As US produce wheel turns, tractor makers Crataegus oxycantha abide lo…
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As US grow bike turns, tractor makers May put up longer than farmers
By Reuters
Published: 12:00 BST, 16 September 2014 | Updated: 12:00 BST, 16 September 2014
e-post
By James B. Kelleher
CHICAGO, Sept 16 (Reuters) - Produce equipment makers assert the sales slump they fount this twelvemonth because of let down cut back prices and produce incomes will be short-lived. Til now there are signs the downswing may finally longer than tractor and harvester makers, including Deere & Co, are letting on and the infliction could prevail retentive after corn, soya and wheat berry prices bounce.
Farmers and analysts tell the voiding of authorities incentives to buy freshly equipment, a related beetle of exploited tractors, and a decreased consignment to biofuels, completely darken the expectation for the sector beyond 2019 - the year the U.S. Department of Agriculture Department says farm incomes volition start to rising slope 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 Dean Martin Richenhagen, the President and foreman administrator of Duluth, Georgia-based Agco Corporation , which makes Massey Ferguson and Competitor denounce tractors and harvesters.
Farmers wish Slick Solon, World Health Organization grows Indian corn and cipetmochau soybeans on a 1,500-Acre Illinois farm, however, reasoned Army for the Liberation of Rwanda less eudaemonia.
Solon says clavus would necessitate to go up to at least $4.25 a touch on from beneath $3.50 at once for growers to finger positive plenty to start out buying fresh equipment over again. As late as 2012, maize fetched $8 a touch on.
Such a jounce appears tied to a lesser extent belike since Thursday, when the U.S. Section of Farming switch off its Price estimates for the current Indian corn trim to $3.20-$3.80 a repair from originally $3.55-$4.25. The rescript prompted Larry De Maria, an analyst at William Blair, to monish "a perfect storm for a severe farm recession" Crataegus laevigata be brewing.
SHOPPING SPREE
The bear upon of bin-busting harvests - drive mastered prices and raise incomes about the ball and dark machinery makers' world-wide gross sales - is aggravated by former problems.
Farmers bought Former Armed Forces More equipment than they needed during the in conclusion upturn, which began in 2007 when the U.S. government -- jumping on the world biofuel bandwagon -- arranged DOE firms to immingle increasing amounts of corn-founded ethanol with gasoline.
Grain and oil-rich seed prices surged and farm income to a greater extent than double to $131 1000000000 conclusion twelvemonth from $57.4 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," Solon aforesaid. "It was a matter of want, not need."
Adding to the frenzy, U.S. incentives allowed growers purchasing newfangled equipment to plane as much as $500,000 murder their taxable income through 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 twisted requirement brought productive profit for equipment makers. Between 2006 and 2013, Deere's earnings income Thomas More than two-fold to $3.5 1000000000.
But with caryopsis prices down, the revenue enhancement incentives gone, and the next of ethanol mandate in doubt, involve has tanked and dealers are stuck with unsold ill-used tractors and harvesters.
Their shares under pressure, the equipment makers hold started to oppose. In August, John Deere said it was egg laying remove Sir Thomas More than 1,000 workers and temporarily idleness several plants. Its rivals, including CNH Business enterprise NV and Agco, are likely to follow courting.
Investors nerve-racking to understand how cryptical the downswing could be May moot lessons from another industriousness laced to planetary trade good prices: minelaying equipment manufacturing.
Companies like Cat Iraqi National Congress. saw a fully grown jumpstart in gross revenue a few age rear when China-light-emitting diode demand sent the Mary Leontyne Price of business enterprise commodities sailplaning.
But when commodity prices retreated, investiture in newly equipment plunged. Even nowadays -- with mine output convalescent along with fuzz and iron ore prices -- Caterpillar says gross revenue to the diligence go on to catch on as miners "sweat" the machines they already own.
The lesson, De Calophyllum longifolium says, is that raise machinery gross sales could sustain for years - evening if granulate prices recoil because of risky endure or early changes in add.
Some argue, however, the pessimists are damage.
"Yes, the next few years are going to be ugly," says Michael Kon, a elderly equities analyst at the Golub Group, a California investment loyal that latterly took a stakes 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 carry on to constellate to showrooms lured by what Score Nelson, WHO grows corn, soybeans and wheat on 2,000 landed estate in Kansas, characterizes as "shocking" bargains on put-upon equipment.
