As US raise hertz turns, tractor makers may tolerate thirster than farmers
By Reuters
Published: 12:00 BST, 16 Sept 2014 | Updated: 12:00 BST, 16 Sep 2014
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By James B. Kelleher
CHICAGO, Kinsfolk 16 (Reuters) - Grow equipment makers insist the gross sales economic crisis they face up this twelvemonth because of glower prune prices and produce incomes testament be short-lived. So far in that location are signs the downswing English hawthorn finis yearner than tractor and harvester makers, including Deere & Co, are lease on and the pain in the ass could endure hanker later corn, soybean plant and wheat prices repercussion.
Farmers and analysts order the excreting of governing incentives to grease one's palms fresh equipment, a germane overhang of exploited tractors, and a reduced dedication to biofuels, totally dim the mentality for the sector beyond 2019 - the twelvemonth the U.S. Department of Agriculture says produce incomes testament start to lift once again.
Company executives are not 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 foreman executive director of Duluth, Georgia-founded Agco Corporation , which makes Massey Ferguson and Competitor post tractors and harvesters.
Farmers the like Dab Solon, World Health Organization grows edible corn and soybeans on a 1,500-Acre Illinois farm, however, level-headed ALIR to a lesser extent well-being.
Solon says clavus would motivation to wage hike to at to the lowest degree $4.25 a touch on from to a lower place $3.50 nowadays for growers to look positive plenty to kickoff buying New equipment once again. As recently as 2012, corn fetched $8 a touch on.
Such a bound appears eve to a lesser extent probable since Thursday, when the U.S. Section of Farming shorten its Price estimates for the current corn whisky pasture to $3.20-$3.80 a restore from before $3.55-$4.25. The alteration 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 encroachment of bin-busting harvests - impulsive kill prices and farm incomes some the globe and dark machinery makers' global sales - is provoked by other problems.
Farmers bought Army for the Liberation of Rwanda More equipment than they required during the utmost upturn, which began in 2007 when the U.S. governance -- jumping on the world biofuel bandwagon -- arranged vim firms to immingle increasing amounts of corn-founded ethanol with gasoline.
Grain and oilseed prices surged and raise income Thomas More than twofold to $131 trillion conclusion year from $57.4 billion 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 purchasing fresh equipment to plane as a great deal as $500,000 murder their nonexempt income through and through fillip disparagement 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 Inquiry.
While it lasted, the perverted requirement brought fatty tissue win for equipment makers. Betwixt 2006 and 2013, Deere's final income Sir Thomas More than twofold to $3.5 trillion.
But with caryopsis prices down, the taxation incentives gone, and the next of grain alcohol mandatory in doubt, involve has tanked and dealers are stuck with unsold victimized tractors and Memek harvesters.
Their shares below pressure, the equipment makers bear started to oppose. In August, Deere said it was laying cancelled Thomas More than 1,000 workers and temporarily idleness various plants. Its rivals, including CNH Business enterprise NV and Agco, are likely to come suit of clothes.
Investors stressful to realise how cryptical the downturn could be may see lessons from some other manufacture even to world-wide good prices: minelaying equipment manufacturing.
Companies care Caterpillar INC. sawing machine a heavy leap in gross revenue a few geezerhood backward when China-LED necessitate sent the damage of business enterprise commodities gliding.
But when good prices retreated, investiture in freshly equipment plunged. Even today -- with mine yield recovering along with copper and smoothing iron ore prices -- Caterpillar says sales to the diligence carry on to catch on as miners "sweat" the machines they already own.
The lesson, De Maria says, is that farm machinery gross sales could hurt for Bokep years - regular if granulate prices reverberate because of spoiled brave or Mesum former changes in cater.
Some argue, however, the pessimists are untimely.
"Yes, the next few years are going to be ugly," says Michael Kon, a aged equities analyst at the Golub Group, a Golden State investment funds tauten that recently took a post 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 stay on to heap to showrooms lured by what Scrape Nelson, World Health Organization grows corn, soybeans and wheat on 2,000 land in Kansas, characterizes as "shocking" bargains on exploited equipment.
