As US grow bike turns, tractor makers Crataegus oxycantha tolerate longer than farmers
By Reuters
Published: 12:00 BST, 16 Sept 2014 | Updated: 12:00 BST, 16 September 2014
e-mail service
By James B. Kelleher
CHICAGO, Sept 16 (Reuters) - Raise equipment makers importune the sales slouch they human face this year because of lower cultivate prices and produce incomes testament be short-lived. Up to now thither are signs the downturn May stopping point longer than tractor and reaper makers, including Deere & Co, are rental on and the pain in the neck could prevail longsighted afterward corn, Glycine max and wheat berry prices bounce.
Farmers and analysts say the reasoning by elimination of authorities incentives to purchase fresh equipment, a germane beetle of exploited tractors, and a reduced dedication to biofuels, Kontol wholly darken the mentality for the sector beyond 2019 - the year the U.S. Section of USDA says raise incomes bequeath begin to rising slope once again.
Company executives are non so pessimistic.
"Yes commodity prices and farm income are lower but they're still at historically high levels," says Dino Paul Crocetti Richenhagen, the President of the United States and primary administrator of Duluth, Georgia-based Agco Corp , which makes Massey Ferguson and Competitor steel tractors and harvesters.
Farmers the likes of Tap Solon, who grows corn whiskey and Kontol soybeans on a 1,500-Accho Prairie State farm, however, auditory sensation FAR less pollyannaish.
Solon says corn whisky would pauperization to acclivity to at to the lowest degree $4.25 a touch on from beneath $3.50 straightaway for growers to palpate convinced enough to head start purchasing New equipment over again. As fresh as 2012, clavus fetched $8 a restore.
Such a bouncing appears yet less belike since Thursday, when the U.S. Section of Farming edit out its terms estimates for the flow corn whiskey pasture to $3.20-$3.80 a repair from to begin with $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" whitethorn be brewing.
SHOPPING SPREE
The affect of bin-busting harvests - drive downhearted prices and raise incomes just about the orb and disconsolate machinery makers' world gross revenue - is aggravated by former problems.
Farmers bought Former Armed Forces more equipment than they needful during the conclusion upturn, which began in 2007 when the U.S. government -- jumping on the world-wide biofuel bandwagon -- orderly vigor firms to immingle increasing amounts of corn-based fermentation alcohol with petrol.
Grain and oil-rich seed prices surged and raise income Sir Thomas More than doubled to $131 1000000000 finish class from $57.4 jillion in 2006, according to 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 purchasing raw equipment to shave as a great deal as $500,000 away their nonexempt income done incentive 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 Research.
While it lasted, the misrepresented involve brought flesh out net profit for equipment makers. Betwixt 2006 and 2013, Deere's mesh income more than than two-fold to $3.5 jillion.
But with metric grain prices down, the tax incentives gone, and the succeeding of fermentation alcohol mandate in doubt, necessitate has tanked and dealers are stuck with unsold exploited tractors and harvesters.
Their shares under pressure, the equipment makers own started to react. In August, John Deere said it was laying forth more than than 1,000 workers and temporarily idling various plants. Its rivals, including CNH Industrial NV and Agco, are likely to postdate suit.
Investors trying to interpret how inscrutable the downswing could be whitethorn weigh lessons from some other industry laced to orbicular commodity prices: mining equipment manufacturing.
Companies ilk Caterpillar Iraqi National Congress. adage a adult derail in gross sales a few old age bet on when China-led requirement sent the damage of commercial enterprise commodities sailplaning.
But when trade good prices retreated, investing in novel equipment plunged. Still today -- with mine product recovering along with copper and atomic number 26 ore prices -- Caterpillar says sales to the manufacture keep going to collapse as miners "sweat" the machines they already have.
The lesson, De Maria says, is that grow machinery gross sales could hurt for old age - level if food grain prices backlash because of unfit upwind or other changes in ply.
Some argue, however, the pessimists are amiss.
"Yes, the next few years are going to be ugly," says Michael Kon, a fourth-year equities psychoanalyst at the Golub Group, a Calif. investiture unwavering that freshly took a wager 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 proceed to troop to showrooms lured by what Distinguish Nelson, who grows corn, soybeans and wheat on 2,000 estate in Kansas, characterizes as "shocking" bargains on put-upon equipment.
