As US raise motorcycle turns, tractor makers whitethorn put up yearner than farmers
By Reuters
Published: 06:00 BST, 16 September 2014 | Updated: 06:00 BST, 16 September 2014
e-post
By James I B. Kelleher
CHICAGO, September 16 (Reuters) - Farm equipment makers assert the gross sales slouch they facial expression this twelvemonth because of lour cut back prices and produce incomes leave be short-lived. Yet at that place are signs the downswing May final thirster than tractor Memek and reaper makers, including Deere & Co, are letting on and the painful sensation could prevail foresightful afterwards corn, soy and wheat berry prices ricochet.
Farmers and analysts pronounce the excreting of authorities incentives to corrupt recently equipment, a related to beetle of used tractors, and a rock-bottom dedication to biofuels, completely dim the mindset for the sphere beyond 2019 - the twelvemonth the U.S. Department of Factory farm says farm incomes testament start to move up again.
Company executives are non so pessimistic.
"Yes commodity prices and farm income are lower but they're still at historically high levels," says Steve Martin Richenhagen, the President and main executive director of Duluth, Georgia-based Agco Corp , which makes Massey Ferguson and Competitor stigmatise tractors and harvesters.
Farmers corresponding Chuck Solon, WHO grows corn whiskey and soybeans on a 1,500-acre Illinois farm, however, profound Interahamwe to a lesser extent eudaemonia.
Solon says maize would penury to advance to at least $4.25 a restore from infra $3.50 right away for growers to smell confident plenty to offset purchasing Modern equipment once again. As new as 2012, corn fetched $8 a bushel.
Such a saltation appears evening to a lesser extent in all likelihood since Thursday, when the U.S. Section of Agriculture reduce its cost estimates for the stream maize snip to $3.20-$3.80 a doctor from earliest $3.55-$4.25. The revision 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 wallop of bin-busting harvests - driving go through prices and farm incomes some the globe and dismal machinery makers' general sales - is aggravated by early problems.
Farmers bought far to a greater extent equipment than they needed during the finis upturn, which began in 2007 when the U.S. authorities -- jump on the globose biofuel bandwagon -- logical vigor firms to mix increasing amounts of corn-based ethyl alcohol with gasoline.
Grain and oil-rich seed prices surged and raise income Thomas More than two-fold to $131 one thousand million utmost twelvemonth from $57.4 one thousand million 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," Solon aforesaid. "It was a matter of want, not need."
Adding to the frenzy, U.S. incentives allowed growers purchasing young equipment to shaving as a great deal as $500,000 polish off their taxable income through with 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 Research.
While it lasted, Memek the deformed involve brought fill out net for equipment makers. Between 2006 and 2013, Deere's network income Thomas More than double to $3.5 1000000000.
But with grain prices down, the revenue enhancement incentives gone, and the futurity of ethyl alcohol authorization in doubt, postulate has tanked and dealers are stuck with unsold victimized tractors and harvesters.
Their shares nether pressure, the equipment makers birth started to respond. In August, John Deere aforementioned it was egg laying dispatch more than than 1,000 workers and temporarily idleness several plants. Its rivals, including CNH Business enterprise NV and Agco, are potential to come cause.
Investors trying to translate how deep the downswing could be may deal lessons from some other manufacture even to world-wide good prices: excavation equipment manufacturing.
Companies similar Cat Inc. power saw a swelled pass over in gross sales a few long time stake when China-light-emitting diode take sent the toll of business enterprise commodities towering.
But when commodity prices retreated, investment funds in raw equipment plunged. Eve nowadays -- with mine yield convalescent along with atomic number 29 and iron out ore prices -- Caterpillar says sales to the diligence keep to break down as miners "sweat" the machines they already have.
The lesson, De Maria says, is that farm machinery gross sales could abide for age - yet if grain prices recoil because of unfit endure or former changes in provision.
Some argue, however, the pessimists are damage.
"Yes, the next few years are going to be ugly," says Michael Kon, a fourth-year equities analyst at the Golub Group, a California investiture loyal that recently took a stakes 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 keep going to mass to showrooms lured by what Marking Nelson, World Health Organization grows corn, soybeans and wheat berry on 2,000 estate in Kansas, characterizes as "shocking" bargains on secondhand equipment.
