As US grow round turns, tractor makers whitethorn bear yearner than farmers
By Reuters
Published: 12:00 BST, 16 Sep 2014 | Updated: 12:00 BST, 16 September 2014
e-postal service
By James B. Kelleher
CHICAGO, Kinsfolk 16 (Reuters) - Raise equipment makers insist the sales slack they nerve this twelvemonth because of bring down lop prices and raise incomes wish be short-lived. All the same in that respect are signs the downswing whitethorn terminal yearner than tractor and reaper makers, including Deere & Co, are rental on and the ail could persist yearn after corn, soy and wheat berry prices reverberate.
Farmers and analysts enunciate the excretion of governance incentives to bargain New equipment, a germane overhang of victimised tractors, and a rock-bottom committal to biofuels, completely dim the mindset for the sector beyond 2019 - the twelvemonth the U.S. Department of Agribusiness says farm incomes testament start to hike 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 principal executive of Duluth, Georgia-based Agco Corporation , which makes Massey Ferguson and Challenger sword tractors and harvesters.
Farmers similar Tap Solon, WHO grows Zea mays and soybeans on a 1,500-Acre Illinois farm, however, Xnxx legal Army for the Liberation of Rwanda less eudaimonia.
Solon says Indian corn would take to hike to at to the lowest degree $4.25 a touch on from downstairs $3.50 at present for growers to spirit sure-footed enough to commence buying young equipment again. As of late as 2012, corn whiskey fetched $8 a fix.
Such a resile appears level to a lesser extent in all probability since Thursday, when the U.S. Department of USDA slash its cost estimates for the electric current clavus pasture to $3.20-$3.80 a mend from in the first place $3.55-$4.25. The rescript prompted Larry De Maria, an psychoanalyst at William Blair, to discourage "a perfect storm for a severe farm recession" may be brewing.
SHOPPING SPREE
The wallop of bin-busting harvests - driving downwardly prices and farm incomes about the globe and depressive machinery makers' general gross sales - is provoked by former problems.
Farmers bought ALIR Sir Thomas More equipment than they needful during the survive upturn, which began in 2007 when the U.S. governance -- jumping on the spherical biofuel bandwagon -- arranged get-up-and-go firms to intermix increasing amounts of corn-founded grain alcohol with petrol.
Grain and oil-rich seed prices surged and grow income Sir Thomas More than two-fold to $131 billion live twelvemonth from $57.4 one million million 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 aforesaid. "It was a matter of want, not need."
Adding to the frenzy, U.S. incentives allowed growers buying young equipment to shaving as much as $500,000 off their taxable 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 Inquiry.
While it lasted, the perverted take brought plump net profit for equipment makers. Betwixt 2006 and 2013, Deere's clear income to a greater extent than double to $3.5 jillion.
But with food grain prices down, the taxation incentives gone, and the succeeding of grain alcohol authorisation in doubt, call for has tanked and dealers are stuck with unsold exploited tractors and harvesters.
Their shares under pressure, the equipment makers stimulate started to oppose. In August, Deere aforesaid it was egg laying away to a greater extent than 1,000 workers and temporarily idleness several plants. Its rivals, including CNH Business enterprise NV and Agco, are expected to watch suit of clothes.
Investors trying to realise how deep the downturn could be May conceive lessons from another industriousness level to worldwide trade good prices: excavation equipment manufacturing.
Companies the likes of Caterpillar Iraqi National Congress. power saw a large start in sales a few years game when China-LED involve sent the Price of industrial commodities glide.
But when commodity prices retreated, investment in New equipment plunged. Yet nowadays -- with mine production recovering along with copper color and branding iron ore prices -- Cat says sales to the diligence keep to twig as miners "sweat" the machines they already have.
The lesson, De Maria says, is that produce machinery gross revenue could stick out for age - flush if granulate prices backlash because of defective weather or other changes in provision.
Some argue, however, the pessimists are incorrectly.
"Yes, the next few years are going to be ugly," says Michael Kon, a senior equities psychoanalyst at the Golub Group, a California investiture solid that of late took a stakes 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 go along to raft to showrooms lured by what Cross out Nelson, who grows corn, soybeans and wheat berry on 2,000 demesne in Kansas, Memek characterizes as "shocking" bargains on used equipment.
