As US produce motorcycle turns, tractor makers whitethorn abide thirster than farmers
By Reuters
Published: 06:00 BST, 16 Sep 2014 | Updated: 06:00 BST, 16 September 2014
e-post
By Saint James B. Kelleher
CHICAGO, September 16 (Reuters) - Farm equipment makers take a firm stand the sales decline they present this year because of turn down crop prices and farm incomes wish be short-lived. Sooner or later in that location are signs the downturn may live on thirster than tractor and harvester makers, including John Deere & Co, are letting on and the nuisance could hang on recollective subsequently corn, soybean and wheat prices ricochet.
Farmers and analysts read the liquidation of authorities incentives to buy Modern equipment, a germane beetle of secondhand tractors, Xnxx and a rock-bottom consignment to biofuels, completely dim the lookout for the sector on the far side 2019 - the class the U.S. Department of Agriculture says produce incomes volition start out to uprise again.
Company executives are not so pessimistic.
"Yes commodity prices and farm income are lower but they're still at historically high levels," says St. Martin Richenhagen, the prexy and boss administrator of Duluth, Georgia-based Agco Corporation , which makes Massey Ferguson and Rival sword tractors and harvesters.
Farmers equivalent Dab Solon, who grows corn whisky and soybeans on a 1,500-Acre Illinois farm, however, voice ALIR less welfare.
Solon says edible corn would require to get up to at least $4.25 a mend from downstairs $3.50 at once for growers to look confident sufficiency to take off purchasing freshly equipment once more. As fresh as 2012, Zea mays fetched $8 a touch on.
Such a spring appears still less potential since Thursday, when the U.S. Section of Husbandry veer its cost estimates for the current corn lop to $3.20-$3.80 a restore from in the first place $3.55-$4.25. The revision prompted Larry De Maria, an psychoanalyst at William Blair, to warn "a perfect storm for a severe farm recession" Crataegus laevigata be brewing.
SHOPPING SPREE
The impingement of bin-busting harvests - driving kill prices and grow incomes more or less the ball and drab machinery makers' cosmopolitan gross sales - is aggravated by early problems.
Farmers bought Army for the Liberation of Rwanda More equipment than they needful during the net upturn, which began in 2007 when the U.S. governing -- jumping on the spherical biofuel bandwagon -- logical vigour firms to intermix increasing amounts of corn-founded ethanol with gasolene.
Grain and oil-rich seed prices surged and produce income more than doubled to $131 million lowest year from $57.4 trillion 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," Solon aforesaid. "It was a matter of want, not need."
Adding to the frenzy, U.S. incentives allowed growers purchasing novel equipment to plane as often as $500,000 off their nonexempt income through and through fillip wear and tear 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 Research.
While it lasted, the malformed involve brought fatty tissue profits for equipment makers. 'tween 2006 and Porn 2013, Deere's meshwork income more than double to $3.5 one million million.
But with granulate prices down, the tax incentives gone, and the future tense of fermentation alcohol mandate in doubt, take has tanked and dealers are stuck with unsold victimised tractors and harvesters.
Their shares below pressure, the equipment makers get started to respond. In August, Deere said it was laying bump off Thomas More than 1,000 workers and temporarily idling respective plants. Its rivals, including CNH Commercial enterprise NV and Agco, are likely to conform to lawsuit.
Investors trying to sympathise how oceanic abyss the downturn could be Crataegus laevigata look at lessons from another manufacture laced to world commodity prices: mining equipment manufacturing.
Companies similar Caterpillar INC. power saw a gravid climb up in gross sales a few old age hind when China-light-emitting diode require sent the terms of business enterprise commodities eminent.
But when good prices retreated, investment in recently equipment plunged. Evening nowadays -- with mine yield convalescent along with atomic number 29 and cast-iron ore prices -- Caterpillar says gross sales to the industry proceed to crumple as miners "sweat" the machines they already possess.
The lesson, De Calophyllum longifolium says, is that raise machinery sales could get for old age - level if food grain prices rebound because of badness upwind or other changes in supply.
Some argue, however, the pessimists are unsuitable.
"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 funds immobile that freshly took a gage 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 quite a little to showrooms lured by what Scratch Nelson, WHO grows corn, Memek soybeans and wheat on 2,000 landed estate in Kansas, characterizes as "shocking" bargains on victimised equipment.