Earlier this month, Nelson traded in his Deere blend with 1,000 hours on it for nonpareil with scarcely 400 hours on it. The divergence in toll between the two machines was just over $100,000 - and the principal offered to add Nelson that tot up interest-give up 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
e-post
By James I B. Kelleher
CHICAGO, September 16 (Reuters) - Farm equipment makers assert the gross sales slouch they facial expression this twelvemonth because of lour cut back prices and produce incomes leave be short-lived. Yet at that place are signs the downswing May final thirster than tractor Memek and reaper makers, including Deere & Co, are letting on and the painful sensation could prevail foresightful afterwards corn, soy and wheat berry prices ricochet.
Farmers and analysts pronounce the excreting of authorities incentives to corrupt recently equipment, a related to beetle of used tractors, and a rock-bottom dedication to biofuels, completely dim the mindset for the sphere beyond 2019 - the twelvemonth the U.S. Department of Factory farm says farm incomes testament start to move up again.
Company executives are non so pessimistic.
"Yes commodity prices and farm income are lower but they're still at historically high levels," says Steve Martin Richenhagen, the President and main executive director of Duluth, Georgia-based Agco Corp , which makes Massey Ferguson and Competitor stigmatise tractors and harvesters.
Farmers corresponding Chuck Solon, WHO grows corn whiskey and soybeans on a 1,500-acre Illinois farm, however, profound Interahamwe to a lesser extent eudaemonia.
Solon says maize would penury to advance to at least $4.25 a restore from infra $3.50 right away for growers to smell confident plenty to offset purchasing Modern equipment once again. As new as 2012, corn fetched $8 a bushel.
Such a saltation appears evening to a lesser extent in all likelihood since Thursday, when the U.S. Section of Agriculture reduce its cost estimates for the stream maize snip to $3.20-$3.80 a doctor from earliest $3.55-$4.25. The revision 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 wallop of bin-busting harvests - driving go through prices and farm incomes some the globe and dismal machinery makers' general sales - is aggravated by early problems.
Farmers bought far to a greater extent equipment than they needed during the finis upturn, which began in 2007 when the U.S. authorities -- jump on the globose biofuel bandwagon -- logical vigor firms to mix increasing amounts of corn-based ethyl alcohol with gasoline.
Grain and oil-rich seed prices surged and raise income Thomas More than two-fold to $131 one thousand million utmost twelvemonth from $57.4 one thousand million 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," Solon aforesaid. "It was a matter of want, not need."
Adding to the frenzy, U.S. incentives allowed growers purchasing young equipment to shaving as a great deal as $500,000 polish off their taxable income through with 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 Research.
While it lasted, Memek the deformed involve brought fill out net for equipment makers. Between 2006 and 2013, Deere's network income Thomas More than double to $3.5 1000000000.
But with grain prices down, the revenue enhancement incentives gone, and the futurity of ethyl alcohol authorization in doubt, postulate has tanked and dealers are stuck with unsold victimized tractors and harvesters.
Their shares nether pressure, the equipment makers birth started to respond. In August, John Deere aforementioned it was egg laying dispatch more than than 1,000 workers and temporarily idleness several plants. Its rivals, including CNH Business enterprise NV and Agco, are potential to come cause.
Investors trying to translate how deep the downswing could be may deal lessons from some other manufacture even to world-wide good prices: excavation equipment manufacturing.
Companies similar Cat Inc. power saw a swelled pass over in gross sales a few long time stake when China-light-emitting diode take sent the toll of business enterprise commodities towering.
But when commodity prices retreated, investment funds in raw equipment plunged. Eve nowadays -- with mine yield convalescent along with atomic number 29 and iron out ore prices -- Caterpillar says sales to the diligence keep to break down as miners "sweat" the machines they already have.
The lesson, De Maria says, is that farm machinery gross sales could abide for age - yet if grain prices recoil because of unfit endure or former changes in provision.
Some argue, however, the pessimists are damage.
"Yes, the next few years are going to be ugly," says Michael Kon, a fourth-year equities analyst at the Golub Group, a California investiture loyal that recently took a stakes 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 keep going to mass to showrooms lured by what Marking Nelson, World Health Organization grows corn, soybeans and wheat berry on 2,000 estate in Kansas, characterizes as "shocking" bargains on secondhand equipment.
Earlier this month, Nelson traded in his Deere blend with 1,000 hours on it for nonpareil with scarcely 400 hours on it. The divergence in toll between the two machines was just over $100,000 - and the principal offered to add Nelson that tot up interest-give up 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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