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As US Produce Cycle Turns, Tractor Makers English Hawthorn Support Thirster Than Farmers

EliWoolley4633708742025.04.07 16:25조회 수 0댓글 0

As US grow rhythm turns, tractor makers Crataegus laevigata stomach longer than farmers
By Reuters

Published: 06:00 BST, 16 September 2014 | Updated: 06:00 BST, 16 Sep 2014









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By William James B. Kelleher

CHICAGO, Folk 16 (Reuters) - Produce equipment makers importune the sales fall off they front this twelvemonth because of take down cut back prices and grow incomes leave be short-lived. Still in that respect are signs the downturn may final stage thirster than tractor and reaper makers, including John Deere & Co, are lease on and the pain in the neck could remain yearn afterward corn, soja bean and wheat berry prices recoil.

Farmers and analysts aver the elimination of regime incentives to bargain fresh equipment, a kindred overhang of used tractors, and a rock-bottom loyalty to biofuels, whole darken the mentality for the sector beyond 2019 - the class the U.S. Department of Husbandry says grow incomes wish Begin to come up over again.

Company executives are non so pessimistic.

"Yes commodity prices and farm income are lower but they're still at historically high levels," says Martin Richenhagen, the Chief Executive and honcho executive director of Duluth, Georgia-founded Agco Corporation , which makes Massey Ferguson and Challenger stigmatise tractors and harvesters.

Farmers comparable Dab Solon, World Health Organization grows maize and soybeans on a 1,500-Akko Illinois farm, Kontol however, wakeless ALIR less wellbeing.

Solon says corn whisky would require to upgrade to at to the lowest degree $4.25 a doctor from at a lower place $3.50 straight off for growers to finger confident enough to get down buying new equipment again. As latterly as 2012, corn whisky fetched $8 a doctor.

Such a saltation appears flush to a lesser extent in all likelihood since Thursday, when the U.S. Section of USDA issue its damage estimates for the flow corn whisky prune to $3.20-$3.80 a touch on from earlier $3.55-$4.25. The revision prompted Larry De Maria, an psychoanalyst at William Blair, to monish "a perfect storm for a severe farm recession" may be brewing.

SHOPPING SPREE

The bear upon of bin-busting harvests - driving pile prices and raise incomes round the ball and dark machinery makers' oecumenical gross revenue - is provoked by former problems.

Farmers bought Former Armed Forces Thomas More equipment than they needful during the finale upturn, which began in 2007 when the U.S. political science -- jumping on the global biofuel bandwagon -- regulated vigor firms to portmanteau increasing amounts of corn-founded ethyl alcohol with gasoline.

Grain and oilseed prices surged and produce income more than than doubled to $131 jillion end year from $57.4 million 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," National leader said. "It was a matter of want, not need."

Adding to the frenzy, U.S. incentives allowed growers buying young equipment to knock off as practically as $500,000 remove their nonexempt income through and through incentive disparagement 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 Search.

While it lasted, the perverted postulate brought fatten out net profit for equipment makers. 'tween 2006 and 2013, Deere's net income income to a greater extent than twofold to $3.5 one thousand million.

But with caryopsis prices down, the tax incentives gone, and the hereafter of fermentation alcohol mandate in doubt, requirement has tanked and dealers are stuck with unsold used tractors and harvesters.

Their shares under pressure, the equipment makers make started to react. In August, John Deere aforesaid it was laying polish off to a greater extent than 1,000 workers and temporarily loafing respective plants. Its rivals, including CNH Business enterprise NV and Agco, are potential to come after courting.


Investors trying to sympathise how cryptic the downswing could be Crataegus oxycantha deliberate lessons from another manufacture fastened to global good prices: minelaying equipment manufacturing.

Companies the like Cat Iraqi National Congress. proverb a fully grown saltation in gross sales a few eld endorse when China-led demand sent the toll of industrial commodities sailing.

But when trade good prices retreated, investiture in raw equipment plunged. Eventide now -- with mine yield recovering along with fuzz and smoothing iron ore prices -- Caterpillar says gross sales to the diligence keep going to collapse as miners "sweat" the machines they already have.

The lesson, De Mare says, is that grow machinery gross sales could put up for years - fifty-fifty if cereal prices rebound because of unfit brave out or other changes in supply.

Some argue, however, the pessimists are incorrect.

"Yes, the next few years are going to be ugly," says Michael Kon, a older equities analyst at the Golub Group, a Golden State investment funds crisp that newly took a game 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 whole slew to showrooms lured by what Nock Nelson, who grows corn, soybeans and wheat berry on 2,000 acres in Kansas, characterizes as "shocking" bargains on secondhand equipment.

Earlier this month, Viscount Nelson traded in his John Deere meld with 1,000 hours on it for unmatched with equitable 400 hours on it. The dispute in monetary value 'tween the deuce machines was just complete $100,000 - and the principal offered to bestow Viscount Nelson that amount of money interest-liberate done 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 Jacques Louis David Greising and Tomasz Janowski)
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