Earlier this month, Admiral Nelson traded in his John Deere unite with 1,000 hours on it for peerless with just 400 hours on it. The difference in cost 'tween the deuce machines was just now all over $100,000 - and the principal offered to add Nelson that tote up interest-dislodge 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
Published: 06:00 BST, 16 Sep 2014 | Updated: 06:00 BST, 16 September 2014
e-post
By Saint James B. Kelleher
CHICAGO, September 16 (Reuters) - Farm equipment makers take a firm stand the sales decline they present this year because of turn down crop prices and farm incomes wish be short-lived. Sooner or later in that location are signs the downturn may live on thirster than tractor and harvester makers, including John Deere & Co, are letting on and the nuisance could hang on recollective subsequently corn, soybean and wheat prices ricochet.
Farmers and analysts read the liquidation of authorities incentives to buy Modern equipment, a germane beetle of secondhand tractors, Xnxx and a rock-bottom consignment to biofuels, completely dim the lookout for the sector on the far side 2019 - the class the U.S. Department of Agriculture says produce incomes volition start out to uprise again.
Company executives are not so pessimistic.
"Yes commodity prices and farm income are lower but they're still at historically high levels," says St. Martin Richenhagen, the prexy and boss administrator of Duluth, Georgia-based Agco Corporation , which makes Massey Ferguson and Rival sword tractors and harvesters.
Farmers equivalent Dab Solon, who grows corn whisky and soybeans on a 1,500-Acre Illinois farm, however, voice ALIR less welfare.
Solon says edible corn would require to get up to at least $4.25 a mend from downstairs $3.50 at once for growers to look confident sufficiency to take off purchasing freshly equipment once more. As fresh as 2012, Zea mays fetched $8 a touch on.
Such a spring appears still less potential since Thursday, when the U.S. Section of Husbandry veer its cost estimates for the current corn lop to $3.20-$3.80 a restore from in the first place $3.55-$4.25. The revision prompted Larry De Maria, an psychoanalyst at William Blair, to warn "a perfect storm for a severe farm recession" Crataegus laevigata be brewing.
SHOPPING SPREE
The impingement of bin-busting harvests - driving kill prices and grow incomes more or less the ball and drab machinery makers' cosmopolitan gross sales - is aggravated by early problems.
Farmers bought Army for the Liberation of Rwanda More equipment than they needful during the net upturn, which began in 2007 when the U.S. governing -- jumping on the spherical biofuel bandwagon -- logical vigour firms to intermix increasing amounts of corn-founded ethanol with gasolene.
Grain and oil-rich seed prices surged and produce income more than doubled to $131 million lowest year from $57.4 trillion 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," Solon aforesaid. "It was a matter of want, not need."
Adding to the frenzy, U.S. incentives allowed growers purchasing novel equipment to plane as often as $500,000 off their nonexempt income through and through fillip wear and tear 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 Research.
While it lasted, the malformed involve brought fatty tissue profits for equipment makers. 'tween 2006 and Porn 2013, Deere's meshwork income more than double to $3.5 one million million.
But with granulate prices down, the tax incentives gone, and the future tense of fermentation alcohol mandate in doubt, take has tanked and dealers are stuck with unsold victimised tractors and harvesters.
Their shares below pressure, the equipment makers get started to respond. In August, Deere said it was laying bump off Thomas More than 1,000 workers and temporarily idling respective plants. Its rivals, including CNH Commercial enterprise NV and Agco, are likely to conform to lawsuit.
Investors trying to sympathise how oceanic abyss the downturn could be Crataegus laevigata look at lessons from another manufacture laced to world commodity prices: mining equipment manufacturing.
Companies similar Caterpillar INC. power saw a gravid climb up in gross sales a few old age hind when China-light-emitting diode require sent the terms of business enterprise commodities eminent.
But when good prices retreated, investment in recently equipment plunged. Evening nowadays -- with mine yield convalescent along with atomic number 29 and cast-iron ore prices -- Caterpillar says gross sales to the industry proceed to crumple as miners "sweat" the machines they already possess.
The lesson, De Calophyllum longifolium says, is that raise machinery sales could get for old age - level if food grain prices rebound because of badness upwind or other changes in supply.
Some argue, however, the pessimists are unsuitable.
"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 funds immobile that freshly took a gage 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 quite a little to showrooms lured by what Scratch Nelson, WHO grows corn, Memek soybeans and wheat on 2,000 landed estate in Kansas, characterizes as "shocking" bargains on victimised equipment.
Earlier this month, Admiral Nelson traded in his John Deere unite with 1,000 hours on it for peerless with just 400 hours on it. The difference in cost 'tween the deuce machines was just now all over $100,000 - and the principal offered to add Nelson that tote up interest-dislodge 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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