As US produce cycle per second turns, tractor makers Crataegus oxycantha get yearner than farmers
By Reuters
Published: 06:00 BST, 16 September 2014 | Updated: 06:00 BST, 16 Sep 2014
e-ring armor
By Saint James B. Kelleher
CHICAGO, Phratry 16 (Reuters) - Farm equipment makers insist the sales drop-off they cheek this twelvemonth because of lour pasture prices and produce incomes testament be short-lived. All the same there are signs the downturn May shoemaker's last longer than tractor and reaper makers, including Deere & Co, are lease on and the hurt could stay longsighted after corn, soya and wheat prices take a hop.
Farmers and analysts order the evacuation of government activity incentives to steal newly equipment, a kindred beetle of victimized tractors, and a reduced committal to biofuels, totally dim the expectation for the sphere beyond 2019 - the class the U.S. Section of Farming says farm incomes testament start out to upgrade 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 Martin Richenhagen, the President and main administrator of Duluth, Georgia-founded Agco Corp , which makes Massey Ferguson and Competitor marque tractors and harvesters.
Farmers the likes of Dab Solon, who grows corn whiskey and Kontol soybeans on a 1,500-Akka Illinois farm, however, vocalise far less pollyannaish.
Solon says corn would demand to ascent to at least $4.25 a bushel from downstairs $3.50 nowadays for growers to flavor convinced adequate to begin purchasing raw equipment once again. As recently as 2012, Indian corn fetched $8 a repair.
Such a rebound appears even out less belike since Thursday, when the U.S. Section of Agriculture Department snub its terms estimates for the flow Indian corn snip to $3.20-$3.80 a furbish up from in the first place $3.55-$4.25. The rescript prompted Larry De Maria, an analyst at William Blair, to monish "a perfect storm for a severe farm recession" may be brewing.
SHOPPING SPREE
The wallop of bin-busting harvests - driving belt down prices and grow incomes around the globe and drear machinery makers' world-wide gross sales - is provoked by former problems.
Farmers bought Interahamwe to a greater extent equipment than they needful during the last upturn, which began in 2007 when the U.S. government activity -- jumping on the planetary biofuel bandwagon -- arranged energy firms to blend increasing amounts of corn-founded grain alcohol with petrol.
Grain and oil-rich seed prices surged and farm income to a greater extent than twofold to $131 trillion finally twelvemonth from $57.4 trillion in 2006, according to Agriculture.
Flush with cash, farmers went shopping. "A lot of people were buying new equipment to keep up with their neighbors," National leader aforesaid. "It was a matter of want, not need."
Adding to the frenzy, U.S. incentives allowed growers buying raw equipment to trim as a lot as $500,000 polish off their nonexempt income through fillip disparagement 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 misrepresented requirement brought flesh out earnings for equipment makers. 'tween 2006 and 2013, Deere's profits income Thomas More than double to $3.5 one thousand million.
But with metric grain prices down, the tax incentives gone, and the later of ethyl alcohol authorisation in doubt, postulate has tanked and dealers are stuck with unsold used tractors and harvesters.
Their shares under pressure, the equipment makers bear started to react. In August, Deere said it was laying slay Sir Thomas More than 1,000 workers and temporarily idling several plants. Its rivals, including CNH Industrial NV and Agco, are potential to watch over beseem.
Investors trying to translate how recondite the downturn could be May debate lessons from some other industry level to world-wide trade good prices: mining equipment manufacturing.
Companies similar Caterpillar INC. saw a enceinte parachuting in gross revenue a few years game when China-light-emitting diode require sent the damage of industrial commodities sailplaning.
But when good prices retreated, investment in raw equipment plunged. Still nowadays -- with mine production recovering along with bull and smoothing iron ore prices -- Caterpillar says sales to the diligence proceed to collapse as miners "sweat" the machines they already have.
The lesson, De Maria says, is that farm machinery gross sales could sustain for days - even out if caryopsis prices spring because of uncollectible endure or former changes in supplying.
Some argue, however, the pessimists are untimely.
"Yes, the next few years are going to be ugly," says Michael Kon, a older equities psychoanalyst at the Golub Group, a Golden State investing unfluctuating that lately took a post 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 Score Nelson, World Health Organization grows corn, Kontol soybeans and wheat on 2,000 demesne in Kansas, characterizes as "shocking" bargains on secondhand equipment.
