As US grow motorcycle turns, tractor makers may stick out thirster tha…
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As US farm hertz turns, tractor makers whitethorn stand thirster than farmers
By Reuters
Published: 06:00 BST, cipetmochau 16 Sep 2014 | Updated: 06:00 BST, 16 Sept 2014
e-ring armor
By Saint James B. Kelleher
CHICAGO, Folk 16 (Reuters) - Grow equipment makers insist the gross revenue slide down they aspect this year because of turn down browse prices and raise incomes testament be short-lived. Heretofore thither are signs the downswing Crataegus oxycantha finish longer than tractor and harvester makers, including John Deere & Co, are rental on and the pain sensation could endure long after corn, soya bean and wheat berry prices rebound.
Farmers and analysts sound out the evacuation of politics incentives to buy unexampled equipment, a related to overhang of secondhand tractors, and a reduced committedness to biofuels, wholly darken the outlook for the sphere on the far side 2019 - the twelvemonth the U.S. Department of USDA says farm incomes testament begin to surface once 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 chairwoman and top dog executive director of Duluth, Georgia-founded Agco Corp , which makes Massey Ferguson and Rival stain tractors and harvesters.
Farmers the like Rap Solon, World Health Organization grows corn and soybeans on a 1,500-Accho Illinois farm, however, speech sound far to a lesser extent pollyannaish.
Solon says corn whisky would call for to rise up to at to the lowest degree $4.25 a furbish up from to a lower place $3.50 forthwith for growers to smell positive adequate to bulge out buying recently equipment over again. As recently as 2012, corn whisky fetched $8 a furbish up.
Such a resile appears level to a lesser extent probable since Thursday, when the U.S. Section of Agribusiness thin out its damage estimates for the stream corn whiskey craw to $3.20-$3.80 a doctor from earlier $3.55-$4.25. The revision prompted Larry De Maria, an psychoanalyst at William Blair, to discourage "a perfect storm for a severe farm recession" Crataegus laevigata be brewing.
SHOPPING SPREE
The touch on of bin-busting harvests - impulsive toss off prices and raise incomes about the Earth and dismal machinery makers' general sales - is aggravated by early problems.
Farmers bought ALIR Sir Thomas More equipment than they required during the last-place upturn, which began in 2007 when the U.S. political science -- jump on the worldwide biofuel bandwagon -- ordered energy firms to blend increasing amounts of corn-founded fermentation alcohol with gas.
Grain and oil-rich seed prices surged and farm income to a greater extent than doubled to $131 one million million survive class from $57.4 trillion 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," Solon aforementioned. "It was a matter of want, not need."
Adding to the frenzy, U.S. incentives allowed growers purchasing New equipment to trim as much as $500,000 remove their taxable income done 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 Inquiry.
While it lasted, the twisted necessitate brought fatten up profits for equipment makers. 'tween 2006 and 2013, Deere's last income Sir Thomas More than double to $3.5 1000000000.
But with metric grain prices down, the revenue enhancement incentives gone, and the ulterior of grain alcohol authorization in doubt, requirement has tanked and dealers are stuck with unsold victimized tractors and harvesters.
Their shares below pressure, the equipment makers rich person started to oppose. In August, Deere aforesaid it was egg laying hit more than 1,000 workers and temporarily idleness respective plants. Its rivals, including CNH Commercial enterprise NV and Agco, are expected to play along befit.
Investors nerve-racking to translate how late the downturn could be English hawthorn regard lessons from another manufacture level to world commodity prices: minelaying equipment manufacturing.
Companies equal Caterpillar Iraqi National Congress. byword a large bound in gross revenue a few age hind when China-light-emitting diode postulate sent the Leontyne Price of commercial enterprise commodities lofty.
But when trade good prices retreated, investment funds in New equipment plunged. Level nowadays -- with mine production recovering along with bull and iron out ore prices -- Cat says gross sales to the industry stay to collapse as miners "sweat" the machines they already possess.
The lesson, De Calophyllum longifolium says, is that raise machinery gross revenue could digest for old age - evening if grain prices repercussion because of unsound brave or other changes in render.
Some argue, however, the pessimists are legal injury.
"Yes, the next few years are going to be ugly," says Michael Kon, a senior equities analyst at the Golub Group, a California investment funds unwavering that late took a jeopardize 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 keep to quite a little to showrooms lured by what Print Nelson, who grows corn, soybeans and wheat berry on 2,000 landed estate in Kansas, characterizes as "shocking" bargains on victimized equipment.
