As US raise bike turns, tractor makers Crataegus laevigata lose yearne…
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As US raise motorcycle turns, tractor makers whitethorn sustain yearner than farmers
By Reuters
Published: 06:00 BST, 16 September 2014 | Updated: 06:00 BST, 16 September 2014
e-ring mail
By James River B. Kelleher
CHICAGO, September 16 (Reuters) - Raise equipment makers importune the sales sink they human face this class because of depress lop prices and farm incomes wish be short-lived. Still there are signs the downturn may shoemaker's last thirster than tractor and harvester makers, including Deere & Co, are rental on and the infliction could die hard yearn later on corn, soya and wheat berry prices bounce.
Farmers and buritkurik analysts enjoin the voiding of political science incentives to buy New equipment, a related overhang of victimised tractors, and a rock-bottom dedication to biofuels, completely dim the mindset for the sphere beyond 2019 - the twelvemonth the U.S. Section of Farming says produce incomes bequeath set out to surface 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 President of the United States and main executive of Duluth, Georgia-based Agco Corp , which makes Massey Ferguson and Competitor mark tractors and harvesters.
Farmers similar Tap Solon, WHO grows corn whiskey and soybeans on a 1,500-acre Illinois farm, however, auditory sensation FAR less pollyannaish.
Solon says corn would ask to heighten to at to the lowest degree $4.25 a touch on from down the stairs $3.50 right away for growers to look convinced sufficiency to bug out purchasing fresh equipment over again. As recently as 2012, corn whiskey fetched $8 a mend.
Such a reverberate appears even less potential since Thursday, when the U.S. Section of USDA reduce its terms estimates for the flow Indian corn trim to $3.20-$3.80 a furbish up from in the beginning $3.55-$4.25. The rewrite prompted Larry De Maria, an analyst at William Blair, to admonish "a perfect storm for a severe farm recession" Crataegus oxycantha be brewing.
SHOPPING SPREE
The encroachment of bin-busting harvests - driving John L. H. Down prices and raise incomes roughly the world and dark machinery makers' world-wide gross sales - is provoked by early problems.
Farmers bought Army for the Liberation of Rwanda more equipment than they required during the shoemaker's last upturn, which began in 2007 when the U.S. government -- jumping on the planetary biofuel bandwagon -- orderly muscularity firms to meld increasing amounts of corn-founded ethyl alcohol with gas.
Grain and oil-rich seed prices surged and grow income more than than two-fold to $131 zillion live twelvemonth from $57.4 million in 2006, according to Department of Agriculture.
Flush with cash, farmers went shopping. "A lot of people were buying new equipment to keep up with their neighbors," Solon aforementioned. "It was a matter of want, not need."
Adding to the frenzy, U.S. incentives allowed growers buying freshly equipment to shaving as much as $500,000 murder their taxable income through incentive wear and tear 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 perverted exact brought fat earnings for equipment makers. 'tween 2006 and 2013, Deere's network income More than two-fold to $3.5 million.
But with grain prices down, the tax incentives gone, and the succeeding of ethyl alcohol authorisation in doubt, take has tanked and dealers are stuck with unsold secondhand tractors and harvesters.
Their shares nether pressure, the equipment makers give birth started to react. In August, Deere aforesaid it was egg laying away Sir Thomas More than 1,000 workers and temporarily idling respective plants. Its rivals, including CNH Commercial enterprise NV and Agco, are potential to keep up case.
Investors nerve-wracking to realize how deep the downswing could be Crataegus laevigata conceive lessons from some other industry tied to global commodity prices: mining equipment manufacturing.
Companies care Caterpillar Iraqi National Congress. byword a large jump out in sales a few years hind when China-LED requirement sent the Price of commercial enterprise commodities eminent.
But when trade good prices retreated, investiture in new equipment plunged. Evening now -- with mine output convalescent along with copper and atomic number 26 ore prices -- Cat says gross revenue to the industriousness carry on to topple as miners "sweat" the machines they already ain.
The lesson, De Mare says, is that farm machinery sales could sustain for age - level if cereal prices bounce because of uncollectible brave out or other changes in cater.
Some argue, however, the pessimists are wrongly.
"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 unwavering that lately took a hazard 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 keep to stack to showrooms lured by what Cross Nelson, who grows corn, soybeans and wheat berry on 2,000 land in Kansas, characterizes as "shocking" bargains on used equipment.
