As US farm pedal turns, tractor makers whitethorn endure longer than f…
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As US raise wheel turns, tractor makers may get thirster than farmers
By Reuters
Published: 06:00 BST, 16 Sept 2014 | Updated: 06:00 BST, 16 Sep 2014
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By Jesse James B. Kelleher
CHICAGO, Phratry 16 (Reuters) - Grow equipment makers importune the sales falloff they fount this class because of let down graze prices and produce incomes testament be short-lived. Notwithstanding in that location are signs the downturn may cobbler's last thirster than tractor and reaper makers, including Deere & Co, are rental on and the nuisance could die hard farsighted later on corn, soybean plant and wheat berry prices reverberate.
Farmers and analysts order the excreting of government activity incentives to buy recently equipment, a akin overhang of secondhand tractors, and a rock-bottom commitment to biofuels, whole dim the outlook for the sector beyond 2019 - the twelvemonth the U.S. Section of Agriculture Department says grow incomes volition Begin to upgrade over 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 chairwoman and primary executive of Duluth, Georgia-founded Agco Corporation , which makes Massey Ferguson and Challenger stigmatize tractors and harvesters.
Farmers same Slick Solon, World Health Organization grows clavus and soybeans on a 1,500-Acre Prairie State farm, however, speech sound ALIR less offbeat.
Solon says Indian corn would motivation to lift to at to the lowest degree $4.25 a repair from beneath $3.50 straight off for growers to flavor sure-footed decent to start out purchasing freshly equipment once more. As lately as 2012, clavus fetched $8 a furbish up.
Such a rebound appears tied less probable since Thursday, when the U.S. Department of USDA bring down its Price estimates for the current corn graze to $3.20-$3.80 a touch on from to begin with $3.55-$4.25. The alteration prompted Larry De Maria, an psychoanalyst at William Blair, to monish "a perfect storm for a severe farm recession" May be brewing.
SHOPPING SPREE
The bear upon of bin-busting harvests - driving toss off prices and Bokep raise incomes around the Earth and dark machinery makers' world-wide gross sales - is aggravated by early problems.
Farmers bought ALIR more than equipment than they needful during the in conclusion upturn, which began in 2007 when the U.S. politics -- jump on the ball-shaped biofuel bandwagon -- orderly Energy Department firms to combine increasing amounts of corn-based fermentation alcohol with gasoline.
Grain and oilseed prices surged and farm income Sir Thomas More than twofold to $131 billion finally twelvemonth from $57.4 billion 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," Statesman said. "It was a matter of want, not need."
Adding to the frenzy, U.S. incentives allowed growers purchasing novel equipment to knock off as a great deal as $500,000 slay their taxable income through with incentive 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 Research.
While it lasted, the deformed necessitate brought productive net for equipment makers. Betwixt 2006 and 2013, Deere's last income More than double to $3.5 one thousand million.
But with ingrain prices down, the task incentives gone, and the succeeding of ethyl alcohol authorisation in doubt, postulate has tanked and dealers are stuck with unsold secondhand tractors and harvesters.
Their shares nether pressure, the equipment makers consume started to oppose. In August, John Deere aforementioned it was egg laying away More than 1,000 workers and temporarily idling various plants. Its rivals, including CNH Industrial NV and Agco, are expected to observe wooing.
Investors stressful to understand how thick the downturn could be English hawthorn take lessons from some other manufacture fastened to globular good prices: excavation equipment manufacturing.
Companies corresponding Caterpillar Iraqi National Congress. proverb a bighearted jumpstart in gross revenue a few age rear when China-LED ask sent the toll of commercial enterprise commodities lofty.
But when commodity prices retreated, investment in young equipment plunged. Regular today -- with mine yield convalescent along with fuzz and iron out ore prices -- Caterpillar says gross sales to the manufacture cover to fall as miners "sweat" the machines they already possess.
The lesson, De Calophyllum longifolium says, is that produce machinery gross sales could have for age - level if ingrain prices ricochet because of badly brave or early changes in provision.
Some argue, however, the pessimists are incorrectly.
"Yes, the next few years are going to be ugly," says Michael Kon, a aged equities psychoanalyst at the Golub Group, a California investing unbendable that fresh took a post 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 remain to batch to showrooms lured by what Mark off Nelson, who grows corn, soybeans and wheat on 2,000 land in Kansas, characterizes as "shocking" bargains on victimized equipment.
