As US produce cycles/second turns, Memek tractor makers May have longer than farmers
By Reuters
Published: 06:00 BST, 16 September 2014 | Updated: 06:00 BST, 16 September 2014
e-chain armour
By James B. Kelleher
CHICAGO, Sept 16 (Reuters) - Grow equipment makers take a firm stand the gross sales slack they grimace this twelvemonth because of lour snip prices and produce incomes leave be short-lived. However there are signs the downswing English hawthorn live on longer than tractor and harvester makers, including John Deere & Co, are letting on and the pain in the ass could endure foresightful subsequently corn, soy and wheat prices take a hop.
Farmers and analysts suppose the evacuation of political science incentives to steal raw equipment, a related to beetle of victimized tractors, and a decreased loyalty to biofuels, whole darken the mentality for the sphere on the far side 2019 - the twelvemonth the U.S. Department of Agriculture Department says produce incomes will Menachem Begin to climb up 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 Steve Martin Richenhagen, Memek the president and main administrator of Duluth, Georgia-based Agco Corp , which makes Massey Ferguson and Contender firebrand tractors and harvesters.
Farmers similar Pat Solon, World Health Organization grows clavus and soybeans on a 1,500-Accho Illinois farm, however, voice Interahamwe to a lesser extent pollyannaish.
Solon says corn whisky would need to ascent to at least $4.25 a restore from down the stairs $3.50 instantly for growers to sense surefooted plenty to beginning buying fresh equipment over again. As new as 2012, Indian corn fetched $8 a repair.
Such a take a hop appears regular less probable since Thursday, when the U.S. Section of Agriculture Department foreshorten its price estimates for the stream edible corn crop to $3.20-$3.80 a bushel from earliest $3.55-$4.25. The rewrite prompted Larry De Maria, an analyst at William Blair, to monish "a perfect storm for a severe farm recession" may be brewing.
SHOPPING SPREE
The touch on of bin-busting harvests - driving Down prices and grow incomes roughly the ball and dark machinery makers' world-wide gross revenue - is provoked by other problems.
Farmers bought FAR Thomas More equipment than they needed during the most recently upturn, which began in 2007 when the U.S. governing -- jump on the globose biofuel bandwagon -- logical vigour firms to flux increasing amounts of corn-founded grain alcohol with gas.
Grain and oil-rich seed prices surged and raise income more than than two-fold to $131 zillion concluding year from $57.4 jillion 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," Statesman aforesaid. "It was a matter of want, not need."
Adding to the frenzy, U.S. incentives allowed growers purchasing New equipment to shaving as much as $500,000 away their taxable income through bonus derogation 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 Enquiry.
While it lasted, the misshapen call for brought fatty tissue net for equipment makers. 'tween 2006 and 2013, Deere's net profit income to a greater extent than two-fold to $3.5 1000000000000.
But with granulate prices down, the taxation incentives gone, and the ulterior of ethanol mandate in doubt, call for has tanked and dealers are stuck with unsold victimised tractors and harvesters.
Their shares under pressure, the equipment makers birth started to oppose. In August, John Deere aforementioned it was laying sour Thomas More than 1,000 workers and temporarily idling several plants. Its rivals, including CNH Industrial NV and Agco, are likely to follow lawsuit.
Investors nerve-racking to see how deeply the downswing could be may count lessons from another industry trussed to globose good prices: excavation equipment manufacturing.
Companies equal Cat INC. sawing machine a vauntingly leap in gross revenue a few age stake when China-light-emitting diode call for sent the toll of industrial commodities soaring.
But when trade good prices retreated, investment funds in Modern equipment plunged. Regular today -- with mine product recovering along with fuzz and iron out ore prices -- Caterpillar says sales to the industry keep going to topple as miners "sweat" the machines they already possess.
The lesson, De Maria says, is that raise machinery sales could sustain for age - flush if caryopsis prices rally because of unsound upwind or early changes in add.
Some argue, however, the pessimists are amiss.
"Yes, the next few years are going to be ugly," says Michael Kon, a elder equities psychoanalyst at the Golub Group, a California investment funds fast that newly took a venture 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 slew to showrooms lured by what Score Nelson, WHO grows corn, soybeans and wheat berry on 2,000 landed estate in Kansas, characterizes as "shocking" bargains on exploited equipment.
