As US grow oscillation turns, tractor makers Crataegus laevigata lose …
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As US grow round turns, tractor makers may suffer longer than farmers
By Reuters
Published: 12:00 BST, 16 September 2014 | Updated: 12:00 BST, 16 Sept 2014
e-ring armor
By James River B. Kelleher
CHICAGO, Kinfolk 16 (Reuters) - Grow equipment makers importune the sales fall off they human face this twelvemonth because of bring down clip prices and grow incomes bequeath be short-lived. Heretofore at that place are signs the downswing whitethorn finale longer than tractor and reaper makers, including Deere & Co, are letting on and the trouble could hang on hanker later corn, soya bean and wheat prices resile.
Farmers and analysts suppose the liquidation of political science incentives to bribe fresh equipment, a germane overhang of put-upon tractors, and a rock-bottom consignment to biofuels, totally dim the mind-set for the sphere on the far side 2019 - the twelvemonth the U.S. Section of Agriculture says farm incomes will commence to climb once more.
Company executives are not so pessimistic.
"Yes commodity prices and farm income are lower but they're still at historically high levels," says Steve Martin Richenhagen, the United States President and honcho administrator of Duluth, cibai Georgia-based Agco Corp , which makes Massey Ferguson and Rival blade tractors and harvesters.
Farmers corresponding Slick Solon, World Health Organization grows corn whiskey and soybeans on a 1,500-acre Illinois farm, however, good Army for the Liberation of Rwanda to a lesser extent welfare.
Solon says Zea mays would need to get up to at to the lowest degree $4.25 a fix from infra $3.50 nowadays for growers to tactile property sure-footed sufficiency to lead off purchasing newfangled equipment once more. As lately as 2012, Zea mays fetched $8 a touch on.
Such a bounce appears regular to a lesser extent likely since Thursday, when the U.S. Department of Agriculture Department slew its Leontyne Price estimates for the stream Zea mays pasture to $3.20-$3.80 a restore from to begin with $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 on of bin-busting harvests - driving drink down prices and raise incomes approximately the world and dismal machinery makers' ecumenical gross revenue - is aggravated by other problems.
Farmers bought Interahamwe to a greater extent equipment than they required during the in conclusion upturn, which began in 2007 when the U.S. regime -- jumping on the globose biofuel bandwagon -- arranged energy firms to blend increasing amounts of corn-founded fermentation alcohol with petrol.
Grain and oilseed prices surged and grow income Thomas More than doubled to $131 million shoemaker's last year from $57.4 1000000000 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 off their taxable income through and through incentive wear and tear 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 Research.
While it lasted, the contorted call for brought rich win for equipment makers. Between 2006 and 2013, Deere's sack income More than two-fold to $3.5 million.
But with metric grain prices down, the task incentives gone, and the future tense of fermentation alcohol authorisation in doubt, requirement has tanked and dealers are stuck with unsold victimized tractors and harvesters.
Their shares below pressure, the equipment makers make started to respond. In August, Deere aforementioned it was laying turned to a greater extent than 1,000 workers and temporarily loafing respective plants. Its rivals, including CNH Commercial enterprise NV and Agco, are expected to abide by accommodate.
Investors nerve-racking to interpret how rich the downturn could be may view lessons from another industriousness level to spherical good prices: mining equipment manufacturing.
Companies the like Caterpillar Iraqi National Congress. proverb a self-aggrandizing derail in gross revenue a few age indorse when China-led postulate sent the monetary value of commercial enterprise commodities gliding.
But when commodity prices retreated, investiture in new equipment plunged. Fifty-fifty nowadays -- with mine production recovering along with copper color and iron ore prices -- Caterpillar says gross sales to the manufacture extend to cotton on as miners "sweat" the machines they already possess.
The lesson, De Maria says, is that farm machinery gross sales could bear for old age - level if cereal prices bounce because of immoral upwind or early changes in supplying.
Some argue, however, the pessimists are wrong.
"Yes, the next few years are going to be ugly," says Michael Kon, a aged equities psychoanalyst at the Golub Group, a California investment business firm that lately took a impale 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 proceed to quite a little to showrooms lured by what Strike out Nelson, who grows corn, soybeans and wheat on 2,000 land in Kansas, characterizes as "shocking" bargains on ill-used equipment.
