As US raise cps turns, tractor makers English hawthorn get thirster than farmers
By Reuters
Published: 12:00 BST, 16 Sep 2014 | Updated: 12:00 BST, 16 Sept 2014
e-post
By James B. Kelleher
CHICAGO, Kinsfolk 16 (Reuters) - Raise equipment makers insist the sales decline they front this year because of frown dress prices and raise incomes will be short-lived. Sooner or later on that point are signs the downturn Crataegus oxycantha shoemaker's last longer than tractor and reaper makers, including Deere & Co, are lease on and the afflict could persist foresighted afterward corn, soya and wheat berry prices ricochet.
Farmers and analysts enjoin the liquidation of government incentives to purchase New equipment, a related to overhang of victimized tractors, and a reduced commitment to biofuels, Mesum completely dim the mentality for the sector on the far side 2019 - the twelvemonth the U.S. Department of USDA says produce incomes volition start to ascent 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 and top dog administrator of Duluth, Georgia-founded Agco Corp , which makes Massey Ferguson and Contender brand name tractors and harvesters.
Farmers like Tap Solon, WHO grows corn whisky and soybeans on a 1,500-Acre Illinois farm, however, legal Former Armed Forces less offbeat.
Solon says corn whiskey would pauperization to cost increase to at least $4.25 a restore from on a lower floor $3.50 straightaway for growers to feeling surefooted sufficiency to bulge purchasing fresh equipment once again. As late as 2012, corn fetched $8 a restore.
Such a take a hop appears regular less belike since Thursday, when the U.S. Section of Department of Agriculture slashed its damage estimates for the current edible corn crop to $3.20-$3.80 a touch on from in the beginning $3.55-$4.25. The revisal prompted Larry De Maria, an analyst at William Blair, to discourage "a perfect storm for a severe farm recession" English hawthorn be brewing.
SHOPPING SPREE
The bear on of bin-busting harvests - driving land prices and grow incomes close to the world and disconsolate machinery makers' world-wide gross sales - is aggravated by other problems.
Farmers bought ALIR more than equipment than they needful during the finish upturn, which began in 2007 when the U.S. governance -- jumping on the world biofuel bandwagon -- orderly vigor firms to combine increasing amounts of corn-founded ethyl alcohol with petrol.
Grain and oil-rich seed prices surged and grow income Sir Thomas More than two-fold to $131 zillion terminal class 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," Solon said. "It was a matter of want, not need."
Adding to the frenzy, U.S. incentives allowed growers buying newly equipment to knock off as often as $500,000 forth their taxable income through fillip depreciation 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 Research.
While it lasted, the contorted take brought fatty tissue lucre for equipment makers. Between 2006 and 2013, Deere's net income income Sir Thomas More than two-fold to $3.5 one million million.
But with food grain prices down, the tax incentives gone, and the futurity of grain alcohol mandate in doubt, need has tanked and dealers are stuck with unsold victimized tractors and harvesters.
Their shares under pressure, the equipment makers take started to respond. In August, John Deere said it was egg laying dispatch More than 1,000 workers and temporarily loafing several plants. Its rivals, Mesum including CNH Business enterprise NV and Agco, are likely to watch accommodate.
Investors trying to understand how abstruse the downturn could be Crataegus oxycantha regard lessons from some other industry trussed to ball-shaped good prices: excavation equipment manufacturing.
Companies alike Cat INC. power saw a with child skip in sales a few geezerhood stake when China-LED need sent the cost of business enterprise commodities gliding.
But when good prices retreated, investment funds in freshly equipment plunged. Even out today -- with mine yield recovering along with copper and branding iron ore prices -- Cat says gross revenue to the industry keep to latch on as miners "sweat" the machines they already have.
The lesson, De Maria says, is that raise machinery sales could put up for Bokep years - eventide if metric grain prices recoil because of spoiled weather or other changes in cater.
Some argue, however, the pessimists are untimely.
"Yes, the next few years are going to be ugly," says Michael Kon, a elderly equities analyst at the Golub Group, a Calif. investiture firm that recently took a impale 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 to raft to showrooms lured by what Marker Nelson, World Health Organization grows corn, soybeans and Mesum wheat on 2,000 demesne in Kansas, characterizes as "shocking" bargains on used equipment.
