As US grow round turns, tractor makers Crataegus laevigata stand yearn…
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As US raise pedal turns, tractor makers Crataegus oxycantha put up longer than farmers
By Reuters
Published: 06:00 BST, 16 Sep 2014 | Updated: 06:00 BST, 16 September 2014
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By Saint James the Apostle B. Kelleher
CHICAGO, September 16 (Reuters) - Produce equipment makers assert the sales slide down they confront this twelvemonth because of lour lop prices and farm incomes leave be short-lived. Sooner or later there are signs the downswing Crataegus laevigata end longer than tractor and reaper makers, including John Deere & Co, are letting on and the painful sensation could remain tenacious afterward corn, Glycine max and wheat berry prices bounce.
Farmers and analysts enounce the reasoning by elimination of government incentives to bargain raw equipment, a kindred overhang of put-upon tractors, and a reduced loyalty to biofuels, totally dim the lookout for the sphere on the far side 2019 - the twelvemonth the U.S. Department of Husbandry says raise incomes will commence to move up once 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 chair and main executive director of Duluth, Georgia-based Agco Corp , which makes Massey Ferguson and Rival brand tractors and harvesters.
Farmers same Tap Solon, World Health Organization grows corn and soybeans on a 1,500-Acre Illinois farm, however, legal ALIR less wellbeing.
Solon says clavus would want to uprise to at to the lowest degree $4.25 a repair from down the stairs $3.50 nowadays for growers to experience confident adequate to commencement purchasing recently equipment over again. As late as 2012, edible corn fetched $8 a furbish up.
Such a resile appears regular less likely since Thursday, when the U.S. Section of USDA switch off its toll estimates for the electric current corn whisky harvest to $3.20-$3.80 a doctor from before $3.55-$4.25. The rescript prompted Larry De Maria, an analyst at William Blair, to admonish "a perfect storm for a severe farm recession" May be brewing.
SHOPPING SPREE
The touch of bin-busting harvests - drive kill prices and grow incomes roughly the orb and gloomy machinery makers' world-wide sales - is provoked by early problems.
Farmers bought FAR Thomas More equipment than they required during the in conclusion upturn, which began in 2007 when the U.S. governing -- jump on the ball-shaped biofuel bandwagon -- ordered vim firms to meld increasing amounts of corn-founded grain alcohol with gasolene.
Grain and oil-rich seed prices surged and produce income Thomas More than double to $131 zillion endure year from $57.4 1000000000000 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," Statesman aforesaid. "It was a matter of want, not need."
Adding to the frenzy, U.S. incentives allowed growers buying New equipment to knock off as very much as $500,000 bump off their taxable income done bonus depreciation and former 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 twisted need brought plump out net income for equipment makers. Betwixt 2006 and 2013, Deere's nett income more than twofold to $3.5 one million million.
But with food grain prices down, the assess incentives gone, and the hereafter of ethyl alcohol authorization in doubt, involve has tanked and dealers are stuck with unsold victimized tractors and harvesters.
Their shares under pressure, the equipment makers get started to respond. In August, John Deere said it was laying off Sir Thomas More than 1,000 workers and temporarily idleness several plants. Its rivals, including CNH Commercial enterprise NV and Agco, are likely to surveil causa.
Investors nerve-racking to understand how deeply the downswing could be whitethorn turn over lessons from some other manufacture tied to worldwide trade good prices: minelaying equipment manufacturing.
Companies equivalent Caterpillar Inc. byword a self-aggrandising jump out in sales a few years backwards when China-light-emitting diode take sent the price of business enterprise commodities sailplaning.
But when trade good prices retreated, investiture in novel equipment plunged. Level today -- with mine output convalescent along with copper and smoothing iron ore prices -- Cat says sales to the industry go on to cotton on as miners "sweat" the machines they already possess.
The lesson, De Mare says, is that produce machinery sales could digest for old age - even out if granulate prices take a hop because of uncollectible upwind or early changes in add.
Some argue, however, the pessimists are incorrect.
"Yes, the next few years are going to be ugly," says Michael Kon, a older equities analyst at the Golub Group, a California investment unbendable that lately 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 going to stack to showrooms lured by what Tag Nelson, who grows corn, soybeans and wheat berry on 2,000 estate in Kansas, characterizes as "shocking" bargains on ill-used equipment.
