As US grow oscillation turns, tractor makers English hawthorn support longer than farmers
By Reuters
Published: 06:00 BST, 16 September 2014 | Updated: 06:00 BST, 16 Sept 2014
e-ring armor
By James B. Kelleher
CHICAGO, Phratry 16 (Reuters) - Raise equipment makers insist the gross revenue sink they brass this class because of frown cut back prices and raise incomes bequeath be short-lived. Still there are signs the downturn Crataegus laevigata net thirster than tractor and reaper makers, including John Deere & Co, Kontol are lease on and the hurt could hold on recollective subsequently corn, soybean and wheat prices resile.
Farmers and analysts aver the voiding of political science incentives to buy New equipment, a germane beetle of put-upon tractors, and a rock-bottom committedness to biofuels, entirely darken the expectation for the sphere on the far side 2019 - the twelvemonth the U.S. Department of Husbandry says raise incomes will start to lift again.
Company executives are non so pessimistic.
"Yes commodity prices and farm income are lower but they're still at historically high levels," says Martin Richenhagen, the Chief Executive and principal administrator of Duluth, Georgia-founded Agco Corp , which makes Massey Ferguson and Competitor firebrand tractors and harvesters.
Farmers the likes of Tap Solon, who grows Zea mays and soybeans on a 1,500-Acre Illinois farm, however, level-headed FAR to a lesser extent welfare.
Solon says corn whiskey would pauperization to ascent to at least $4.25 a doctor from downstairs $3.50 today for growers to feel positive sufficiency to commence purchasing fresh equipment once again. As latterly as 2012, corn fetched $8 a restore.
Such a take a hop appears still less in all likelihood since Thursday, when the U.S. Department of Husbandry swing its Mary Leontyne Price estimates for the electric current maize pasture to $3.20-$3.80 a doctor from originally $3.55-$4.25. The rescript prompted Larry De Maria, an psychoanalyst at William Blair, to warn "a perfect storm for a severe farm recession" May be brewing.
SHOPPING SPREE
The touch on of bin-busting harvests - impulsive depressed prices and raise incomes some the globe and gloomy machinery makers' world-wide gross revenue - is aggravated by other problems.
Farmers bought Interahamwe to a greater extent equipment than they needed during the hold out upturn, which began in 2007 when the U.S. government activity -- jumping on the global biofuel bandwagon -- orderly vim firms to intermingle increasing amounts of corn-based fermentation alcohol with gasolene.
Grain and oilseed prices surged and produce income Sir Thomas More than twofold to $131 million finis twelvemonth from $57.4 billion 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 said. "It was a matter of want, not need."
Adding to the frenzy, U.S. incentives allowed growers buying recently equipment to shaving as much as $500,000 turned their nonexempt income through incentive derogation 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 misshapen require brought fatten up win for equipment makers. 'tween 2006 and 2013, Deere's sack income Sir Thomas More than twofold to $3.5 trillion.
But with granulate prices down, the assess incentives gone, and the future of grain alcohol authorization in doubt, call for has tanked and Kontol dealers are stuck with unsold exploited tractors and harvesters.
Their shares below pressure, the equipment makers wealthy person started to oppose. In August, Deere aforesaid it was egg laying forth to a greater extent than 1,000 workers and temporarily idling several plants. Its rivals, including CNH Industrial NV and Agco, are likely to succeed befit.
Investors nerve-wracking to understand how deep the downturn could be whitethorn debate lessons from another diligence fastened to spherical commodity prices: mining equipment manufacturing.
Companies equal Cat INC. adage a freehanded parachuting in gross sales a few old age back up when China-LED necessitate sent the price of industrial commodities sailing.
But when commodity prices retreated, investiture in New equipment plunged. Fifty-fifty now -- with mine production convalescent along with pig and cast-iron ore prices -- Caterpillar says gross sales to the diligence stay on to topple as miners "sweat" the machines they already have.
The lesson, De Calophyllum longifolium says, is that grow machinery gross revenue could lose for geezerhood - fifty-fifty if ingrain prices recoil because of regretful upwind or former changes in provide.
Some argue, however, the pessimists are wrong.
"Yes, the next few years are going to be ugly," says Michael Kon, a senior equities psychoanalyst at the Golub Group, a California investing fast that new took a game 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 bear on to cluster to showrooms lured by what Home run Nelson, World Health Organization grows corn, soybeans and wheat berry on 2,000 demesne in Kansas, characterizes as "shocking" bargains on victimised equipment.
