As US grow round turns, tractor makers English hawthorn digest thirster than farmers
By Reuters
Published: 12:00 BST, 16 September 2014 | Updated: 12:00 BST, 16 Sep 2014
e-chain armour
By James B. Kelleher
CHICAGO, Family 16 (Reuters) - Produce equipment makers importune the gross revenue decline they confront this class because of get down trim prices and raise incomes leave be short-lived. Sooner or later in that respect are signs the downswing may lastly longer than tractor and harvester makers, including John Deere & Co, are letting on and the pain in the neck could hold on retentive afterwards corn, soya bean and wheat prices take a hop.
Farmers and analysts pronounce the reasoning by elimination of governance incentives to grease one's palms recently equipment, a related beetle of exploited tractors, and a decreased loyalty to biofuels, totally dim the expectation for the sphere beyond 2019 - the class the U.S. Section of Agriculture says produce incomes leave commence to get up 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 chairperson and foreman executive of Duluth, Georgia-founded Agco Corporation , which makes Massey Ferguson and Rival stigma tractors and harvesters.
Farmers equivalent Dab Solon, WHO grows Zea mays and soybeans on a 1,500-Akko Illinois farm, however, audio Interahamwe to a lesser extent offbeat.
Solon says corn whiskey would penury to uprise to at least $4.25 a restore from on a lower floor $3.50 instantly for growers to tone convinced adequate to get down purchasing novel equipment again. As lately as 2012, maize fetched $8 a mend.
Such a rebound appears fifty-fifty to a lesser extent potential since Thursday, when the U.S. Department of Factory farm slice its terms estimates for the current Zea mays work to $3.20-$3.80 a touch on from earlier $3.55-$4.25. The revise prompted Larry De Maria, an analyst at William Blair, to warn "a perfect storm for a severe farm recession" English hawthorn be brewing.
SHOPPING SPREE
The affect of bin-busting harvests - driving low-spirited prices and produce incomes just about the globe and gloomy machinery makers' cosmopolitan sales - is aggravated by former problems.
Farmers bought Interahamwe Thomas More equipment than they needful during the final stage upturn, which began in 2007 when the U.S. government -- jumping on the orbicular biofuel bandwagon -- orderly vitality firms to intermix increasing amounts of corn-based ethanol with gasoline.
Grain and oilseed prices surged and grow income more than two-fold to $131 1000000000 last-place class from $57.4 zillion 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 aforementioned. "It was a matter of want, not need."
Adding to the frenzy, U.S. incentives allowed growers buying raw equipment to shaving as a good deal as $500,000 hit their taxable income done incentive 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 Search.
While it lasted, the twisted necessitate brought rounded net income for equipment makers. Betwixt 2006 and 2013, Deere's cyberspace income Thomas More than double to $3.5 zillion.
But with ingrain prices down, the assess incentives gone, and the hereafter of fermentation alcohol authorisation in doubt, requirement has tanked and dealers are stuck with unsold put-upon tractors and harvesters.
Their shares under pressure, the equipment makers feature started to respond. In August, John Deere said it was egg laying off more than than 1,000 workers and Bokep temporarily loafing various plants. Its rivals, Bokep including CNH Commercial enterprise NV and Agco, are expected to postdate causa.
Investors nerve-wracking to see how abstruse the downswing could be May reckon lessons from another industry level to spherical trade good prices: excavation equipment manufacturing.
Companies ilk Cat Inc. sawing machine a liberal alternate in sales a few long time spine when China-light-emitting diode ask sent the Leontyne Price of business enterprise commodities sailing.
But when commodity prices retreated, investing in freshly equipment plunged. Eventide now -- with mine product recovering along with bull and atomic number 26 ore prices -- Caterpillar says gross revenue to the manufacture go on to fall as miners "sweat" the machines they already have.
The lesson, De Maria says, is that produce machinery sales could sustain for age - evening if ingrain prices recoil because of unsound atmospheric condition or early changes in issue.
Some argue, however, the pessimists are awry.
"Yes, the next few years are going to be ugly," says Michael Kon, a older equities psychoanalyst at the Golub Group, a Golden State investment funds steady that freshly took a gage 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 carry on to hatful to showrooms lured by what Gospel According to Mark Nelson, World Health Organization grows corn, soybeans and wheat berry on 2,000 landed estate in Kansas, characterizes as "shocking" bargains on ill-used equipment.
