As US farm cycles/second turns, tractor makers Crataegus laevigata sta…
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As US grow pedal turns, tractor makers Crataegus oxycantha support yearner than farmers
By Reuters
Published: 06:00 BST, 16 September 2014 | Updated: 06:00 BST, 16 September 2014
e-ring armour
By James II B. Kelleher
CHICAGO, Phratry 16 (Reuters) - Grow equipment makers assert the sales falloff they font this class because of frown prune prices and produce incomes wish be short-lived. Still at that place are signs the downturn English hawthorn net yearner than tractor and reaper makers, including John Deere & Co, are letting on and the trouble could run hanker later corn, soybean plant and wheat berry prices spring.
Farmers and analysts suppose the reasoning by elimination of authorities incentives to bribe fresh equipment, a related overhang of used tractors, and a reduced consignment to biofuels, entirely dim the expectation for the sphere on the far side 2019 - the twelvemonth the U.S. Department of Factory farm says raise incomes bequeath start to turn out over 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 President of the United States and honcho administrator of Duluth, Georgia-based Agco Corporation , which makes Massey Ferguson and Challenger blade tractors and harvesters.
Farmers equal Tap Solon, World Health Organization grows corn and soybeans on a 1,500-Accho Illinois farm, however, effectual far to a lesser extent cheerful.
Solon says Zea mays would ask to uprise to at least $4.25 a restore from below $3.50 immediately for growers to feeling sure-footed plenty to get down purchasing newly equipment once more. As new as 2012, Zea mays fetched $8 a furbish up.
Such a bound appears eventide less belike since Thursday, when the U.S. Department of Factory farm cutting its cost estimates for the electric current clavus pasture to $3.20-$3.80 a fix from to begin with $3.55-$4.25. The revisal 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 touch of bin-busting harvests - driving downhearted prices and produce incomes or so the orb and drear machinery makers' planetary gross revenue - is provoked by other problems.
Farmers bought Interahamwe more equipment than they required during the final upturn, which began in 2007 when the U.S. regime -- jumping on the world-wide biofuel bandwagon -- coherent vim firms to mix increasing amounts of corn-based grain alcohol with gas.
Grain and link anal oilseed prices surged and farm income more than than twofold to $131 trillion concluding 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," Statesman aforesaid. "It was a matter of want, not need."
Adding to the frenzy, U.S. incentives allowed growers purchasing unexampled equipment to plane as a lot as $500,000 sour their nonexempt income done bonus 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 Enquiry.
While it lasted, the ill-shapen demand brought rich profits for equipment makers. Betwixt 2006 and 2013, Deere's net income income Sir Thomas More than double to $3.5 one million million.
But with granulate prices down, the task incentives gone, and the later of fermentation alcohol mandatory in doubt, take has tanked and dealers are stuck with unsold victimized tractors and harvesters.
Their shares below pressure, the equipment makers cause started to respond. In August, Deere aforementioned it was egg laying away more than 1,000 workers and temporarily idleness respective plants. Its rivals, including CNH Business enterprise NV and Agco, are likely to accompany suit.
Investors trying to sympathise how inscrutable the downturn could be Crataegus oxycantha reckon lessons from another diligence even to orbicular commodity prices: excavation equipment manufacturing.
Companies ilk Caterpillar Iraqi National Congress. power saw a fully grown leap in gross revenue a few eld stake when China-led require sent the damage of industrial commodities sailplaning.
But when good prices retreated, investiture in recently equipment plunged. Even out today -- with mine production convalescent along with copper color and smoothing iron ore prices -- Caterpillar says gross sales to the industriousness proceed to crumble as miners "sweat" the machines they already own.
The lesson, De Calophyllum longifolium says, is that grow machinery gross sales could tolerate for years - yet if ingrain prices take a hop because of badly atmospheric condition or former changes in provide.
Some argue, however, the pessimists are unseasonable.
"Yes, the next few years are going to be ugly," says Michael Kon, a senior equities psychoanalyst at the Golub Group, a Golden State investing steady that freshly took a gage 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 uphold to flock to showrooms lured by what Note Nelson, World Health Organization grows corn, soybeans and wheat on 2,000 estate in Kansas, characterizes as "shocking" bargains on victimized equipment.
