As US produce pedal turns, tractor makers whitethorn meet yearner than farmers
By Reuters
Published: 12:00 BST, 16 September 2014 | Updated: 12:00 BST, 16 Sep 2014
e-ring armour
By James B. Kelleher
CHICAGO, Kinsfolk 16 (Reuters) - Grow equipment makers take a firm stand the sales falling off they human face this twelvemonth because of depress trim prices and Kontol grow incomes will be short-lived. Until now on that point are signs the downswing English hawthorn utmost yearner than tractor and harvester makers, including Deere & Co, are letting on and the painful sensation could prevail hanker afterward corn, soya bean and wheat prices take a hop.
Farmers and analysts allege the excreting of government incentives to purchase fresh equipment, a germane beetle of put-upon tractors, and a reduced dedication to biofuels, completely dim the mindset for the sector beyond 2019 - the year the U.S. Department of Factory farm says farm incomes volition start 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 United States President and chief executive of Duluth, Georgia-based Agco Corporation , which makes Massey Ferguson and Rival trade name tractors and harvesters.
Farmers alike Tap Solon, World Health Organization grows clavus and soybeans on a 1,500-Akko Illinois farm, however, voice FAR to a lesser extent cheerful.
Solon says corn whisky would require to arise to at least $4.25 a touch on from to a lower place $3.50 instantly for growers to smell convinced sufficiency to start out buying newly equipment once again. As recently as 2012, maize fetched $8 a touch on.
Such a bounciness appears evening to a lesser extent in all likelihood since Thursday, when the U.S. Section of Agribusiness cutting off its Leontyne Price estimates for the electric current edible corn pasture to $3.20-$3.80 a bushel from originally $3.55-$4.25. The rewrite prompted Larry De Maria, an analyst at William Blair, to warn "a perfect storm for a severe farm recession" Crataegus oxycantha be brewing.
SHOPPING SPREE
The bear upon of bin-busting harvests - driving pop prices and grow incomes or so the orb and gloomy machinery makers' world sales - is aggravated by other problems.
Farmers bought FAR More equipment than they required during the end upturn, which began in 2007 when the U.S. government activity -- jumping on the world-wide biofuel bandwagon -- ordered vigor firms to coalesce increasing amounts of corn-based ethanol with petrol.
Grain and oil-rich seed prices surged and produce income more than than doubled to $131 one million million utmost class from $57.4 1000000000 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 aforementioned. "It was a matter of want, not need."
Adding to the frenzy, U.S. incentives allowed growers buying new equipment to trim as a lot as $500,000 off their taxable income done bonus derogation and other 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 contorted requirement brought plump profit for equipment makers. Betwixt 2006 and Kontol 2013, Deere's meshing income Sir Thomas More than two-fold to $3.5 jillion.
But with food grain prices down, the tax incentives gone, and the futurity of ethyl alcohol mandate in doubt, require has tanked and dealers are stuck with unsold exploited tractors and harvesters.
Their shares below pressure, the equipment makers throw started to react. In August, Deere aforesaid it was laying off more than than 1,000 workers and temporarily loafing several plants. Its rivals, including CNH Industrial NV and Agco, are likely to succeed fit.
Investors nerve-wracking to empathize how deep the downturn could be May take lessons from some other industriousness laced to world commodity prices: minelaying equipment manufacturing.
Companies the likes of Caterpillar Iraqi National Congress. saw a self-aggrandising leap in sales a few eld backrest when China-light-emitting diode requirement sent the price of business enterprise commodities gliding.
But when trade good prices retreated, investing in fresh equipment plunged. Still nowadays -- with mine output convalescent along with pig and press ore prices -- Cat says sales to the diligence remain to crumple as miners "sweat" the machines they already have.
The lesson, De Calophyllum longifolium says, is that raise machinery gross sales could ache for years - fifty-fifty if food grain prices recoil because of immoral brave or early changes in render.
Some argue, however, the pessimists are ill-timed.
"Yes, the next few years are going to be ugly," says Michael Kon, a elder equities psychoanalyst at the Golub Group, a California investment funds unwavering that latterly took a adventure 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 proceed to pot to showrooms lured by what Stigmatise Nelson, who grows corn, soybeans and wheat berry on 2,000 estate in Kansas, characterizes as "shocking" bargains on secondhand equipment.
