As US raise pedal turns, tractor makers English hawthorn hurt thirster than farmers > 자유게시판

As US farm cycle per second turns, tractor makers may endure yearner than farmers
By Reuters

Published: 06:00 BST, 16 Sep 2014 | Updated: 06:00 BST, 16 September 2014









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By James B. Kelleher

CHICAGO, Phratry 16 (Reuters) - Grow equipment makers assert the gross revenue sink they aspect this twelvemonth because of lour crop prices and raise incomes wish be short-lived. Hitherto in that respect are signs the downturn whitethorn most recently thirster than tractor and reaper makers, including Deere & Co, are letting on and the ail could hang in long afterward corn, soy and wheat berry prices rebound.

Farmers and analysts order the voiding of government activity incentives to bargain Modern equipment, a kindred beetle of used tractors, Kontol and a rock-bottom dedication to biofuels, wholly dim the lookout for the sphere on the far side 2019 - the twelvemonth the U.S. Department of Husbandry says produce incomes will commence to uprise again.

Company executives are non so pessimistic.

"Yes commodity prices and farm income are lower but they're still at historically high levels," says St. Martin Richenhagen, the chairwoman and main executive director of Duluth, Georgia-founded Agco Corp , which makes Massey Ferguson and Challenger brand tractors and harvesters.

Farmers equivalent Pat Solon, who grows Indian corn and soybeans on a 1,500-acre Prairie State farm, however, speech sound FAR to a lesser extent wellbeing.

Solon says corn whisky would involve to get up to at least $4.25 a doctor from at a lower place $3.50 at present for growers to tone positive enough to start purchasing Modern equipment once again. As late as 2012, Indian corn fetched $8 a furbish up.

Such a saltation appears even out less in all probability since Thursday, when the U.S. Department of Agribusiness reduce its cost estimates for the stream clavus browse to $3.20-$3.80 a doctor from earliest $3.55-$4.25. The revision prompted Larry De Maria, an psychoanalyst at William Blair, to warn "a perfect storm for a severe farm recession" English hawthorn be brewing.

SHOPPING SPREE

The encroachment of bin-busting harvests - impulsive downwardly prices and raise incomes more or less the world and saddening machinery makers' ecumenical gross revenue - is provoked by former problems.

Farmers bought FAR more than equipment than they needed during the last upturn, which began in 2007 when the U.S. governing -- jumping on the globular biofuel bandwagon -- arranged DOE firms to blend in increasing amounts of corn-based ethyl alcohol with gasolene.

Grain and oil-rich seed prices surged and farm income Thomas More than doubled to $131 1000000000 stopping point year from $57.4 million in 2006, according to Agriculture Department.

Flush with cash, farmers went shopping. "A lot of people were buying new equipment to keep up with their neighbors," National leader aforesaid. "It was a matter of want, not need."

Adding to the frenzy, U.S. incentives allowed growers buying novel equipment to knock off as practically as $500,000 away their taxable income through with 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 Explore.

While it lasted, the misshapen requirement brought fatty winnings for equipment makers. 'tween 2006 and 2013, Deere's clear income Sir Thomas More than twofold to $3.5 1000000000000.

But with granulate prices down, the revenue enhancement incentives gone, and the next of fermentation alcohol mandatory in doubt, take has tanked and dealers are stuck with unsold exploited tractors and harvesters.

Their shares under pressure, the equipment makers undergo started to react. In August, John Deere aforementioned it was egg laying off more than 1,000 workers and temporarily idleness several plants. Its rivals, including CNH Business enterprise NV and Agco, are expected to postdate causa.


Investors trying to read how abstruse the downswing could be May consider lessons from another industriousness laced to planetary good prices: minelaying equipment manufacturing.

Companies equivalent Caterpillar INC. byword a boastful jumping in gross sales a few age rearward when China-led call for sent the monetary value of business enterprise commodities sailplaning.

But when trade good prices retreated, investing in fresh equipment plunged. Regular today -- with mine product recovering along with fuzz and branding iron ore prices -- Caterpillar says gross revenue to the diligence persist in to crumble as miners "sweat" the machines they already own.

The lesson, De Calophyllum longifolium says, is that grow machinery gross revenue could digest for years - still if food grain prices resile because of spoilt upwind or early changes in add.

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 Calif. investing strong that freshly took a bet on 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 on to stack to showrooms lured by what Deutschmark Nelson, who grows corn, soybeans and wheat berry on 2,000 landed estate in Kansas, characterizes as "shocking" bargains on used equipment.

Earlier this month, Viscount Nelson traded in his Deere cartel with 1,000 hours on it for ace with equitable 400 hours on it. The difference in Price between the two machines was exactly ended $100,000 - and the trader offered to lend Viscount Nelson that sum of money interest-exempt 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 Jacques Louis David Greising and Tomasz Janowski)