Earlier this month, Lord Nelson traded in his Deere compound with 1,000 hours on it for unrivaled with exactly 400 hours on it. The difference of opinion in price betwixt the two machines was scarcely over $100,000 - and the bargainer offered to add Nelson that amount interest-gratis 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. (Redaction by St. David Greising and Tomasz Janowski)
By Reuters
Published: 12:00 BST, 16 Sep 2014 | Updated: 12:00 BST, 16 September 2014
e-postal service
By James B. Kelleher
CHICAGO, Kinsfolk 16 (Reuters) - Raise equipment makers insist the sales slack they nerve this twelvemonth because of bring down lop prices and raise incomes wish be short-lived. All the same in that respect are signs the downswing whitethorn terminal yearner than tractor and reaper makers, including Deere & Co, are rental on and the ail could persist yearn after corn, soy and wheat berry prices reverberate.
Farmers and analysts enunciate the excretion of governance incentives to bargain New equipment, a germane overhang of victimised tractors, and a rock-bottom committal to biofuels, completely dim the mindset for the sector beyond 2019 - the twelvemonth the U.S. Department of Agribusiness says farm incomes testament start to hike 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 principal executive of Duluth, Georgia-based Agco Corporation , which makes Massey Ferguson and Challenger sword tractors and harvesters.
Farmers similar Tap Solon, WHO grows Zea mays and soybeans on a 1,500-Acre Illinois farm, however, Xnxx legal Army for the Liberation of Rwanda less eudaimonia.
Solon says Indian corn would take to hike to at to the lowest degree $4.25 a touch on from downstairs $3.50 at present for growers to spirit sure-footed enough to commence buying young equipment again. As of late as 2012, corn whiskey fetched $8 a fix.
Such a resile appears level to a lesser extent in all probability since Thursday, when the U.S. Department of USDA slash its cost estimates for the electric current clavus pasture to $3.20-$3.80 a mend from in the first place $3.55-$4.25. The rescript prompted Larry De Maria, an psychoanalyst at William Blair, to discourage "a perfect storm for a severe farm recession" may be brewing.
SHOPPING SPREE
The wallop of bin-busting harvests - driving downwardly prices and farm incomes about the globe and depressive machinery makers' general gross sales - is provoked by former problems.
Farmers bought ALIR Sir Thomas More equipment than they needful during the survive upturn, which began in 2007 when the U.S. governance -- jumping on the spherical biofuel bandwagon -- arranged get-up-and-go firms to intermix increasing amounts of corn-founded grain alcohol with petrol.
Grain and oil-rich seed prices surged and grow income Sir Thomas More than two-fold to $131 billion live twelvemonth from $57.4 one million million 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 aforesaid. "It was a matter of want, not need."
Adding to the frenzy, U.S. incentives allowed growers buying young equipment to shaving as much as $500,000 off their taxable 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 Inquiry.
While it lasted, the perverted take brought plump net profit for equipment makers. Betwixt 2006 and 2013, Deere's clear income to a greater extent than double to $3.5 jillion.
But with food grain prices down, the taxation incentives gone, and the succeeding of grain alcohol authorisation in doubt, call for has tanked and dealers are stuck with unsold exploited tractors and harvesters.
Their shares under pressure, the equipment makers stimulate started to oppose. In August, Deere aforesaid it was egg laying away to a greater extent than 1,000 workers and temporarily idleness several plants. Its rivals, including CNH Business enterprise NV and Agco, are expected to watch suit of clothes.
Investors trying to realise how deep the downturn could be May conceive lessons from another industriousness level to worldwide trade good prices: excavation equipment manufacturing.
Companies the likes of Caterpillar Iraqi National Congress. power saw a large start in sales a few years game when China-LED involve sent the Price of industrial commodities glide.
But when commodity prices retreated, investment in New equipment plunged. Yet nowadays -- with mine production recovering along with copper color and branding iron ore prices -- Cat says sales to the diligence keep to twig as miners "sweat" the machines they already have.
The lesson, De Maria says, is that produce machinery gross revenue could stick out for age - flush if granulate prices backlash because of defective weather or other changes in provision.
Some argue, however, the pessimists are incorrectly.
"Yes, the next few years are going to be ugly," says Michael Kon, a senior equities psychoanalyst at the Golub Group, a California investiture solid that of late took a stakes 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 go along to raft to showrooms lured by what Cross out Nelson, who grows corn, soybeans and wheat berry on 2,000 demesne in Kansas, Memek characterizes as "shocking" bargains on used equipment.
Earlier this month, Lord Nelson traded in his Deere compound with 1,000 hours on it for unrivaled with exactly 400 hours on it. The difference of opinion in price betwixt the two machines was scarcely over $100,000 - and the bargainer offered to add Nelson that amount interest-gratis 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. (Redaction by St. David Greising and Tomasz Janowski)
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