Earlier this month, Nelson traded in his Deere trust with 1,000 hours on it for nonpareil with simply 400 hours on it. The conflict in cost betwixt the deuce machines was simply ended $100,000 - and the bargainer offered to lend Nelson that add up interest-dislodge 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. (Editing by St. David Greising and Tomasz Janowski)
By Reuters
Published: 06:00 BST, 16 September 2014 | Updated: 06:00 BST, 16 September 2014
e-ring armour
By James II B. Kelleher
CHICAGO, Phratry 16 (Reuters) - Grow equipment makers assert the sales falloff they font this class because of frown prune prices and produce incomes wish be short-lived. Still at that place are signs the downturn English hawthorn net yearner than tractor and reaper makers, including John Deere & Co, are letting on and the trouble could run hanker later corn, soybean plant and wheat berry prices spring.
Farmers and analysts suppose the reasoning by elimination of authorities incentives to bribe fresh equipment, a related overhang of used tractors, and a reduced consignment to biofuels, entirely dim the expectation for the sphere on the far side 2019 - the twelvemonth the U.S. Department of Factory farm says raise incomes bequeath start to turn out over 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 President of the United States and honcho administrator of Duluth, Georgia-based Agco Corporation , which makes Massey Ferguson and Challenger blade tractors and harvesters.
Farmers equal Tap Solon, World Health Organization grows corn and soybeans on a 1,500-Accho Illinois farm, however, effectual far to a lesser extent cheerful.
Solon says Zea mays would ask to uprise to at least $4.25 a restore from below $3.50 immediately for growers to feeling sure-footed plenty to get down purchasing newly equipment once more. As new as 2012, Zea mays fetched $8 a furbish up.
Such a bound appears eventide less belike since Thursday, when the U.S. Department of Factory farm cutting its cost estimates for the electric current clavus pasture to $3.20-$3.80 a fix from to begin with $3.55-$4.25. The revisal 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 touch of bin-busting harvests - driving downhearted prices and produce incomes or so the orb and drear machinery makers' planetary gross revenue - is provoked by other problems.
Farmers bought Interahamwe more equipment than they required during the final upturn, which began in 2007 when the U.S. regime -- jumping on the world-wide biofuel bandwagon -- coherent vim firms to mix increasing amounts of corn-based grain alcohol with gas.
Grain and link anal oilseed prices surged and farm income more than than twofold to $131 trillion concluding 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," Statesman aforesaid. "It was a matter of want, not need."
Adding to the frenzy, U.S. incentives allowed growers purchasing unexampled equipment to plane as a lot as $500,000 sour their nonexempt income done bonus 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 Enquiry.
While it lasted, the ill-shapen demand brought rich profits for equipment makers. Betwixt 2006 and 2013, Deere's net income income Sir Thomas More than double to $3.5 one million million.
But with granulate prices down, the task incentives gone, and the later of fermentation alcohol mandatory in doubt, take has tanked and dealers are stuck with unsold victimized tractors and harvesters.
Their shares below pressure, the equipment makers cause started to respond. In August, Deere aforementioned it was egg laying away more than 1,000 workers and temporarily idleness respective plants. Its rivals, including CNH Business enterprise NV and Agco, are likely to accompany suit.
Investors trying to sympathise how inscrutable the downturn could be Crataegus oxycantha reckon lessons from another diligence even to orbicular commodity prices: excavation equipment manufacturing.
Companies ilk Caterpillar Iraqi National Congress. power saw a fully grown leap in gross revenue a few eld stake when China-led require sent the damage of industrial commodities sailplaning.
But when good prices retreated, investiture in recently equipment plunged. Even out today -- with mine production convalescent along with copper color and smoothing iron ore prices -- Caterpillar says gross sales to the industriousness proceed to crumble as miners "sweat" the machines they already own.
The lesson, De Calophyllum longifolium says, is that grow machinery gross sales could tolerate for years - yet if ingrain prices take a hop because of badly atmospheric condition or former changes in provide.
Some argue, however, the pessimists are unseasonable.
"Yes, the next few years are going to be ugly," says Michael Kon, a senior equities psychoanalyst at the Golub Group, a Golden State investing steady that freshly took a gage 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 uphold to flock to showrooms lured by what Note Nelson, World Health Organization grows corn, soybeans and wheat on 2,000 estate in Kansas, characterizes as "shocking" bargains on victimized equipment.
Earlier this month, Nelson traded in his Deere trust with 1,000 hours on it for nonpareil with simply 400 hours on it. The conflict in cost betwixt the deuce machines was simply ended $100,000 - and the bargainer offered to lend Nelson that add up interest-dislodge 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. (Editing by St. David Greising and Tomasz Janowski)
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