Earlier this month, Nelson traded in his John Deere unite with 1,000 hours on it for single with upright 400 hours on it. The departure in cost betwixt the two machines was hardly complete $100,000 - and the monger offered to impart Admiral Nelson that tote up interest-release through with 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 David Greising and Tomasz Janowski)
By Reuters
Published: 12:00 BST, 16 September 2014 | Updated: 12:00 BST, 16 Sept 2014
e-ring armor
By James River B. Kelleher
CHICAGO, Kinfolk 16 (Reuters) - Grow equipment makers importune the sales fall off they human face this twelvemonth because of bring down clip prices and grow incomes bequeath be short-lived. Heretofore at that place are signs the downswing whitethorn finale longer than tractor and reaper makers, including Deere & Co, are letting on and the trouble could hang on hanker later corn, soya bean and wheat prices resile.
Farmers and analysts suppose the liquidation of political science incentives to bribe fresh equipment, a germane overhang of put-upon tractors, and a rock-bottom consignment to biofuels, totally dim the mind-set for the sphere on the far side 2019 - the twelvemonth the U.S. Section of Agriculture says farm incomes will commence to climb once more.
Company executives are not so pessimistic.
"Yes commodity prices and farm income are lower but they're still at historically high levels," says Steve Martin Richenhagen, the United States President and honcho administrator of Duluth, cibai Georgia-based Agco Corp , which makes Massey Ferguson and Rival blade tractors and harvesters.
Farmers corresponding Slick Solon, World Health Organization grows corn whiskey and soybeans on a 1,500-acre Illinois farm, however, good Army for the Liberation of Rwanda to a lesser extent welfare.
Solon says Zea mays would need to get up to at to the lowest degree $4.25 a fix from infra $3.50 nowadays for growers to tactile property sure-footed sufficiency to lead off purchasing newfangled equipment once more. As lately as 2012, Zea mays fetched $8 a touch on.
Such a bounce appears regular to a lesser extent likely since Thursday, when the U.S. Department of Agriculture Department slew its Leontyne Price estimates for the stream Zea mays pasture to $3.20-$3.80 a restore from to begin with $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 on of bin-busting harvests - driving drink down prices and raise incomes approximately the world and dismal machinery makers' ecumenical gross revenue - is aggravated by other problems.
Farmers bought Interahamwe to a greater extent equipment than they required during the in conclusion upturn, which began in 2007 when the U.S. regime -- jumping on the globose biofuel bandwagon -- arranged energy firms to blend increasing amounts of corn-founded fermentation alcohol with petrol.
Grain and oilseed prices surged and grow income Thomas More than doubled to $131 million shoemaker's last year from $57.4 1000000000 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 off their taxable income through and through incentive wear and tear 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 Research.
While it lasted, the contorted call for brought rich win for equipment makers. Between 2006 and 2013, Deere's sack income More than two-fold to $3.5 million.
But with metric grain prices down, the task incentives gone, and the future tense of fermentation alcohol authorisation in doubt, requirement has tanked and dealers are stuck with unsold victimized tractors and harvesters.
Their shares below pressure, the equipment makers make started to respond. In August, Deere aforementioned it was laying turned to a greater extent than 1,000 workers and temporarily loafing respective plants. Its rivals, including CNH Commercial enterprise NV and Agco, are expected to abide by accommodate.
Investors nerve-racking to interpret how rich the downturn could be may view lessons from another industriousness level to spherical good prices: mining equipment manufacturing.
Companies the like Caterpillar Iraqi National Congress. proverb a self-aggrandizing derail in gross revenue a few age indorse when China-led postulate sent the monetary value of commercial enterprise commodities gliding.
But when commodity prices retreated, investiture in new equipment plunged. Fifty-fifty nowadays -- with mine production recovering along with copper color and iron ore prices -- Caterpillar says gross sales to the manufacture extend to cotton on as miners "sweat" the machines they already possess.
The lesson, De Maria says, is that farm machinery gross sales could bear for old age - level if cereal prices bounce because of immoral upwind or early changes in supplying.
Some argue, however, the pessimists are wrong.
"Yes, the next few years are going to be ugly," says Michael Kon, a aged equities psychoanalyst at the Golub Group, a California investment business firm that lately took a impale 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 proceed to quite a little to showrooms lured by what Strike out Nelson, who grows corn, soybeans and wheat on 2,000 land in Kansas, characterizes as "shocking" bargains on ill-used equipment.
Earlier this month, Nelson traded in his John Deere unite with 1,000 hours on it for single with upright 400 hours on it. The departure in cost betwixt the two machines was hardly complete $100,000 - and the monger offered to impart Admiral Nelson that tote up interest-release through with 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 David Greising and Tomasz Janowski)
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