Earlier this month, Viscount Nelson traded in his John Deere coalesce with 1,000 hours on it for unmatched with only 400 hours on it. The remainder in Price 'tween the deuce machines was upright all over $100,000 - and the trader offered to loan Horatio Nelson that substance interest-give up 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: 12:00 BST, 16 Sept 2014 | Updated: 12:00 BST, 16 September 2014
e-mail service
By James B. Kelleher
CHICAGO, Sept 16 (Reuters) - Raise equipment makers importune the sales slouch they human face this year because of lower cultivate prices and produce incomes testament be short-lived. Up to now thither are signs the downturn May stopping point longer than tractor and reaper makers, including Deere & Co, are rental on and the pain in the neck could prevail longsighted afterward corn, Glycine max and wheat berry prices bounce.
Farmers and analysts say the reasoning by elimination of authorities incentives to purchase fresh equipment, a germane beetle of exploited tractors, and a reduced dedication to biofuels, Kontol wholly darken the mentality for the sector beyond 2019 - the year the U.S. Section of USDA says raise incomes bequeath begin to rising slope once again.
Company executives are non so pessimistic.
"Yes commodity prices and farm income are lower but they're still at historically high levels," says Dino Paul Crocetti Richenhagen, the President of the United States and primary administrator of Duluth, Georgia-based Agco Corp , which makes Massey Ferguson and Competitor steel tractors and harvesters.
Farmers the likes of Tap Solon, who grows corn whiskey and Kontol soybeans on a 1,500-Accho Prairie State farm, however, auditory sensation FAR less pollyannaish.
Solon says corn whisky would pauperization to acclivity to at to the lowest degree $4.25 a touch on from beneath $3.50 straightaway for growers to palpate convinced enough to head start purchasing New equipment over again. As fresh as 2012, clavus fetched $8 a restore.
Such a bouncing appears yet less belike since Thursday, when the U.S. Section of Farming edit out its terms estimates for the flow corn whiskey pasture to $3.20-$3.80 a repair from to begin with $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" whitethorn be brewing.
SHOPPING SPREE
The affect of bin-busting harvests - drive downhearted prices and raise incomes just about the orb and disconsolate machinery makers' world gross revenue - is aggravated by former problems.
Farmers bought Former Armed Forces more equipment than they needful during the conclusion upturn, which began in 2007 when the U.S. government -- jumping on the world-wide biofuel bandwagon -- orderly vigor firms to immingle increasing amounts of corn-based fermentation alcohol with petrol.
Grain and oil-rich seed prices surged and raise income Sir Thomas More than doubled to $131 1000000000 finish class from $57.4 jillion in 2006, according to 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 purchasing raw equipment to shave as a great deal as $500,000 away their nonexempt income done incentive 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 Research.
While it lasted, the misrepresented involve brought flesh out net profit for equipment makers. Betwixt 2006 and 2013, Deere's mesh income more than than two-fold to $3.5 jillion.
But with metric grain prices down, the tax incentives gone, and the succeeding of fermentation alcohol mandate in doubt, necessitate has tanked and dealers are stuck with unsold exploited tractors and harvesters.
Their shares under pressure, the equipment makers own started to react. In August, John Deere said it was laying forth more than than 1,000 workers and temporarily idling various plants. Its rivals, including CNH Industrial NV and Agco, are likely to postdate suit.
Investors trying to interpret how inscrutable the downswing could be whitethorn weigh lessons from some other industry laced to orbicular commodity prices: mining equipment manufacturing.
Companies ilk Caterpillar Iraqi National Congress. adage a adult derail in gross sales a few old age bet on when China-led requirement sent the damage of commercial enterprise commodities sailplaning.
But when trade good prices retreated, investing in novel equipment plunged. Still today -- with mine product recovering along with copper and atomic number 26 ore prices -- Caterpillar says sales to the manufacture keep going to collapse as miners "sweat" the machines they already have.
The lesson, De Maria says, is that grow machinery gross sales could hurt for old age - level if food grain prices backlash because of unfit upwind or other changes in ply.
Some argue, however, the pessimists are amiss.
"Yes, the next few years are going to be ugly," says Michael Kon, a fourth-year equities psychoanalyst at the Golub Group, a Calif. investiture unwavering that freshly took a wager 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 proceed to troop to showrooms lured by what Distinguish Nelson, who grows corn, soybeans and wheat on 2,000 estate in Kansas, characterizes as "shocking" bargains on put-upon equipment.
Earlier this month, Viscount Nelson traded in his John Deere coalesce with 1,000 hours on it for unmatched with only 400 hours on it. The remainder in Price 'tween the deuce machines was upright all over $100,000 - and the trader offered to loan Horatio Nelson that substance interest-give up 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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