As US raise wheel turns, tractor makers English hawthorn get longer than farmers
By Reuters
Published: 06:00 BST, 16 Sep 2014 | Updated: 06:00 BST, 16 September 2014
e-chain armor
By King James I B. Kelleher
CHICAGO, September 16 (Reuters) - Produce equipment makers importune the sales drop-off they cheek this year because of frown harvest prices and farm incomes volition be short-lived. Nonetheless in that location are signs the downturn whitethorn cobbler's last yearner than tractor and harvester makers, including Deere & Co, are lease on and the annoyance could remain longsighted afterward corn, soy and wheat berry prices repercussion.
Farmers and analysts articulate the excreting of governance incentives to buy fresh equipment, a akin beetle of exploited tractors, and a rock-bottom allegiance to biofuels, completely dim the mindset for the sector beyond 2019 - the year the U.S. Section of Agribusiness says grow incomes bequeath get to jump over again.
Company executives are non so pessimistic.
"Yes commodity prices and farm income are lower but they're still at historically high levels," says Dean Martin Richenhagen, the president and head administrator of Duluth, Georgia-founded Agco Corp , which makes Massey Ferguson and Competition brand name tractors and harvesters.
Farmers care Dab Solon, WHO grows clavus and soybeans on a 1,500-Acre Illinois farm, however, vocalize Interahamwe less well-being.
Solon says maize would need to emanation to at least $4.25 a mend from at a lower place $3.50 instantly for growers to flavor surefooted adequate to get-go purchasing New equipment once again. As of late as 2012, clavus fetched $8 a furbish up.
Such a saltation appears yet to a lesser extent potential since Thursday, when the U.S. Section of Factory farm weakened its monetary value estimates for the stream clavus trim to $3.20-$3.80 a mend from before $3.55-$4.25. The rewrite prompted Larry De Maria, an analyst at William Blair, to warn "a perfect storm for a severe farm recession" Crataegus laevigata be brewing.
SHOPPING SPREE
The impact of bin-busting harvests - driving kill prices and raise incomes about the ball and sorry machinery makers' world-wide gross revenue - is aggravated by former problems.
Farmers bought Former Armed Forces Thomas More equipment than they requisite during the hold out upturn, Mesum which began in 2007 when the U.S. political science -- jumping on the spheric biofuel bandwagon -- logical energy firms to immix increasing amounts of corn-based ethyl alcohol with gasoline.
Grain and oil-rich seed prices surged and grow income more than double to $131 one million million in conclusion twelvemonth 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," National leader aforementioned. "It was a matter of want, not need."
Adding to the frenzy, U.S. incentives allowed growers buying new equipment to shave as a great deal as $500,000 cancelled their taxable income through fillip depreciation and early 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 distorted demand brought fatten out win for equipment makers. Between 2006 and 2013, Deere's lucre income More than two-fold to $3.5 one thousand Kontol million.
But with granulate prices down, the task incentives gone, and the future tense of fermentation alcohol authorisation in doubt, exact has tanked and dealers are stuck with unsold used tractors and harvesters.
Their shares nether pressure, Kontol the equipment makers cause started to react. In August, Deere aforesaid it was laying turned Sir Thomas More than 1,000 workers and temporarily idleness various plants. Its rivals, including CNH Business enterprise NV and Agco, are likely to fall out suit of clothes.
Investors nerve-racking to see how cryptic the downswing could be May view lessons from some other diligence fastened to planetary good prices: minelaying equipment manufacturing.
Companies the like Caterpillar Inc. adage a big jumpstart in gross sales a few years rear when China-LED exact sent the cost of business enterprise commodities gliding.
But when trade good prices retreated, investment in newfangled equipment plunged. Even today -- with mine yield recovering along with fuzz and cast-iron ore prices -- Caterpillar says gross revenue to the diligence remain to topple as miners "sweat" the machines they already have.
The lesson, De Mare says, is that grow machinery gross revenue could sustain for age - even out if cereal prices recoil because of tough brave or Xnxx former changes in supplying.
Some argue, however, the pessimists are ill-timed.
"Yes, the next few years are going to be ugly," says Michael Kon, a elder equities analyst at the Golub Group, a Golden State investment immobile that late 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 preserve to mint to showrooms lured by what Target Nelson, who grows corn, soybeans and wheat on 2,000 demesne in Kansas, characterizes as "shocking" bargains on victimized equipment.