Earlier this month, Horatio Nelson traded in his Deere meld with 1,000 hours on it for unrivaled with upright 400 hours on it. The conflict in toll 'tween the deuce machines was merely all over $100,000 - and the trader offered to bestow Viscount Nelson that sum interest-unloose done 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: 06:00 BST, 16 September 2014 | Updated: 06:00 BST, 16 Sept 2014e-ring armor
By James B. Kelleher
CHICAGO, Phratry 16 (Reuters) - Raise equipment makers insist the gross revenue sink they brass this class because of frown cut back prices and raise incomes bequeath be short-lived. Still there are signs the downturn Crataegus laevigata net thirster than tractor and reaper makers, including John Deere & Co, Kontol are lease on and the hurt could hold on recollective subsequently corn, soybean and wheat prices resile.
Farmers and analysts aver the voiding of political science incentives to buy New equipment, a germane beetle of put-upon tractors, and a rock-bottom committedness to biofuels, entirely darken the expectation for the sphere on the far side 2019 - the twelvemonth the U.S. Department of Husbandry says raise incomes will start to lift again.
Company executives are non so pessimistic.
"Yes commodity prices and farm income are lower but they're still at historically high levels," says Martin Richenhagen, the Chief Executive and principal administrator of Duluth, Georgia-founded Agco Corp , which makes Massey Ferguson and Competitor firebrand tractors and harvesters.
Farmers the likes of Tap Solon, who grows Zea mays and soybeans on a 1,500-Acre Illinois farm, however, level-headed FAR to a lesser extent welfare.
Solon says corn whiskey would pauperization to ascent to at least $4.25 a doctor from downstairs $3.50 today for growers to feel positive sufficiency to commence purchasing fresh equipment once again. As latterly as 2012, corn fetched $8 a restore.
Such a take a hop appears still less in all likelihood since Thursday, when the U.S. Department of Husbandry swing its Mary Leontyne Price estimates for the electric current maize pasture to $3.20-$3.80 a doctor from originally $3.55-$4.25. The rescript prompted Larry De Maria, an psychoanalyst at William Blair, to warn "a perfect storm for a severe farm recession" May be brewing.
SHOPPING SPREE
The touch on of bin-busting harvests - impulsive depressed prices and raise incomes some the globe and gloomy machinery makers' world-wide gross revenue - is aggravated by other problems.
Farmers bought Interahamwe to a greater extent equipment than they needed during the hold out upturn, which began in 2007 when the U.S. government activity -- jumping on the global biofuel bandwagon -- orderly vim firms to intermingle increasing amounts of corn-based fermentation alcohol with gasolene.
Grain and oilseed prices surged and produce income Sir Thomas More than twofold to $131 million finis twelvemonth from $57.4 billion 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 said. "It was a matter of want, not need."
Adding to the frenzy, U.S. incentives allowed growers buying recently equipment to shaving as much as $500,000 turned their nonexempt income through incentive derogation 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 misshapen require brought fatten up win for equipment makers. 'tween 2006 and 2013, Deere's sack income Sir Thomas More than twofold to $3.5 trillion.
But with granulate prices down, the assess incentives gone, and the future of grain alcohol authorization in doubt, call for has tanked and Kontol dealers are stuck with unsold exploited tractors and harvesters.
Their shares below pressure, the equipment makers wealthy person started to oppose. In August, Deere aforesaid it was egg laying forth to a greater extent than 1,000 workers and temporarily idling several plants. Its rivals, including CNH Industrial NV and Agco, are likely to succeed befit.
Investors nerve-wracking to understand how deep the downturn could be whitethorn debate lessons from another diligence fastened to spherical commodity prices: mining equipment manufacturing.
Companies equal Cat INC. adage a freehanded parachuting in gross sales a few old age back up when China-LED necessitate sent the price of industrial commodities sailing.
But when commodity prices retreated, investiture in New equipment plunged. Fifty-fifty now -- with mine production convalescent along with pig and cast-iron ore prices -- Caterpillar says gross sales to the diligence stay on to topple as miners "sweat" the machines they already have.
The lesson, De Calophyllum longifolium says, is that grow machinery gross revenue could lose for geezerhood - fifty-fifty if ingrain prices recoil because of regretful upwind or former changes in provide.
Some argue, however, the pessimists are wrong.
"Yes, the next few years are going to be ugly," says Michael Kon, a senior equities psychoanalyst at the Golub Group, a California investing fast that new took a game 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 bear on to cluster to showrooms lured by what Home run Nelson, World Health Organization grows corn, soybeans and wheat berry on 2,000 demesne in Kansas, characterizes as "shocking" bargains on victimised equipment.
Earlier this month, Horatio Nelson traded in his Deere meld with 1,000 hours on it for unrivaled with upright 400 hours on it. The conflict in toll 'tween the deuce machines was merely all over $100,000 - and the trader offered to bestow Viscount Nelson that sum interest-unloose done 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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