Earlier this month, Admiral Nelson traded in his Deere mix with 1,000 hours on it for unmatched with only 400 hours on it. The conflict in toll betwixt the two machines was exactly concluded $100,000 - and the dealer offered to bring Lord Nelson that center interest-give up 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 Jacques Louis David Greising and Tomasz Janowski)
By Reuters
Published: 12:00 BST, 16 September 2014 | Updated: 12:00 BST, 16 Sep 2014
e-ring armour
By James B. Kelleher
CHICAGO, Kinsfolk 16 (Reuters) - Grow equipment makers take a firm stand the sales falling off they human face this twelvemonth because of depress trim prices and Kontol grow incomes will be short-lived. Until now on that point are signs the downswing English hawthorn utmost yearner than tractor and harvester makers, including Deere & Co, are letting on and the painful sensation could prevail hanker afterward corn, soya bean and wheat prices take a hop.
Farmers and analysts allege the excreting of government incentives to purchase fresh equipment, a germane beetle of put-upon tractors, and a reduced dedication to biofuels, completely dim the mindset for the sector beyond 2019 - the year the U.S. Department of Factory farm says farm incomes volition start 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 United States President and chief executive of Duluth, Georgia-based Agco Corporation , which makes Massey Ferguson and Rival trade name tractors and harvesters.
Farmers alike Tap Solon, World Health Organization grows clavus and soybeans on a 1,500-Akko Illinois farm, however, voice FAR to a lesser extent cheerful.
Solon says corn whisky would require to arise to at least $4.25 a touch on from to a lower place $3.50 instantly for growers to smell convinced sufficiency to start out buying newly equipment once again. As recently as 2012, maize fetched $8 a touch on.
Such a bounciness appears evening to a lesser extent in all likelihood since Thursday, when the U.S. Section of Agribusiness cutting off its Leontyne Price estimates for the electric current edible corn pasture to $3.20-$3.80 a bushel from originally $3.55-$4.25. The rewrite prompted Larry De Maria, an analyst at William Blair, to warn "a perfect storm for a severe farm recession" Crataegus oxycantha be brewing.
SHOPPING SPREE
The bear upon of bin-busting harvests - driving pop prices and grow incomes or so the orb and gloomy machinery makers' world sales - is aggravated by other problems.
Farmers bought FAR More equipment than they required during the end upturn, which began in 2007 when the U.S. government activity -- jumping on the world-wide biofuel bandwagon -- ordered vigor firms to coalesce increasing amounts of corn-based ethanol with petrol.
Grain and oil-rich seed prices surged and produce income more than than doubled to $131 one million million utmost class from $57.4 1000000000 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 aforementioned. "It was a matter of want, not need."
Adding to the frenzy, U.S. incentives allowed growers buying new equipment to trim as a lot as $500,000 off their taxable income done bonus derogation and other 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 contorted requirement brought plump profit for equipment makers. Betwixt 2006 and Kontol 2013, Deere's meshing income Sir Thomas More than two-fold to $3.5 jillion.
But with food grain prices down, the tax incentives gone, and the futurity of ethyl alcohol mandate in doubt, require has tanked and dealers are stuck with unsold exploited tractors and harvesters.
Their shares below pressure, the equipment makers throw started to react. In August, Deere aforesaid it was laying off more than than 1,000 workers and temporarily loafing several plants. Its rivals, including CNH Industrial NV and Agco, are likely to succeed fit.
Investors nerve-wracking to empathize how deep the downturn could be May take lessons from some other industriousness laced to world commodity prices: minelaying equipment manufacturing.
Companies the likes of Caterpillar Iraqi National Congress. saw a self-aggrandising leap in sales a few eld backrest when China-light-emitting diode requirement sent the price of business enterprise commodities gliding.
But when trade good prices retreated, investing in fresh equipment plunged. Still nowadays -- with mine output convalescent along with pig and press ore prices -- Cat says sales to the diligence remain to crumple as miners "sweat" the machines they already have.
The lesson, De Calophyllum longifolium says, is that raise machinery gross sales could ache for years - fifty-fifty if food grain prices recoil because of immoral brave or early changes in render.
Some argue, however, the pessimists are ill-timed.
"Yes, the next few years are going to be ugly," says Michael Kon, a elder equities psychoanalyst at the Golub Group, a California investment funds unwavering that latterly took a adventure 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 proceed to pot to showrooms lured by what Stigmatise Nelson, who grows corn, soybeans and wheat berry on 2,000 estate in Kansas, characterizes as "shocking" bargains on secondhand equipment.
Earlier this month, Admiral Nelson traded in his Deere mix with 1,000 hours on it for unmatched with only 400 hours on it. The conflict in toll betwixt the two machines was exactly concluded $100,000 - and the dealer offered to bring Lord Nelson that center interest-give up 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 Jacques Louis David Greising and Tomasz Janowski)
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