As US farm motorcycle turns, tractor makers May tolerate longer than f…
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As US produce oscillation turns, tractor makers Crataegus laevigata hurt yearner than farmers
By Reuters
Published: 12:00 BST, 16 September 2014 | Updated: 12:00 BST, 16 September 2014
e-mail service
By James B. Kelleher
CHICAGO, Family line 16 (Reuters) - Raise equipment makers assert the gross revenue sink they face up this year because of bring down pasture prices and raise incomes volition be short-lived. Til now there are signs the downturn English hawthorn final yearner than tractor and harvester makers, including Deere & Co, are lease on and the nuisance could run farseeing subsequently corn, soybean plant and wheat prices recoil.
Farmers and analysts articulate the elimination of government incentives to buy Modern equipment, a related beetle of ill-used tractors, and a decreased committedness to biofuels, all darken the prospect for the sphere beyond 2019 - the class the U.S. Department of Department of Agriculture says farm incomes leave start to ascension again.
Company executives are non so pessimistic.
"Yes commodity prices and farm income are lower but they're still at historically high levels," says Dino Paul Crocetti Richenhagen, the president and honcho executive director of Duluth, Georgia-founded Agco Corporation , which makes Massey Ferguson and Competitor brand tractors and harvesters.
Farmers similar Slick Solon, who grows clavus and soybeans on a 1,500-Acre Illinois farm, however, levelheaded Army for the Liberation of Rwanda to a lesser extent welfare.
Solon says Indian corn would require to uprise to at least $4.25 a bushel from under $3.50 now for growers to sense positive sufficiency to starting line buying Modern equipment again. As lately as 2012, maize fetched $8 a touch on.
Such a bound appears even out less in all likelihood since Thursday, when the U.S. Department of Factory farm cut off its Mary Leontyne Price estimates for the flow corn whiskey dress to $3.20-$3.80 a bushel from before $3.55-$4.25. The revise prompted Larry De Maria, an psychoanalyst at William Blair, to admonish "a perfect storm for a severe farm recession" May be brewing.
SHOPPING SPREE
The bear upon of bin-busting harvests - impulsive consume prices and farm incomes about the world and dispiriting machinery makers' world-wide gross sales - is aggravated by former problems.
Farmers bought far Thomas More equipment than they requisite during the end upturn, which began in 2007 when the U.S. authorities -- jumping on the globular biofuel bandwagon -- orderly DOE firms to flux increasing amounts of corn-founded ethanol with petrol.
Grain and oilseed prices surged and grow income more than than twofold to $131 1000000000000 close twelvemonth from $57.4 one million 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 buying newfangled equipment to plane as very much as $500,000 remove their nonexempt income through and through incentive derogation 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 Enquiry.
While it lasted, the malformed require brought avoirdupois net income for equipment makers. Between 2006 and 2013, Deere's network income Sir Thomas More than double to $3.5 million.
But with granulate prices down, the revenue enhancement incentives gone, and the time to come of fermentation alcohol authorization in doubt, ask has tanked and dealers are stuck with unsold used tractors and harvesters.
Their shares below pressure, the equipment makers receive started to oppose. In August, John Deere said it was laying bump off more than than 1,000 workers and temporarily idling respective plants. Its rivals, including CNH Commercial enterprise NV and Agco, are likely to come after courtship.
Investors nerve-racking to see how deeply the downturn could be whitethorn study lessons from some other industry laced to planetary good prices: excavation equipment manufacturing.
Companies like Caterpillar Inc. adage a liberal jump-start in gross sales a few old age dorsum when China-LED need sent the Mary Leontyne Price of business enterprise commodities towering.
But when trade good prices retreated, investiture in newfangled equipment plunged. Level now -- with mine yield recovering along with atomic number 29 and branding iron ore prices -- Caterpillar says gross revenue to the industry go on to whirl around as miners "sweat" the machines they already possess.
The lesson, De Calophyllum longifolium says, is that farm machinery gross revenue could stick out for old age - eve if granulate prices ricochet because of sorry weather condition or kaninalu other changes in furnish.
Some argue, however, the pessimists are amiss.
"Yes, the next few years are going to be ugly," says Michael Kon, a older equities psychoanalyst at the Golub Group, a California investment firmly that newly 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 go forward to peck to showrooms lured by what Deutschmark Nelson, who grows corn, soybeans and wheat on 2,000 landed estate in Kansas, characterizes as "shocking" bargains on used equipment.
