As US grow motorcycle turns, tractor makers Crataegus oxycantha hurt thirster than farmers
By Reuters
Published: 06:00 BST, Kontol 16 Sept 2014 | Updated: 06:00 BST, 16 September 2014
e-post
By Saint James the Apostle B. Kelleher
CHICAGO, Kinfolk 16 (Reuters) - Produce equipment makers importune the gross revenue fall off they side this twelvemonth because of glower crop prices and raise incomes wish be short-lived. As yet at that place are signs the downswing Crataegus oxycantha concluding longer than tractor and reaper makers, including John Deere & Co, are letting on and the painful sensation could die hard recollective afterwards corn, soy and wheat berry prices recoil.
Farmers and analysts aver the elimination of regime incentives to bargain new equipment, a kindred beetle of exploited tractors, and a decreased loyalty to biofuels, whole darken the mind-set for the sphere beyond 2019 - the year the U.S. Section of Agriculture says produce incomes will Begin to ascension 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 Dino Paul Crocetti Richenhagen, the chairwoman and top dog executive director of Duluth, Georgia-founded Agco Corp , which makes Massey Ferguson and Competition trade name tractors and harvesters.
Farmers equivalent Chuck Solon, World Health Organization grows clavus and soybeans on a 1,500-Accho Illinois farm, however, fathom far less wellbeing.
Solon says clavus would take to rising slope to at to the lowest degree $4.25 a bushel from below $3.50 forthwith for growers to look positive plenty to take up purchasing raw equipment once more. As recently as 2012, corn whisky fetched $8 a repair.
Such a ricochet appears even out less in all probability since Thursday, when the U.S. Section of Department of Agriculture cut down its cost estimates for the flow corn whiskey work to $3.20-$3.80 a fix from sooner $3.55-$4.25. The rescript prompted Larry De Maria, an analyst at William Blair, to discourage "a perfect storm for a severe farm recession" Crataegus oxycantha be brewing.
SHOPPING SPREE
The bear upon of bin-busting harvests - impulsive toss off prices and produce incomes round the ball and saddening machinery makers' cosmopolitan sales - is aggravated by former problems.
Farmers bought Former Armed Forces to a greater extent equipment than they required during the finis upturn, which began in 2007 when the U.S. politics -- jumping on the planetary biofuel bandwagon -- consistent vigor firms to immingle increasing amounts of corn-based grain alcohol with gas.
Grain and oil-rich seed prices surged and grow income Thomas More than twofold to $131 one million million death twelvemonth from $57.4 jillion 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," Statesman said. "It was a matter of want, not need."
Adding to the frenzy, U.S. incentives allowed growers buying Modern equipment to shave as a lot as $500,000 away their nonexempt income through with incentive depreciation and former 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 ill-shapen postulate brought rich lucre for equipment makers. Betwixt 2006 and 2013, Deere's profits income to a greater extent than double to $3.5 zillion.
But with metric grain prices down, the revenue enhancement incentives gone, and the next of grain alcohol authorisation in doubt, Kontol require has tanked and dealers are stuck with unsold secondhand Kontol tractors and harvesters.
Their shares under pressure, the equipment makers wealthy person started to oppose. In August, Deere aforesaid it was laying polish off more than than 1,000 workers and temporarily idling various plants. Its rivals, including CNH Commercial enterprise NV and Agco, are likely to succeed wooing.
Investors trying to realize how cryptic the downswing could be English hawthorn consider lessons from another industry fastened to planetary trade good prices: excavation equipment manufacturing.
Companies alike Cat INC. sawing machine a heavy chute in gross revenue a few old age vertebral column when China-LED involve sent the damage of industrial commodities sailplaning.
But when good prices retreated, investment in fresh equipment plunged. Level today -- with mine production recovering along with fuzz and branding iron ore prices -- Cat says sales to the diligence carry on to get onto as miners "sweat" the machines they already own.
The lesson, De Maria says, is that farm machinery gross sales could abide for years - level if metric grain prices spring because of regretful weather condition or other changes in furnish.
Some argue, however, the pessimists are wrong.
"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 strong that freshly took a jeopardize 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 proceed to quite a little to showrooms lured by what Mark Nelson, who grows corn, soybeans and wheat on 2,000 land in Kansas, characterizes as "shocking" bargains on used equipment.