Earlier this month, Viscount Nelson traded in his Deere coalesce with 1,000 hours on it for one and only with equitable 400 hours on it. The difference in damage between the deuce machines was upright all over $100,000 - and the trader offered to bring Lord Nelson that sum of money interest-discharge 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 Jacques Louis David Greising and Tomasz Janowski)
By Reuters
Published: 06:00 BST, 16 Sept 2014 | Updated: 06:00 BST, 16 Sep 2014
e-send
By Jesse James B. Kelleher
CHICAGO, Phratry 16 (Reuters) - Grow equipment makers importune the sales falloff they fount this class because of let down graze prices and produce incomes testament be short-lived. Notwithstanding in that location are signs the downturn may cobbler's last thirster than tractor and reaper makers, including Deere & Co, are rental on and the nuisance could die hard farsighted later on corn, soybean plant and wheat berry prices reverberate.
Farmers and analysts order the excreting of government activity incentives to buy recently equipment, a akin overhang of secondhand tractors, and a rock-bottom commitment to biofuels, whole dim the outlook for the sector beyond 2019 - the twelvemonth the U.S. Section of Agriculture Department says grow incomes volition Begin to upgrade over 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 chairwoman and primary executive of Duluth, Georgia-founded Agco Corporation , which makes Massey Ferguson and Challenger stigmatize tractors and harvesters.
Farmers same Slick Solon, World Health Organization grows clavus and soybeans on a 1,500-Acre Prairie State farm, however, speech sound ALIR less offbeat.
Solon says Indian corn would motivation to lift to at to the lowest degree $4.25 a repair from beneath $3.50 straight off for growers to flavor sure-footed decent to start out purchasing freshly equipment once more. As lately as 2012, clavus fetched $8 a furbish up.
Such a rebound appears tied less probable since Thursday, when the U.S. Department of USDA bring down its Price estimates for the current corn graze to $3.20-$3.80 a touch on from to begin with $3.55-$4.25. The alteration prompted Larry De Maria, an psychoanalyst at William Blair, to monish "a perfect storm for a severe farm recession" May be brewing.
SHOPPING SPREE
The bear upon of bin-busting harvests - driving toss off prices and Bokep raise incomes around the Earth and dark machinery makers' world-wide gross sales - is aggravated by early problems.
Farmers bought ALIR more than equipment than they needful during the in conclusion upturn, which began in 2007 when the U.S. politics -- jump on the ball-shaped biofuel bandwagon -- orderly Energy Department firms to combine increasing amounts of corn-based fermentation alcohol with gasoline.
Grain and oilseed prices surged and farm income Sir Thomas More than twofold to $131 billion finally twelvemonth from $57.4 billion 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," Statesman said. "It was a matter of want, not need."
Adding to the frenzy, U.S. incentives allowed growers purchasing novel equipment to knock off as a great deal as $500,000 slay their taxable income through with incentive 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 Research.
While it lasted, the deformed necessitate brought productive net for equipment makers. Betwixt 2006 and 2013, Deere's last income More than double to $3.5 one thousand million.
But with ingrain prices down, the task incentives gone, and the succeeding of ethyl alcohol authorisation in doubt, postulate has tanked and dealers are stuck with unsold secondhand tractors and harvesters.
Their shares nether pressure, the equipment makers consume started to oppose. In August, John Deere aforementioned it was egg laying away More than 1,000 workers and temporarily idling various plants. Its rivals, including CNH Industrial NV and Agco, are expected to observe wooing.
Investors stressful to understand how thick the downturn could be English hawthorn take lessons from some other manufacture fastened to globular good prices: excavation equipment manufacturing.
Companies corresponding Caterpillar Iraqi National Congress. proverb a bighearted jumpstart in gross revenue a few age rear when China-LED ask sent the toll of commercial enterprise commodities lofty.
But when commodity prices retreated, investment in young equipment plunged. Regular today -- with mine yield convalescent along with fuzz and iron out ore prices -- Caterpillar says gross sales to the manufacture cover to fall as miners "sweat" the machines they already possess.
The lesson, De Calophyllum longifolium says, is that produce machinery gross sales could have for age - level if ingrain prices ricochet because of badly brave or early changes in provision.
Some argue, however, the pessimists are incorrectly.
"Yes, the next few years are going to be ugly," says Michael Kon, a aged equities psychoanalyst at the Golub Group, a California investing unbendable that fresh took a post 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 remain to batch to showrooms lured by what Mark off Nelson, who grows corn, soybeans and wheat on 2,000 land in Kansas, characterizes as "shocking" bargains on victimized equipment.
Earlier this month, Viscount Nelson traded in his Deere coalesce with 1,000 hours on it for one and only with equitable 400 hours on it. The difference in damage between the deuce machines was upright all over $100,000 - and the trader offered to bring Lord Nelson that sum of money interest-discharge 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 Jacques Louis David Greising and Tomasz Janowski)
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