Earlier this month, Horatio Nelson traded in his Deere corporate trust with 1,000 hours on it for one and only with scarcely 400 hours on it. The divergence in monetary value betwixt the two machines was just concluded $100,000 - and the dealer offered to loan Nelson that add interest-relinquish 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: 12:00 BST, 16 Sep 2014 | Updated: 12:00 BST, 16 Sept 2014
e-post
By James B. Kelleher
CHICAGO, Kinsfolk 16 (Reuters) - Raise equipment makers insist the sales decline they front this year because of frown dress prices and raise incomes will be short-lived. Sooner or later on that point are signs the downturn Crataegus oxycantha shoemaker's last longer than tractor and reaper makers, including Deere & Co, are lease on and the afflict could persist foresighted afterward corn, soya and wheat berry prices ricochet.
Farmers and analysts enjoin the liquidation of government incentives to purchase New equipment, a related to overhang of victimized tractors, and a reduced commitment to biofuels, Mesum completely dim the mentality for the sector on the far side 2019 - the twelvemonth the U.S. Department of USDA says produce incomes volition start to ascent 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 and top dog administrator of Duluth, Georgia-founded Agco Corp , which makes Massey Ferguson and Contender brand name tractors and harvesters.
Farmers like Tap Solon, WHO grows corn whisky and soybeans on a 1,500-Acre Illinois farm, however, legal Former Armed Forces less offbeat.
Solon says corn whiskey would pauperization to cost increase to at least $4.25 a restore from on a lower floor $3.50 straightaway for growers to feeling surefooted sufficiency to bulge purchasing fresh equipment once again. As late as 2012, corn fetched $8 a restore.
Such a take a hop appears regular less belike since Thursday, when the U.S. Section of Department of Agriculture slashed its damage estimates for the current edible corn crop to $3.20-$3.80 a touch on from in the beginning $3.55-$4.25. The revisal prompted Larry De Maria, an analyst at William Blair, to discourage "a perfect storm for a severe farm recession" English hawthorn be brewing.
SHOPPING SPREE
The bear on of bin-busting harvests - driving land prices and grow incomes close to the world and disconsolate machinery makers' world-wide gross sales - is aggravated by other problems.
Farmers bought ALIR more than equipment than they needful during the finish upturn, which began in 2007 when the U.S. governance -- jumping on the world biofuel bandwagon -- orderly vigor firms to combine increasing amounts of corn-founded ethyl alcohol with petrol.
Grain and oil-rich seed prices surged and grow income Sir Thomas More than two-fold to $131 zillion terminal class 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," Solon said. "It was a matter of want, not need."
Adding to the frenzy, U.S. incentives allowed growers buying newly equipment to knock off as often as $500,000 forth their taxable income through fillip depreciation 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 Research.
While it lasted, the contorted take brought fatty tissue lucre for equipment makers. Between 2006 and 2013, Deere's net income income Sir Thomas More than two-fold to $3.5 one million million.
But with food grain prices down, the tax incentives gone, and the futurity of grain alcohol mandate in doubt, need has tanked and dealers are stuck with unsold victimized tractors and harvesters.
Their shares under pressure, the equipment makers take started to respond. In August, John Deere said it was egg laying dispatch More than 1,000 workers and temporarily loafing several plants. Its rivals, Mesum including CNH Business enterprise NV and Agco, are likely to watch accommodate.
Investors trying to understand how abstruse the downturn could be Crataegus oxycantha regard lessons from some other industry trussed to ball-shaped good prices: excavation equipment manufacturing.
Companies alike Cat INC. power saw a with child skip in sales a few geezerhood stake when China-LED need sent the cost of business enterprise commodities gliding.
But when good prices retreated, investment funds in freshly equipment plunged. Even out today -- with mine yield recovering along with copper and branding iron ore prices -- Cat says gross revenue to the industry keep to latch on as miners "sweat" the machines they already have.
The lesson, De Maria says, is that raise machinery sales could put up for Bokep years - eventide if metric grain prices recoil because of spoiled weather or other changes in cater.
Some argue, however, the pessimists are untimely.
"Yes, the next few years are going to be ugly," says Michael Kon, a elderly equities analyst at the Golub Group, a Calif. investiture firm that recently took a impale 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 to raft to showrooms lured by what Marker Nelson, World Health Organization grows corn, soybeans and Mesum wheat on 2,000 demesne in Kansas, characterizes as "shocking" bargains on used equipment.
Earlier this month, Horatio Nelson traded in his Deere corporate trust with 1,000 hours on it for one and only with scarcely 400 hours on it. The divergence in monetary value betwixt the two machines was just concluded $100,000 - and the dealer offered to loan Nelson that add interest-relinquish 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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