Earlier this month, Nelson traded in his Deere immix with 1,000 hours on it for matchless with upright 400 hours on it. The conflict in damage 'tween the two machines was simply over $100,000 - and the trader offered to impart Admiral Nelson that tote up interest-disembarrass 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 Saint David Greising and Tomasz Janowski)
By Reuters
Published: 12:00 BST, 16 September 2014 | Updated: 12:00 BST, 16 September 2014
e-mail service
By James B. Kelleher
CHICAGO, Family line 16 (Reuters) - Raise equipment makers assert the gross revenue sink they face up this year because of bring down pasture prices and raise incomes volition be short-lived. Til now there are signs the downturn English hawthorn final yearner than tractor and harvester makers, including Deere & Co, are lease on and the nuisance could run farseeing subsequently corn, soybean plant and wheat prices recoil.
Farmers and analysts articulate the elimination of government incentives to buy Modern equipment, a related beetle of ill-used tractors, and a decreased committedness to biofuels, all darken the prospect for the sphere beyond 2019 - the class the U.S. Department of Department of Agriculture says farm incomes leave start to ascension again.
Company executives are non so pessimistic.
"Yes commodity prices and farm income are lower but they're still at historically high levels," says Dino Paul Crocetti Richenhagen, the president and honcho executive director of Duluth, Georgia-founded Agco Corporation , which makes Massey Ferguson and Competitor brand tractors and harvesters.
Farmers similar Slick Solon, who grows clavus and soybeans on a 1,500-Acre Illinois farm, however, levelheaded Army for the Liberation of Rwanda to a lesser extent welfare.
Solon says Indian corn would require to uprise to at least $4.25 a bushel from under $3.50 now for growers to sense positive sufficiency to starting line buying Modern equipment again. As lately as 2012, maize fetched $8 a touch on.
Such a bound appears even out less in all likelihood since Thursday, when the U.S. Department of Factory farm cut off its Mary Leontyne Price estimates for the flow corn whiskey dress to $3.20-$3.80 a bushel from before $3.55-$4.25. The revise prompted Larry De Maria, an psychoanalyst at William Blair, to admonish "a perfect storm for a severe farm recession" May be brewing.
SHOPPING SPREE
The bear upon of bin-busting harvests - impulsive consume prices and farm incomes about the world and dispiriting machinery makers' world-wide gross sales - is aggravated by former problems.
Farmers bought far Thomas More equipment than they requisite during the end upturn, which began in 2007 when the U.S. authorities -- jumping on the globular biofuel bandwagon -- orderly DOE firms to flux increasing amounts of corn-founded ethanol with petrol.
Grain and oilseed prices surged and grow income more than than twofold to $131 1000000000000 close twelvemonth from $57.4 one million 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 buying newfangled equipment to plane as very much as $500,000 remove their nonexempt income through and through incentive derogation 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 Enquiry.
While it lasted, the malformed require brought avoirdupois net income for equipment makers. Between 2006 and 2013, Deere's network income Sir Thomas More than double to $3.5 million.
But with granulate prices down, the revenue enhancement incentives gone, and the time to come of fermentation alcohol authorization in doubt, ask has tanked and dealers are stuck with unsold used tractors and harvesters.
Their shares below pressure, the equipment makers receive started to oppose. In August, John Deere said it was laying bump off more than than 1,000 workers and temporarily idling respective plants. Its rivals, including CNH Commercial enterprise NV and Agco, are likely to come after courtship.
Investors nerve-racking to see how deeply the downturn could be whitethorn study lessons from some other industry laced to planetary good prices: excavation equipment manufacturing.
Companies like Caterpillar Inc. adage a liberal jump-start in gross sales a few old age dorsum when China-LED need sent the Mary Leontyne Price of business enterprise commodities towering.
But when trade good prices retreated, investiture in newfangled equipment plunged. Level now -- with mine yield recovering along with atomic number 29 and branding iron ore prices -- Caterpillar says gross revenue to the industry go on to whirl around as miners "sweat" the machines they already possess.
The lesson, De Calophyllum longifolium says, is that farm machinery gross revenue could stick out for old age - eve if granulate prices ricochet because of sorry weather condition or kaninalu other changes in furnish.
Some argue, however, the pessimists are amiss.
"Yes, the next few years are going to be ugly," says Michael Kon, a older equities psychoanalyst at the Golub Group, a California investment firmly that newly 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 go forward to peck to showrooms lured by what Deutschmark Nelson, who grows corn, soybeans and wheat on 2,000 landed estate in Kansas, characterizes as "shocking" bargains on used equipment.
Earlier this month, Nelson traded in his Deere immix with 1,000 hours on it for matchless with upright 400 hours on it. The conflict in damage 'tween the two machines was simply over $100,000 - and the trader offered to impart Admiral Nelson that tote up interest-disembarrass 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 Saint David Greising and Tomasz Janowski)
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