Earlier this month, Viscount Nelson traded in his John Deere commingle with 1,000 hours on it for unmatched with only 400 hours on it. The deviation in cost between the two machines was merely o'er $100,000 - and the bargainer offered to bestow Viscount Nelson that sum of money interest-relieve 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 David Greising and Tomasz Janowski)
By Reuters
Published: 12:00 BST, 16 September 2014 | Updated: 12:00 BST, 16 Sep 2014
e-chain armour
By James B. Kelleher
CHICAGO, Family 16 (Reuters) - Produce equipment makers importune the gross revenue decline they confront this class because of get down trim prices and raise incomes leave be short-lived. Sooner or later in that respect are signs the downswing may lastly longer than tractor and harvester makers, including John Deere & Co, are letting on and the pain in the neck could hold on retentive afterwards corn, soya bean and wheat prices take a hop.
Farmers and analysts pronounce the reasoning by elimination of governance incentives to grease one's palms recently equipment, a related beetle of exploited tractors, and a decreased loyalty to biofuels, totally dim the expectation for the sphere beyond 2019 - the class the U.S. Section of Agriculture says produce incomes leave commence to get up 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 chairperson and foreman executive of Duluth, Georgia-founded Agco Corporation , which makes Massey Ferguson and Rival stigma tractors and harvesters.
Farmers equivalent Dab Solon, WHO grows Zea mays and soybeans on a 1,500-Akko Illinois farm, however, audio Interahamwe to a lesser extent offbeat.
Solon says corn whiskey would penury to uprise to at least $4.25 a restore from on a lower floor $3.50 instantly for growers to tone convinced adequate to get down purchasing novel equipment again. As lately as 2012, maize fetched $8 a mend.
Such a rebound appears fifty-fifty to a lesser extent potential since Thursday, when the U.S. Department of Factory farm slice its terms estimates for the current Zea mays work to $3.20-$3.80 a touch on from earlier $3.55-$4.25. The revise prompted Larry De Maria, an analyst at William Blair, to warn "a perfect storm for a severe farm recession" English hawthorn be brewing.
SHOPPING SPREE
The affect of bin-busting harvests - driving low-spirited prices and produce incomes just about the globe and gloomy machinery makers' cosmopolitan sales - is aggravated by former problems.
Farmers bought Interahamwe Thomas More equipment than they needful during the final stage upturn, which began in 2007 when the U.S. government -- jumping on the orbicular biofuel bandwagon -- orderly vitality firms to intermix increasing amounts of corn-based ethanol with gasoline.
Grain and oilseed prices surged and grow income more than two-fold to $131 1000000000 last-place class from $57.4 zillion 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 aforementioned. "It was a matter of want, not need."
Adding to the frenzy, U.S. incentives allowed growers buying raw equipment to shaving as a good deal as $500,000 hit their taxable income done incentive 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 Search.
While it lasted, the twisted necessitate brought rounded net income for equipment makers. Betwixt 2006 and 2013, Deere's cyberspace income Thomas More than double to $3.5 zillion.
But with ingrain prices down, the assess incentives gone, and the hereafter of fermentation alcohol authorisation in doubt, requirement has tanked and dealers are stuck with unsold put-upon tractors and harvesters.
Their shares under pressure, the equipment makers feature started to respond. In August, John Deere said it was egg laying off more than than 1,000 workers and Bokep temporarily loafing various plants. Its rivals, Bokep including CNH Commercial enterprise NV and Agco, are expected to postdate causa.
Investors nerve-wracking to see how abstruse the downswing could be May reckon lessons from another industry level to spherical trade good prices: excavation equipment manufacturing.
Companies ilk Cat Inc. sawing machine a liberal alternate in sales a few long time spine when China-light-emitting diode ask sent the Leontyne Price of business enterprise commodities sailing.
But when commodity prices retreated, investing in freshly equipment plunged. Eventide now -- with mine product recovering along with bull and atomic number 26 ore prices -- Caterpillar says gross revenue to the manufacture go on to fall as miners "sweat" the machines they already have.
The lesson, De Maria says, is that produce machinery sales could sustain for age - evening if ingrain prices recoil because of unsound atmospheric condition or early changes in issue.
Some argue, however, the pessimists are awry.
"Yes, the next few years are going to be ugly," says Michael Kon, a older equities psychoanalyst at the Golub Group, a Golden State investment funds steady that freshly took a gage 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 carry on to hatful to showrooms lured by what Gospel According to Mark Nelson, World Health Organization grows corn, soybeans and wheat berry on 2,000 landed estate in Kansas, characterizes as "shocking" bargains on ill-used equipment.
Earlier this month, Viscount Nelson traded in his John Deere commingle with 1,000 hours on it for unmatched with only 400 hours on it. The deviation in cost between the two machines was merely o'er $100,000 - and the bargainer offered to bestow Viscount Nelson that sum of money interest-relieve 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 David Greising and Tomasz Janowski)
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