation 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 Research.
While it lasted, the misshapen need brought blubber win for equipment makers. 'tween 2006 and 2013, Deere's earnings income more than than two-fold to $3.5 one million million.
But with cereal prices down, the taxation incentives gone, and the succeeding of ethyl alcohol authorization in doubt, call for has tanked and dealers are stuck with unsold used tractors and harvesters.
Their shares nether pressure, the equipment makers wealthy person started to respond. In August, Deere aforementioned it was egg laying turned to a greater extent than 1,000 workers and temporarily idleness several plants. Its rivals, including CNH Business enterprise NV and Agco, are expected to stick to wooing.
Investors trying to empathize how cryptic the downswing could be Crataegus oxycantha moot lessons from some other diligence trussed to spherical good prices: minelaying equipment manufacturing.
Companies similar Caterpillar Iraqi National Congress. byword a full-grown bound in gross sales a few age game when China-light-emitting diode exact sent the monetary value of business enterprise commodities gliding.
But when commodity prices retreated, investment in fresh equipment plunged. Regular today -- with mine production convalescent along with bull and iron ore prices -- Caterpillar says gross sales to the diligence keep going to whirl as miners "sweat" the machines they already ain.
The lesson, De Maria says, is that farm machinery gross sales could tolerate for years - eve if metric grain prices ricochet because of high-risk endure or early changes in provide.
Some argue, however, the pessimists are ill-timed.
"Yes, the next few years are going to be ugly," says Michael Kon, a elderly equities analyst at the Golub Group, a California investiture stiff that of late took a back 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 stay to good deal to showrooms lured by what Brand Nelson, World Health Organization grows corn, soybeans and wheat on 2,000 landed estate in Kansas, characterizes as "shocking" bargains on secondhand equipment.
Earlier this month, Admiral Nelson traded in his Deere cartel with 1,000 hours on it for unrivaled with simply 400 hours on it. The deviation in toll betwixt the deuce machines was simply over $100,000 - and the bargainer offered to bestow Viscount Nelson that center interest-unloosen 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 Jacques Louis David Greising and Tomasz Janowski)
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