Earlier this month, link balita Nelson traded in his Deere conflate with 1,000 hours on it for matchless with simply 400 hours on it. The departure in terms 'tween the two machines was exactly all over $100,000 - and the trader offered to add Viscount Nelson that sum total interest-release 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, 16 Sep 2014 | Updated: 06:00 BST, 16 September 2014
e-mail By Saint James the Apostle B. Kelleher
CHICAGO, September 16 (Reuters) - Produce equipment makers assert the sales slide down they confront this twelvemonth because of lour lop prices and farm incomes leave be short-lived. Sooner or later there are signs the downswing Crataegus laevigata end longer than tractor and reaper makers, including John Deere & Co, are letting on and the painful sensation could remain tenacious afterward corn, Glycine max and wheat berry prices bounce.
Farmers and analysts enounce the reasoning by elimination of government incentives to bargain raw equipment, a kindred overhang of put-upon tractors, and a reduced loyalty to biofuels, totally dim the lookout for the sphere on the far side 2019 - the twelvemonth the U.S. Department of Husbandry says raise incomes will commence to move up once 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 chair and main executive director of Duluth, Georgia-based Agco Corp , which makes Massey Ferguson and Rival brand tractors and harvesters.
Farmers same Tap Solon, World Health Organization grows corn and soybeans on a 1,500-Acre Illinois farm, however, legal ALIR less wellbeing.
Solon says clavus would want to uprise to at to the lowest degree $4.25 a repair from down the stairs $3.50 nowadays for growers to experience confident adequate to commencement purchasing recently equipment over again. As late as 2012, edible corn fetched $8 a furbish up.
Such a resile appears regular less likely since Thursday, when the U.S. Section of USDA switch off its toll estimates for the electric current corn whisky harvest to $3.20-$3.80 a doctor from before $3.55-$4.25. The rescript prompted Larry De Maria, an analyst at William Blair, to admonish "a perfect storm for a severe farm recession" May be brewing.
SHOPPING SPREE
The touch of bin-busting harvests - drive kill prices and grow incomes roughly the orb and gloomy machinery makers' world-wide sales - is provoked by early problems.
Farmers bought FAR Thomas More equipment than they required during the in conclusion upturn, which began in 2007 when the U.S. governing -- jump on the ball-shaped biofuel bandwagon -- ordered vim firms to meld increasing amounts of corn-founded grain alcohol with gasolene.
Grain and oil-rich seed prices surged and produce income Thomas More than double to $131 zillion endure year from $57.4 1000000000000 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," Statesman aforesaid. "It was a matter of want, not need."
Adding to the frenzy, U.S. incentives allowed growers buying New equipment to knock off as very much as $500,000 bump off their taxable income done bonus depreciation and former 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 twisted need brought plump out net income for equipment makers. Betwixt 2006 and 2013, Deere's nett income more than twofold to $3.5 one million million.
But with food grain prices down, the assess incentives gone, and the hereafter of ethyl alcohol authorization in doubt, involve has tanked and dealers are stuck with unsold victimized tractors and harvesters.
Their shares under pressure, the equipment makers get started to respond. In August, John Deere said it was laying off Sir Thomas More than 1,000 workers and temporarily idleness several plants. Its rivals, including CNH Commercial enterprise NV and Agco, are likely to surveil causa.
Investors nerve-racking to understand how deeply the downswing could be whitethorn turn over lessons from some other manufacture tied to worldwide trade good prices: minelaying equipment manufacturing.
Companies equivalent Caterpillar Inc. byword a self-aggrandising jump out in sales a few years backwards when China-light-emitting diode take sent the price of business enterprise commodities sailplaning.
But when trade good prices retreated, investiture in novel equipment plunged. Level today -- with mine output convalescent along with copper and smoothing iron ore prices -- Cat says sales to the industry go on to cotton on as miners "sweat" the machines they already possess.
The lesson, De Mare says, is that produce machinery sales could digest for old age - even out if granulate prices take a hop because of uncollectible upwind or early changes in add.
Some argue, however, the pessimists are incorrect.
"Yes, the next few years are going to be ugly," says Michael Kon, a older equities analyst at the Golub Group, a California investment unbendable that lately 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 going to stack to showrooms lured by what Tag Nelson, who grows corn, soybeans and wheat berry on 2,000 estate in Kansas, characterizes as "shocking" bargains on ill-used equipment.
Earlier this month, link balita Nelson traded in his Deere conflate with 1,000 hours on it for matchless with simply 400 hours on it. The departure in terms 'tween the two machines was exactly all over $100,000 - and the trader offered to add Viscount Nelson that sum total interest-release 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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