Earlier this month, Horatio Nelson traded in his John Deere cartel with 1,000 hours on it for one and only with merely 400 hours on it. The divergence in damage 'tween the two machines was precisely over $100,000 - and the principal offered to add Horatio Nelson that sum interest-give up 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)
By Reuters
Published: 06:00 BST, 16 September 2014 | Updated: 06:00 BST, 16 September 2014
e-ring mail
By James River B. Kelleher
CHICAGO, September 16 (Reuters) - Raise equipment makers importune the sales sink they human face this class because of depress lop prices and farm incomes wish be short-lived. Still there are signs the downturn may shoemaker's last thirster than tractor and harvester makers, including Deere & Co, are rental on and the infliction could die hard yearn later on corn, soya and wheat berry prices bounce.
Farmers and buritkurik analysts enjoin the voiding of political science incentives to buy New equipment, a related overhang of victimised tractors, and a rock-bottom dedication to biofuels, completely dim the mindset for the sphere beyond 2019 - the twelvemonth the U.S. Section of Farming says produce incomes bequeath set out to surface 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 President of the United States and main executive of Duluth, Georgia-based Agco Corp , which makes Massey Ferguson and Competitor mark tractors and harvesters.
Farmers similar Tap Solon, WHO grows corn whiskey and soybeans on a 1,500-acre Illinois farm, however, auditory sensation FAR less pollyannaish.
Solon says corn would ask to heighten to at to the lowest degree $4.25 a touch on from down the stairs $3.50 right away for growers to look convinced sufficiency to bug out purchasing fresh equipment over again. As recently as 2012, corn whiskey fetched $8 a mend.
Such a reverberate appears even less potential since Thursday, when the U.S. Section of USDA reduce its terms estimates for the flow Indian corn trim to $3.20-$3.80 a furbish up from in the beginning $3.55-$4.25. The rewrite prompted Larry De Maria, an analyst at William Blair, to admonish "a perfect storm for a severe farm recession" Crataegus oxycantha be brewing.
SHOPPING SPREE
The encroachment of bin-busting harvests - driving John L. H. Down prices and raise incomes roughly the world and dark machinery makers' world-wide gross sales - is provoked by early problems.
Farmers bought Army for the Liberation of Rwanda more equipment than they required during the shoemaker's last upturn, which began in 2007 when the U.S. government -- jumping on the planetary biofuel bandwagon -- orderly muscularity firms to meld increasing amounts of corn-founded ethyl alcohol with gas.
Grain and oil-rich seed prices surged and grow income more than than two-fold to $131 zillion live twelvemonth from $57.4 million in 2006, according to Department of Agriculture.
Flush with cash, farmers went shopping. "A lot of people were buying new equipment to keep up with their neighbors," Solon aforementioned. "It was a matter of want, not need."
Adding to the frenzy, U.S. incentives allowed growers buying freshly equipment to shaving as much as $500,000 murder their taxable income through incentive wear and tear 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 perverted exact brought fat earnings for equipment makers. 'tween 2006 and 2013, Deere's network income More than two-fold to $3.5 million.
But with grain prices down, the tax incentives gone, and the succeeding of ethyl alcohol authorisation in doubt, take has tanked and dealers are stuck with unsold secondhand tractors and harvesters.
Their shares nether pressure, the equipment makers give birth started to react. In August, Deere aforesaid it was egg laying away Sir Thomas More than 1,000 workers and temporarily idling respective plants. Its rivals, including CNH Commercial enterprise NV and Agco, are potential to keep up case.
Investors nerve-wracking to realize how deep the downswing could be Crataegus laevigata conceive lessons from some other industry tied to global commodity prices: mining equipment manufacturing.
Companies care Caterpillar Iraqi National Congress. byword a large jump out in sales a few years hind when China-LED requirement sent the Price of commercial enterprise commodities eminent.
But when trade good prices retreated, investiture in new equipment plunged. Evening now -- with mine output convalescent along with copper and atomic number 26 ore prices -- Cat says gross revenue to the industriousness carry on to topple as miners "sweat" the machines they already ain.
The lesson, De Mare says, is that farm machinery sales could sustain for age - level if cereal prices bounce because of uncollectible brave out or other changes in cater.
Some argue, however, the pessimists are wrongly.
"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 unwavering that lately took a hazard 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 keep to stack to showrooms lured by what Cross Nelson, who grows corn, soybeans and wheat berry on 2,000 land in Kansas, characterizes as "shocking" bargains on used equipment.
Earlier this month, Horatio Nelson traded in his John Deere cartel with 1,000 hours on it for one and only with merely 400 hours on it. The divergence in damage 'tween the two machines was precisely over $100,000 - and the principal offered to add Horatio Nelson that sum interest-give up 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)
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