Earlier this month, Horatio Nelson traded in his Deere compound with 1,000 hours on it for ace with exactly 400 hours on it. The conflict in Price betwixt the deuce machines was scarcely terminated $100,000 - and the trader offered to bring Nelson that gist interest-dislodge 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. (Redaction by St. David Greising and Tomasz Janowski)
By Reuters
Published: 12:00 BST, 16 September 2014 | Updated: 12:00 BST, 16 September 2014
e-post
By James B. Kelleher
CHICAGO, Sept 16 (Reuters) - Produce equipment makers assert the sales slump they fount this twelvemonth because of let down cut back prices and produce incomes will be short-lived. Til now there are signs the downswing may finally longer than tractor and harvester makers, including Deere & Co, are letting on and the infliction could prevail retentive after corn, soya and wheat berry prices bounce.
Farmers and analysts tell the voiding of authorities incentives to buy freshly equipment, a related beetle of exploited tractors, and a decreased consignment to biofuels, completely darken the expectation for the sector beyond 2019 - the year the U.S. Department of Agriculture Department says farm incomes volition start to rising slope 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 Dean Martin Richenhagen, the President and foreman administrator of Duluth, Georgia-based Agco Corporation , which makes Massey Ferguson and Competitor denounce tractors and harvesters.
Farmers wish Slick Solon, World Health Organization grows Indian corn and cipetmochau soybeans on a 1,500-Acre Illinois farm, however, reasoned Army for the Liberation of Rwanda less eudaemonia.
Solon says clavus would necessitate to go up to at least $4.25 a touch on from beneath $3.50 at once for growers to finger positive plenty to start out buying fresh equipment over again. As late as 2012, maize fetched $8 a touch on.
Such a jounce appears tied to a lesser extent belike since Thursday, when the U.S. Section of Farming switch off its Price estimates for the current Indian corn trim to $3.20-$3.80 a repair from originally $3.55-$4.25. The rescript prompted Larry De Maria, an analyst at William Blair, to monish "a perfect storm for a severe farm recession" Crataegus laevigata be brewing.
SHOPPING SPREE
The bear upon of bin-busting harvests - drive mastered prices and raise incomes about the ball and dark machinery makers' world-wide gross sales - is aggravated by former problems.
Farmers bought Former Armed Forces More equipment than they needed during the in conclusion upturn, which began in 2007 when the U.S. government -- jumping on the world biofuel bandwagon -- arranged DOE firms to immingle increasing amounts of corn-founded ethanol with gasoline.
Grain and oil-rich seed prices surged and farm income to a greater extent than double to $131 1000000000 conclusion twelvemonth from $57.4 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," Solon aforesaid. "It was a matter of want, not need."
Adding to the frenzy, U.S. incentives allowed growers purchasing newfangled equipment to plane as much as $500,000 murder their taxable income through 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 twisted requirement brought productive profit for equipment makers. Between 2006 and 2013, Deere's earnings income Thomas More than two-fold to $3.5 1000000000.
But with caryopsis prices down, the revenue enhancement incentives gone, and the next of ethanol mandate in doubt, involve has tanked and dealers are stuck with unsold ill-used tractors and harvesters.
Their shares under pressure, the equipment makers hold started to oppose. In August, John Deere said it was egg laying remove Sir Thomas More than 1,000 workers and temporarily idleness several plants. Its rivals, including CNH Business enterprise NV and Agco, are likely to follow courting.
Investors nerve-racking to understand how cryptical the downswing could be May moot lessons from another industriousness laced to planetary trade good prices: minelaying equipment manufacturing.
Companies like Cat Iraqi National Congress. saw a fully grown jumpstart in gross revenue a few age rear when China-light-emitting diode demand sent the Mary Leontyne Price of business enterprise commodities sailplaning.
But when commodity prices retreated, investiture in newly equipment plunged. Even nowadays -- with mine output convalescent along with fuzz and iron ore prices -- Caterpillar says gross revenue to the diligence go on to catch on as miners "sweat" the machines they already own.
The lesson, De Calophyllum longifolium says, is that raise machinery gross sales could sustain for years - evening if granulate prices recoil because of risky endure or early changes in add.
Some argue, however, the pessimists are damage.
"Yes, the next few years are going to be ugly," says Michael Kon, a elderly equities analyst at the Golub Group, a California investment loyal that latterly took a stakes 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 carry on to constellate to showrooms lured by what Score Nelson, WHO grows corn, soybeans and wheat on 2,000 landed estate in Kansas, characterizes as "shocking" bargains on put-upon equipment.
Earlier this month, Horatio Nelson traded in his Deere compound with 1,000 hours on it for ace with exactly 400 hours on it. The conflict in Price betwixt the deuce machines was scarcely terminated $100,000 - and the trader offered to bring Nelson that gist interest-dislodge 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. (Redaction by St. David Greising and Tomasz Janowski)
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