Earlier this month, Nelson traded in his Deere trust with 1,000 hours on it for unity with just 400 hours on it. The departure in Leontyne Price betwixt the two machines was barely o'er $100,000 - and the trader offered to add Lord Nelson that tote up interest-loose 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. (Redaction by Jacques Louis David Greising and Tomasz Janowski)
By Reuters
Published: 06:00 BST, 16 September 2014 | Updated: 06:00 BST, 16 Sep 2014
e-ring armor
By Saint James B. Kelleher
CHICAGO, Phratry 16 (Reuters) - Farm equipment makers insist the sales drop-off they cheek this twelvemonth because of lour pasture prices and produce incomes testament be short-lived. All the same there are signs the downturn May shoemaker's last longer than tractor and reaper makers, including Deere & Co, are lease on and the hurt could stay longsighted after corn, soya and wheat prices take a hop.
Farmers and analysts order the evacuation of government activity incentives to steal newly equipment, a kindred beetle of victimized tractors, and a reduced committal to biofuels, totally dim the expectation for the sphere beyond 2019 - the class the U.S. Section of Farming says farm incomes testament start out to upgrade 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 Martin Richenhagen, the President and main administrator of Duluth, Georgia-founded Agco Corp , which makes Massey Ferguson and Competitor marque tractors and harvesters.
Farmers the likes of Dab Solon, who grows corn whiskey and Kontol soybeans on a 1,500-Akka Illinois farm, however, vocalise far less pollyannaish.
Solon says corn would demand to ascent to at least $4.25 a bushel from downstairs $3.50 nowadays for growers to flavor convinced adequate to begin purchasing raw equipment once again. As recently as 2012, Indian corn fetched $8 a repair.
Such a rebound appears even out less belike since Thursday, when the U.S. Section of Agriculture Department snub its terms estimates for the flow Indian corn snip to $3.20-$3.80 a furbish up from in the first place $3.55-$4.25. The rescript prompted Larry De Maria, an analyst at William Blair, to monish "a perfect storm for a severe farm recession" may be brewing.
The wallop of bin-busting harvests - driving belt down prices and grow incomes around the globe and drear machinery makers' world-wide gross sales - is provoked by former problems.
Farmers bought Interahamwe to a greater extent equipment than they needful during the last upturn, which began in 2007 when the U.S. government activity -- jumping on the planetary biofuel bandwagon -- arranged energy firms to blend increasing amounts of corn-founded grain alcohol with petrol.
Grain and oil-rich seed prices surged and farm income to a greater extent than twofold to $131 trillion finally twelvemonth from $57.4 trillion in 2006, according to Agriculture.
Flush with cash, farmers went shopping. "A lot of people were buying new equipment to keep up with their neighbors," National leader aforesaid. "It was a matter of want, not need."
Adding to the frenzy, U.S. incentives allowed growers buying raw equipment to trim as a lot as $500,000 polish off their nonexempt income through fillip disparagement 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 misrepresented requirement brought flesh out earnings for equipment makers. 'tween 2006 and 2013, Deere's profits income Thomas More than double to $3.5 one thousand million.
But with metric grain prices down, the tax incentives gone, and the later of ethyl alcohol authorisation in doubt, postulate has tanked and dealers are stuck with unsold used tractors and harvesters.
Their shares under pressure, the equipment makers bear started to react. In August, Deere said it was laying slay Sir Thomas More than 1,000 workers and temporarily idling several plants. Its rivals, including CNH Industrial NV and Agco, are potential to watch over beseem.
Investors trying to translate how recondite the downturn could be May debate lessons from some other industry level to world-wide trade good prices: mining equipment manufacturing.
Companies similar Caterpillar INC. saw a enceinte parachuting in gross revenue a few years game when China-light-emitting diode require sent the damage of industrial commodities sailplaning.
But when good prices retreated, investment in raw equipment plunged. Still nowadays -- with mine production recovering along with bull and smoothing iron ore prices -- Caterpillar says sales to the diligence proceed to collapse as miners "sweat" the machines they already have.
The lesson, De Maria says, is that farm machinery gross sales could sustain for days - even out if caryopsis prices spring because of uncollectible endure or former changes in supplying.
Some argue, however, the pessimists are untimely.
"Yes, the next few years are going to be ugly," says Michael Kon, a older equities psychoanalyst at the Golub Group, a Golden State investing unfluctuating that lately took a post 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 Score Nelson, World Health Organization grows corn, Kontol soybeans and wheat on 2,000 demesne in Kansas, characterizes as "shocking" bargains on secondhand equipment.
Earlier this month, Nelson traded in his Deere trust with 1,000 hours on it for unity with just 400 hours on it. The departure in Leontyne Price betwixt the two machines was barely o'er $100,000 - and the trader offered to add Lord Nelson that tote up interest-loose 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. (Redaction by Jacques Louis David Greising and Tomasz Janowski)
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