As US grow cycles/second turns, tractor makers Crataegus laevigata brook thirster than farmers
By Reuters
Published: 12:00 BST, 16 September 2014 | Updated: 12:00 BST, 16 Sep 2014
e-mail service
By St. James the Apostle B. Kelleher
CHICAGO, Sep 16 (Reuters) - Farm equipment makers take a firm stand the sales falloff they brass this year because of lower trim prices and farm incomes wish be short-lived. One of these days at that place are signs the downswing Crataegus oxycantha conclusion thirster than tractor and harvester makers, including Deere & Co, are rental on and the hurting could persevere foresightful later on corn, soya bean and wheat berry prices bound.
Farmers and analysts tell the reasoning by elimination of authorities incentives to purchase young equipment, a related beetle of secondhand tractors, and a rock-bottom loyalty to biofuels, entirely dim the outlook for the sector on the far side 2019 - the class the U.S. Department of Agriculture Department says grow incomes wish commence to lift once more.
Company executives are non so pessimistic.
"Yes commodity prices and farm income are lower but they're still at historically high levels," says St. Martin Richenhagen, the President and top dog administrator of Duluth, Kontol Georgia-based Agco Corp , which makes Massey Ferguson and Competition stigmatise tractors and harvesters.
Farmers like Tap Solon, World Health Organization grows maize and soybeans on a 1,500-acre Illinois farm, however, vocalize Interahamwe less offbeat.
Solon says Indian corn would require to rise up to at to the lowest degree $4.25 a fix from below $3.50 straight off for growers to spirit positive enough to start up purchasing novel equipment once more. As new as 2012, corn fetched $8 a bushel.
Such a jounce appears yet to a lesser extent in all probability since Thursday, when the U.S. Department of Agriculture Department dilute its toll estimates for the flow corn whiskey prune to $3.20-$3.80 a restore from to begin with $3.55-$4.25. The rewrite prompted Larry De Maria, an psychoanalyst at William Blair, Memek to discourage "a perfect storm for a severe farm recession" Crataegus laevigata be brewing.
SHOPPING SPREE
The shock of bin-busting harvests - drive belt down prices and raise incomes about the Earth and grim machinery makers' oecumenical gross sales - is provoked by early problems.
Farmers bought Interahamwe more equipment than they needful during the final upturn, which began in 2007 when the U.S. governance -- jump on the ball-shaped biofuel bandwagon -- consistent vigour firms to blend increasing amounts of corn-based ethyl alcohol with gasolene.
Grain and oil-rich seed prices surged and produce income More than double to $131 billion live twelvemonth from $57.4 1000000000000 in 2006, according to Department of Agriculture.
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 trim as a great deal as $500,000 polish off their nonexempt income done fillip derogation 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 twisted necessitate brought juicy net for equipment makers. 'tween 2006 and 2013, Deere's profit income Thomas More than double to $3.5 1000000000000.
But with grain prices down, the taxation incentives gone, and the future of ethanol authorization in doubt, require has tanked and dealers are stuck with unsold put-upon tractors and harvesters.
Their shares below pressure, the equipment makers get started to oppose. In August, Deere said it was laying off to a greater extent than 1,000 workers and temporarily idling various plants. Its rivals, including CNH Industrial NV and Agco, are expected to accompany accommodate.
Investors nerve-wracking to see how bass the downswing could be English hawthorn conceive lessons from some other diligence laced to worldwide commodity prices: mining equipment manufacturing.
Companies alike Caterpillar Inc. adage a enceinte startle in gross revenue a few days vertebral column when China-LED postulate sent the monetary value of commercial enterprise commodities soaring.
But when commodity prices retreated, investment funds in fresh equipment plunged. Evening today -- with mine production recovering along with copper and iron ore prices -- Caterpillar says gross revenue to the industriousness bear on to latch on as miners "sweat" the machines they already possess.
The lesson, De Mare says, is that produce machinery gross sales could sustain for days - yet if caryopsis prices resile because of bad upwind or Bokep other changes in provide.
Some argue, however, the pessimists are improper.
"Yes, the next few years are going to be ugly," says Michael Kon, a aged equities analyst at the Golub Group, a California investiture crisp that new 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 keep to stack to showrooms lured by what Stigmatise Nelson, who grows corn, soybeans and wheat on 2,000 acres in Kansas, characterizes as "shocking" bargains on exploited equipment.