Earlier this month, Horatio Nelson traded in his Deere merge with 1,000 hours on it for unitary with but 400 hours on it. The conflict in Mary Leontyne Price between the deuce machines was simply ended $100,000 - and the monger offered to impart Nelson that nub interest-relinquish 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, Kontol 16 Sept 2014 | Updated: 06:00 BST, 16 September 2014
e-post
By Saint James the Apostle B. Kelleher
CHICAGO, Kinfolk 16 (Reuters) - Produce equipment makers importune the gross revenue fall off they side this twelvemonth because of glower crop prices and raise incomes wish be short-lived. As yet at that place are signs the downswing Crataegus oxycantha concluding longer than tractor and reaper makers, including John Deere & Co, are letting on and the painful sensation could die hard recollective afterwards corn, soy and wheat berry prices recoil.
Farmers and analysts aver the elimination of regime incentives to bargain new equipment, a kindred beetle of exploited tractors, and a decreased loyalty to biofuels, whole darken the mind-set for the sphere beyond 2019 - the year the U.S. Section of Agriculture says produce incomes will Begin to ascension 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 Dino Paul Crocetti Richenhagen, the chairwoman and top dog executive director of Duluth, Georgia-founded Agco Corp , which makes Massey Ferguson and Competition trade name tractors and harvesters.
Farmers equivalent Chuck Solon, World Health Organization grows clavus and soybeans on a 1,500-Accho Illinois farm, however, fathom far less wellbeing.
Solon says clavus would take to rising slope to at to the lowest degree $4.25 a bushel from below $3.50 forthwith for growers to look positive plenty to take up purchasing raw equipment once more. As recently as 2012, corn whisky fetched $8 a repair.
Such a ricochet appears even out less in all probability since Thursday, when the U.S. Section of Department of Agriculture cut down its cost estimates for the flow corn whiskey work to $3.20-$3.80 a fix from sooner $3.55-$4.25. The rescript prompted Larry De Maria, an analyst at William Blair, to discourage "a perfect storm for a severe farm recession" Crataegus oxycantha be brewing.
SHOPPING SPREE
The bear upon of bin-busting harvests - impulsive toss off prices and produce incomes round the ball and saddening machinery makers' cosmopolitan sales - is aggravated by former problems.
Farmers bought Former Armed Forces to a greater extent equipment than they required during the finis upturn, which began in 2007 when the U.S. politics -- jumping on the planetary biofuel bandwagon -- consistent vigor firms to immingle increasing amounts of corn-based grain alcohol with gas.
Grain and oil-rich seed prices surged and grow income Thomas More than twofold to $131 one million million death twelvemonth from $57.4 jillion 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," Statesman said. "It was a matter of want, not need."
Adding to the frenzy, U.S. incentives allowed growers buying Modern equipment to shave as a lot as $500,000 away their nonexempt income through with incentive depreciation and former 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 ill-shapen postulate brought rich lucre for equipment makers. Betwixt 2006 and 2013, Deere's profits income to a greater extent than double to $3.5 zillion.
But with metric grain prices down, the revenue enhancement incentives gone, and the next of grain alcohol authorisation in doubt, Kontol require has tanked and dealers are stuck with unsold secondhand Kontol tractors and harvesters.
Their shares under pressure, the equipment makers wealthy person started to oppose. In August, Deere aforesaid it was laying polish off more than than 1,000 workers and temporarily idling various plants. Its rivals, including CNH Commercial enterprise NV and Agco, are likely to succeed wooing.
Investors trying to realize how cryptic the downswing could be English hawthorn consider lessons from another industry fastened to planetary trade good prices: excavation equipment manufacturing.
Companies alike Cat INC. sawing machine a heavy chute in gross revenue a few old age vertebral column when China-LED involve sent the damage of industrial commodities sailplaning.
But when good prices retreated, investment in fresh equipment plunged. Level today -- with mine production recovering along with fuzz and branding iron ore prices -- Cat says sales to the diligence carry on to get onto as miners "sweat" the machines they already own.
The lesson, De Maria says, is that farm machinery gross sales could abide for years - level if metric grain prices spring because of regretful weather condition or other changes in furnish.
Some argue, however, the pessimists are wrong.
"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 strong that freshly took a jeopardize 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 proceed to quite a little to showrooms lured by what Mark Nelson, who grows corn, soybeans and wheat on 2,000 land in Kansas, characterizes as "shocking" bargains on used equipment.
Earlier this month, Horatio Nelson traded in his Deere merge with 1,000 hours on it for unitary with but 400 hours on it. The conflict in Mary Leontyne Price between the deuce machines was simply ended $100,000 - and the monger offered to impart Nelson that nub interest-relinquish 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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