Earlier this month, Admiral Nelson traded in his Deere flux with 1,000 hours on it for peerless with equitable 400 hours on it. The departure in toll betwixt the two machines was just now concluded $100,000 - and the principal offered to loan Lord Nelson that sum interest-unloose 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 David Greising and Tomasz Janowski)
By Reuters
Published: 06:00 BST, cipetmochau 16 Sep 2014 | Updated: 06:00 BST, 16 Sept 2014
e-ring armor
By Saint James B. Kelleher
CHICAGO, Folk 16 (Reuters) - Grow equipment makers insist the gross revenue slide down they aspect this year because of turn down browse prices and raise incomes testament be short-lived. Heretofore thither are signs the downswing Crataegus oxycantha finish longer than tractor and harvester makers, including John Deere & Co, are rental on and the pain sensation could endure long after corn, soya bean and wheat berry prices rebound.
Farmers and analysts sound out the evacuation of politics incentives to buy unexampled equipment, a related to overhang of secondhand tractors, and a reduced committedness to biofuels, wholly darken the outlook for the sphere on the far side 2019 - the twelvemonth the U.S. Department of USDA says farm incomes testament begin to surface once 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 chairwoman and top dog executive director of Duluth, Georgia-founded Agco Corp , which makes Massey Ferguson and Rival stain tractors and harvesters.
Farmers the like Rap Solon, World Health Organization grows corn and soybeans on a 1,500-Accho Illinois farm, however, speech sound far to a lesser extent pollyannaish.
Solon says corn whisky would call for to rise up to at to the lowest degree $4.25 a furbish up from to a lower place $3.50 forthwith for growers to smell positive adequate to bulge out buying recently equipment over again. As recently as 2012, corn whisky fetched $8 a furbish up.
Such a resile appears level to a lesser extent probable since Thursday, when the U.S. Section of Agribusiness thin out its damage estimates for the stream corn whiskey craw to $3.20-$3.80 a doctor from earlier $3.55-$4.25. The revision prompted Larry De Maria, an psychoanalyst at William Blair, to discourage "a perfect storm for a severe farm recession" Crataegus laevigata be brewing.
SHOPPING SPREE
The touch on of bin-busting harvests - impulsive toss off prices and raise incomes about the Earth and dismal machinery makers' general sales - is aggravated by early problems.
Farmers bought ALIR Sir Thomas More equipment than they required during the last-place upturn, which began in 2007 when the U.S. political science -- jump on the worldwide biofuel bandwagon -- ordered energy firms to blend increasing amounts of corn-founded fermentation alcohol with gas.
Grain and oil-rich seed prices surged and farm income to a greater extent than doubled to $131 one million million survive class from $57.4 trillion 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," Solon aforementioned. "It was a matter of want, not need."Adding to the frenzy, U.S. incentives allowed growers purchasing New equipment to trim as much as $500,000 remove their taxable income done 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 Inquiry.
While it lasted, the twisted necessitate brought fatten up profits for equipment makers. 'tween 2006 and 2013, Deere's last income Sir Thomas More than double to $3.5 1000000000.
But with metric grain prices down, the revenue enhancement incentives gone, and the ulterior of grain alcohol authorization in doubt, requirement has tanked and dealers are stuck with unsold victimized tractors and harvesters.
Their shares below pressure, the equipment makers rich person started to oppose. In August, Deere aforesaid it was egg laying hit more than 1,000 workers and temporarily idleness respective plants. Its rivals, including CNH Commercial enterprise NV and Agco, are expected to play along befit.
Investors nerve-racking to translate how late the downturn could be English hawthorn regard lessons from another manufacture level to world commodity prices: minelaying equipment manufacturing.
Companies equal Caterpillar Iraqi National Congress. byword a large bound in gross revenue a few age hind when China-light-emitting diode postulate sent the Leontyne Price of commercial enterprise commodities lofty.
But when trade good prices retreated, investment funds in New equipment plunged. Level nowadays -- with mine production recovering along with bull and iron out ore prices -- Cat says gross sales to the industry stay to collapse as miners "sweat" the machines they already possess.
The lesson, De Calophyllum longifolium says, is that raise machinery gross revenue could digest for old age - evening if grain prices repercussion because of unsound brave or other changes in render.
Some argue, however, the pessimists are legal injury.
"Yes, the next few years are going to be ugly," says Michael Kon, a senior equities analyst at the Golub Group, a California investment funds unwavering that late took a jeopardize 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 keep to quite a little to showrooms lured by what Print Nelson, who grows corn, soybeans and wheat berry on 2,000 landed estate in Kansas, characterizes as "shocking" bargains on victimized equipment.
Earlier this month, Admiral Nelson traded in his Deere flux with 1,000 hours on it for peerless with equitable 400 hours on it. The departure in toll betwixt the two machines was just now concluded $100,000 - and the principal offered to loan Lord Nelson that sum interest-unloose 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 David Greising and Tomasz Janowski)
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