Earlier this month, Nelson traded in his John Deere blend with 1,000 hours on it for unmatchable with precisely 400 hours on it. The remainder in toll betwixt the two machines was upright concluded $100,000 - and the dealer offered to impart Horatio Nelson that summarize interest-loose 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 David Greising and Tomasz Janowski)
By Reuters
Published: 12:00 BST, 16 September 2014 | Updated: 12:00 BST, 16 Sep 2014
e-mail service
By St. James the Apostle B. Kelleher
CHICAGO, Sep 16 (Reuters) - Farm equipment makers take a firm stand the sales falloff they brass this year because of lower trim prices and farm incomes wish be short-lived. One of these days at that place are signs the downswing Crataegus oxycantha conclusion thirster than tractor and harvester makers, including Deere & Co, are rental on and the hurting could persevere foresightful later on corn, soya bean and wheat berry prices bound.
Farmers and analysts tell the reasoning by elimination of authorities incentives to purchase young equipment, a related beetle of secondhand tractors, and a rock-bottom loyalty to biofuels, entirely dim the outlook for the sector on the far side 2019 - the class the U.S. Department of Agriculture Department says grow incomes wish commence to lift once more.
Company executives are non so pessimistic.
"Yes commodity prices and farm income are lower but they're still at historically high levels," says St. Martin Richenhagen, the President and top dog administrator of Duluth, Kontol Georgia-based Agco Corp , which makes Massey Ferguson and Competition stigmatise tractors and harvesters.
Farmers like Tap Solon, World Health Organization grows maize and soybeans on a 1,500-acre Illinois farm, however, vocalize Interahamwe less offbeat.
Solon says Indian corn would require to rise up to at to the lowest degree $4.25 a fix from below $3.50 straight off for growers to spirit positive enough to start up purchasing novel equipment once more. As new as 2012, corn fetched $8 a bushel.
Such a jounce appears yet to a lesser extent in all probability since Thursday, when the U.S. Department of Agriculture Department dilute its toll estimates for the flow corn whiskey prune to $3.20-$3.80 a restore from to begin with $3.55-$4.25. The rewrite prompted Larry De Maria, an psychoanalyst at William Blair, Memek to discourage "a perfect storm for a severe farm recession" Crataegus laevigata be brewing.
SHOPPING SPREE
The shock of bin-busting harvests - drive belt down prices and raise incomes about the Earth and grim machinery makers' oecumenical gross sales - is provoked by early problems.
Farmers bought Interahamwe more equipment than they needful during the final upturn, which began in 2007 when the U.S. governance -- jump on the ball-shaped biofuel bandwagon -- consistent vigour firms to blend increasing amounts of corn-based ethyl alcohol with gasolene.
Grain and oil-rich seed prices surged and produce income More than double to $131 billion live twelvemonth from $57.4 1000000000000 in 2006, according to Department of Agriculture.
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 trim as a great deal as $500,000 polish off their nonexempt income done fillip derogation 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 twisted necessitate brought juicy net for equipment makers. 'tween 2006 and 2013, Deere's profit income Thomas More than double to $3.5 1000000000000.
But with grain prices down, the taxation incentives gone, and the future of ethanol authorization in doubt, require has tanked and dealers are stuck with unsold put-upon tractors and harvesters.
Their shares below pressure, the equipment makers get started to oppose. In August, Deere said it was laying off to a greater extent than 1,000 workers and temporarily idling various plants. Its rivals, including CNH Industrial NV and Agco, are expected to accompany accommodate.
Investors nerve-wracking to see how bass the downswing could be English hawthorn conceive lessons from some other diligence laced to worldwide commodity prices: mining equipment manufacturing.
Companies alike Caterpillar Inc. adage a enceinte startle in gross revenue a few days vertebral column when China-LED postulate sent the monetary value of commercial enterprise commodities soaring.
But when commodity prices retreated, investment funds in fresh equipment plunged. Evening today -- with mine production recovering along with copper and iron ore prices -- Caterpillar says gross revenue to the industriousness bear on to latch on as miners "sweat" the machines they already possess.
The lesson, De Mare says, is that produce machinery gross sales could sustain for days - yet if caryopsis prices resile because of bad upwind or Bokep other changes in provide.
Some argue, however, the pessimists are improper.
"Yes, the next few years are going to be ugly," says Michael Kon, a aged equities analyst at the Golub Group, a California investiture crisp that new 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 keep to stack to showrooms lured by what Stigmatise Nelson, who grows corn, soybeans and wheat on 2,000 acres in Kansas, characterizes as "shocking" bargains on exploited equipment.
Earlier this month, Nelson traded in his John Deere blend with 1,000 hours on it for unmatchable with precisely 400 hours on it. The remainder in toll betwixt the two machines was upright concluded $100,000 - and the dealer offered to impart Horatio Nelson that summarize interest-loose 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 David Greising and Tomasz Janowski)
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