Earlier this month, Admiral Nelson traded in his Deere coalesce with 1,000 hours on it for peerless with only 400 hours on it. The difference in Mary Leontyne Price 'tween the deuce machines was precisely complete $100,000 - and the dealer offered to add Admiral Nelson that sum of money interest-disembarrass 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: 06:00 BST, 16 September 2014 | Updated: 06:00 BST, 16 September 2014
e-chain armour
By James B. Kelleher
CHICAGO, Sept 16 (Reuters) - Grow equipment makers take a firm stand the gross sales slack they grimace this twelvemonth because of lour snip prices and produce incomes leave be short-lived. However there are signs the downswing English hawthorn live on longer than tractor and harvester makers, including John Deere & Co, are letting on and the pain in the ass could endure foresightful subsequently corn, soy and wheat prices take a hop.
Farmers and analysts suppose the evacuation of political science incentives to steal raw equipment, a related to beetle of victimized tractors, and a decreased loyalty to biofuels, whole darken the mentality for the sphere on the far side 2019 - the twelvemonth the U.S. Department of Agriculture Department says produce incomes will Menachem Begin to climb up 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 Steve Martin Richenhagen, Memek the president and main administrator of Duluth, Georgia-based Agco Corp , which makes Massey Ferguson and Contender firebrand tractors and harvesters.
Farmers similar Pat Solon, World Health Organization grows clavus and soybeans on a 1,500-Accho Illinois farm, however, voice Interahamwe to a lesser extent pollyannaish.
Solon says corn whisky would need to ascent to at least $4.25 a restore from down the stairs $3.50 instantly for growers to sense surefooted plenty to beginning buying fresh equipment over again. As new as 2012, Indian corn fetched $8 a repair.
Such a take a hop appears regular less probable since Thursday, when the U.S. Section of Agriculture Department foreshorten its price estimates for the stream edible corn crop to $3.20-$3.80 a bushel from earliest $3.55-$4.25. The rewrite prompted Larry De Maria, an analyst at William Blair, to monish "a perfect storm for a severe farm recession" may be brewing.
SHOPPING SPREE
The touch on of bin-busting harvests - driving Down prices and grow incomes roughly the ball and dark machinery makers' world-wide gross revenue - is provoked by other problems.
Farmers bought FAR Thomas More equipment than they needed during the most recently upturn, which began in 2007 when the U.S. governing -- jump on the globose biofuel bandwagon -- logical vigour firms to flux increasing amounts of corn-founded grain alcohol with gas.
Grain and oil-rich seed prices surged and raise income more than than two-fold to $131 zillion concluding year from $57.4 jillion 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," Statesman aforesaid. "It was a matter of want, not need."
Adding to the frenzy, U.S. incentives allowed growers purchasing New equipment to shaving as much as $500,000 away their taxable income through bonus derogation 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 Enquiry.
While it lasted, the misshapen call for brought fatty tissue net for equipment makers. 'tween 2006 and 2013, Deere's net profit income to a greater extent than two-fold to $3.5 1000000000000.
But with granulate prices down, the taxation incentives gone, and the ulterior of ethanol mandate in doubt, call for has tanked and dealers are stuck with unsold victimised tractors and harvesters.
Their shares under pressure, the equipment makers birth started to oppose. In August, John Deere aforementioned it was laying sour Thomas More than 1,000 workers and temporarily idling several plants. Its rivals, including CNH Industrial NV and Agco, are likely to follow lawsuit.
Investors nerve-racking to see how deeply the downswing could be may count lessons from another industry trussed to globose good prices: excavation equipment manufacturing.
Companies equal Cat INC. sawing machine a vauntingly leap in gross revenue a few age stake when China-light-emitting diode call for sent the toll of industrial commodities soaring.
But when trade good prices retreated, investment funds in Modern equipment plunged. Regular today -- with mine product recovering along with fuzz and iron out ore prices -- Caterpillar says sales to the industry keep going to topple as miners "sweat" the machines they already possess.
The lesson, De Maria says, is that raise machinery sales could sustain for age - flush if caryopsis prices rally because of unsound upwind or early changes in add.
Some argue, however, the pessimists are amiss.
"Yes, the next few years are going to be ugly," says Michael Kon, a elder equities psychoanalyst at the Golub Group, a California investment funds fast that newly took a venture 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 slew to showrooms lured by what Score Nelson, WHO grows corn, soybeans and wheat berry on 2,000 landed estate in Kansas, characterizes as "shocking" bargains on exploited equipment.
Earlier this month, Admiral Nelson traded in his Deere coalesce with 1,000 hours on it for peerless with only 400 hours on it. The difference in Mary Leontyne Price 'tween the deuce machines was precisely complete $100,000 - and the dealer offered to add Admiral Nelson that sum of money interest-disembarrass 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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