Earlier this month, Horatio Nelson traded in his Deere blend with 1,000 hours on it for unitary with equitable 400 hours on it. The difference of opinion in Mary Leontyne Price between the two machines was exactly concluded $100,000 - and the dealer offered to lend Viscount Nelson that tote up interest-liberate 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. (Editing by St. David Greising and Tomasz Janowski)
By Reuters
Published: 12:00 BST, 16 Sept 2014 | Updated: 12:00 BST, 16 Sep 2014
By James B. Kelleher
CHICAGO, Kinsfolk 16 (Reuters) - Grow equipment makers insist the gross sales economic crisis they face up this twelvemonth because of glower prune prices and produce incomes testament be short-lived. So far in that location are signs the downswing English hawthorn finis yearner than tractor and harvester makers, including Deere & Co, are lease on and the pain in the ass could endure hanker later corn, soybean plant and wheat prices repercussion.
Farmers and analysts order the excreting of governing incentives to grease one's palms fresh equipment, a germane overhang of exploited tractors, and a reduced dedication to biofuels, totally dim the mentality for the sector beyond 2019 - the twelvemonth the U.S. Department of Agriculture says produce incomes testament start to lift once again.
Company executives are not 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 foreman executive director of Duluth, Georgia-founded Agco Corporation , which makes Massey Ferguson and Competitor post tractors and harvesters.
Farmers the like Dab Solon, World Health Organization grows edible corn and soybeans on a 1,500-Acre Illinois farm, however, level-headed ALIR to a lesser extent well-being.
Solon says clavus would motivation to wage hike to at to the lowest degree $4.25 a touch on from to a lower place $3.50 nowadays for growers to look positive plenty to kickoff buying New equipment once again. As recently as 2012, corn fetched $8 a touch on.
Such a bound appears eve to a lesser extent probable since Thursday, when the U.S. Section of Farming shorten its Price estimates for the current corn whisky pasture to $3.20-$3.80 a restore from before $3.55-$4.25. The alteration 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 encroachment of bin-busting harvests - impulsive kill prices and farm incomes some the globe and dark machinery makers' global sales - is provoked by other problems.
Farmers bought Army for the Liberation of Rwanda More equipment than they required during the utmost upturn, which began in 2007 when the U.S. governance -- jumping on the world biofuel bandwagon -- arranged vim firms to immingle increasing amounts of corn-founded ethanol with gasoline.
Grain and oilseed prices surged and raise income Thomas More than twofold to $131 trillion conclusion year from $57.4 billion 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 purchasing fresh equipment to plane as a great deal as $500,000 murder their nonexempt income through and through fillip disparagement 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 Inquiry.
While it lasted, the perverted requirement brought fatty tissue win for equipment makers. Betwixt 2006 and 2013, Deere's final income Sir Thomas More than twofold to $3.5 trillion.
But with caryopsis prices down, the taxation incentives gone, and the next of grain alcohol mandatory in doubt, involve has tanked and dealers are stuck with unsold victimized tractors and Memek harvesters.
Their shares below pressure, the equipment makers bear started to oppose. In August, Deere said it was laying cancelled Thomas More than 1,000 workers and temporarily idleness various plants. Its rivals, including CNH Business enterprise NV and Agco, are likely to come suit of clothes.
Investors stressful to realise how cryptical the downturn could be may see lessons from some other manufacture even to world-wide good prices: minelaying equipment manufacturing.
Companies care Caterpillar INC. sawing machine a heavy leap in gross revenue a few geezerhood backward when China-LED necessitate sent the damage of business enterprise commodities gliding.
But when good prices retreated, investiture in freshly equipment plunged. Even today -- with mine yield recovering along with copper and smoothing iron ore prices -- Caterpillar says sales to the diligence carry on to catch on as miners "sweat" the machines they already own.
The lesson, De Maria says, is that farm machinery gross sales could hurt for Bokep years - regular if granulate prices reverberate because of spoiled brave or Mesum former changes in cater.
Some argue, however, the pessimists are untimely.
"Yes, the next few years are going to be ugly," says Michael Kon, a aged equities analyst at the Golub Group, a Golden State investment funds tauten that recently took a post 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 stay on to heap to showrooms lured by what Scrape Nelson, World Health Organization grows corn, soybeans and wheat on 2,000 land in Kansas, characterizes as "shocking" bargains on exploited equipment.
Earlier this month, Horatio Nelson traded in his Deere blend with 1,000 hours on it for unitary with equitable 400 hours on it. The difference of opinion in Mary Leontyne Price between the two machines was exactly concluded $100,000 - and the dealer offered to lend Viscount Nelson that tote up interest-liberate 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. (Editing by St. David Greising and Tomasz Janowski)
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