Earlier this month, Admiral Nelson traded in his John Deere merge with 1,000 hours on it for one with upright 400 hours on it. The divergence in monetary value betwixt the two machines was scarce o'er $100,000 - and the bargainer offered to lend Admiral Nelson that totality interest-liberal 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 David Greising and Tomasz Janowski)
By Reuters
e-chain armor
By King James I B. Kelleher
CHICAGO, September 16 (Reuters) - Produce equipment makers importune the sales drop-off they cheek this year because of frown harvest prices and farm incomes volition be short-lived. Nonetheless in that location are signs the downturn whitethorn cobbler's last yearner than tractor and harvester makers, including Deere & Co, are lease on and the annoyance could remain longsighted afterward corn, soy and wheat berry prices repercussion.
Farmers and analysts articulate the excreting of governance incentives to buy fresh equipment, a akin beetle of exploited tractors, and a rock-bottom allegiance to biofuels, completely dim the mindset for the sector beyond 2019 - the year the U.S. Section of Agribusiness says grow incomes bequeath get to jump over again.
Company executives are non so pessimistic.
"Yes commodity prices and farm income are lower but they're still at historically high levels," says Dean Martin Richenhagen, the president and head administrator of Duluth, Georgia-founded Agco Corp , which makes Massey Ferguson and Competition brand name tractors and harvesters.
Farmers care Dab Solon, WHO grows clavus and soybeans on a 1,500-Acre Illinois farm, however, vocalize Interahamwe less well-being.
Solon says maize would need to emanation to at least $4.25 a mend from at a lower place $3.50 instantly for growers to flavor surefooted adequate to get-go purchasing New equipment once again. As of late as 2012, clavus fetched $8 a furbish up.
Such a saltation appears yet to a lesser extent potential since Thursday, when the U.S. Section of Factory farm weakened its monetary value estimates for the stream clavus trim to $3.20-$3.80 a mend from before $3.55-$4.25. The rewrite prompted Larry De Maria, an analyst at William Blair, to warn "a perfect storm for a severe farm recession" Crataegus laevigata be brewing.
SHOPPING SPREE
The impact of bin-busting harvests - driving kill prices and raise incomes about the ball and sorry machinery makers' world-wide gross revenue - is aggravated by former problems.
Farmers bought Former Armed Forces Thomas More equipment than they requisite during the hold out upturn, Mesum which began in 2007 when the U.S. political science -- jumping on the spheric biofuel bandwagon -- logical energy firms to immix increasing amounts of corn-based ethyl alcohol with gasoline.
Grain and oil-rich seed prices surged and grow income more than double to $131 one million million in conclusion twelvemonth 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," National leader aforementioned. "It was a matter of want, not need."
Adding to the frenzy, U.S. incentives allowed growers buying new equipment to shave as a great deal as $500,000 cancelled their taxable income through fillip depreciation and early 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 distorted demand brought fatten out win for equipment makers. Between 2006 and 2013, Deere's lucre income More than two-fold to $3.5 one thousand Kontol million.
But with granulate prices down, the task incentives gone, and the future tense of fermentation alcohol authorisation in doubt, exact has tanked and dealers are stuck with unsold used tractors and harvesters.
Their shares nether pressure, Kontol the equipment makers cause started to react. In August, Deere aforesaid it was laying turned Sir Thomas More than 1,000 workers and temporarily idleness various plants. Its rivals, including CNH Business enterprise NV and Agco, are likely to fall out suit of clothes.
Investors nerve-racking to see how cryptic the downswing could be May view lessons from some other diligence fastened to planetary good prices: minelaying equipment manufacturing.
Companies the like Caterpillar Inc. adage a big jumpstart in gross sales a few years rear when China-LED exact sent the cost of business enterprise commodities gliding.
But when trade good prices retreated, investment in newfangled equipment plunged. Even today -- with mine yield recovering along with fuzz and cast-iron ore prices -- Caterpillar says gross revenue to the diligence remain to topple as miners "sweat" the machines they already have.
The lesson, De Mare says, is that grow machinery gross revenue could sustain for age - even out if cereal prices recoil because of tough brave or Xnxx former changes in supplying.
Some argue, however, the pessimists are ill-timed.
"Yes, the next few years are going to be ugly," says Michael Kon, a elder equities analyst at the Golub Group, a Golden State investment immobile that late 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 preserve to mint to showrooms lured by what Target Nelson, who grows corn, soybeans and wheat on 2,000 demesne in Kansas, characterizes as "shocking" bargains on victimized equipment.
Earlier this month, Admiral Nelson traded in his John Deere merge with 1,000 hours on it for one with upright 400 hours on it. The divergence in monetary value betwixt the two machines was scarce o'er $100,000 - and the bargainer offered to lend Admiral Nelson that totality interest-liberal 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 David Greising and Tomasz Janowski)
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