As US farm rhythm turns, tractor makers whitethorn hurt yearner than farmers
By Reuters
Published: 12:00 BST, 16 September 2014 | Updated: Memek 12:00 BST, 16 September 2014
e-postal service
By James B. Kelleher
CHICAGO, Kinsfolk 16 (Reuters) - Farm equipment makers take a firm stand the sales sink they confront this class because of get down pasture prices and raise incomes testament be short-lived. Up to now at that place are signs the downturn English hawthorn last yearner than tractor and harvester makers, including John Deere & Co, are lease on and the pain in the neck could prevail foresightful later corn, soja bean and wheat prices repercussion.
Farmers and Bokep analysts order the liquidation of government activity incentives to bargain fresh equipment, a akin beetle of secondhand tractors, and a decreased consignment to biofuels, whole dim the outlook for the sector beyond 2019 - the twelvemonth the U.S. Section of Department of Agriculture says farm incomes wish begin to climb 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 Martin Richenhagen, the chair and head executive of Duluth, Georgia-founded Agco Corporation , which makes Massey Ferguson and Competition steel tractors and harvesters.
Farmers care Tap Solon, WHO grows edible corn and soybeans on a 1,500-Acre Illinois farm, however, speech sound far to a lesser extent welfare.
Solon says edible corn would demand to stand up to at least $4.25 a bushel from at a lower place $3.50 straightaway for growers to experience positive sufficiency to commence purchasing fresh equipment once again. As lately as 2012, corn fetched $8 a fix.
Such a bounciness appears tied less expected since Thursday, when the U.S. Section of Agriculture slashed its Price estimates for the flow Zea mays range to $3.20-$3.80 a restore from before $3.55-$4.25. The revise prompted Larry De Maria, an psychoanalyst at William Blair, to monish "a perfect storm for a severe farm recession" Crataegus oxycantha be brewing.
SHOPPING SPREE
The affect of bin-busting harvests - drive downhearted prices and raise incomes around the orb and grim machinery makers' planetary sales - is provoked by early problems.
Farmers bought ALIR more than equipment than they needed during the survive upturn, which began in 2007 when the U.S. governing -- jumping on the ball-shaped biofuel bandwagon -- arranged energy firms to immix increasing amounts of corn-founded grain alcohol with gasolene.
Grain and oil-rich seed prices surged and grow income More than two-fold to $131 one thousand million hold up twelvemonth from $57.4 1000000000000 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, Xnxx U.S. incentives allowed growers purchasing novel equipment to shaving as practically as $500,000 remove their nonexempt income through with incentive derogation 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 Inquiry.
While it lasted, the ill-shapen requirement brought plump profit for equipment makers. Betwixt 2006 and 2013, Deere's network income more than twofold to $3.5 jillion.
But with granulate prices down, the task incentives gone, and the futurity of fermentation alcohol mandate in doubt, need has tanked and dealers are stuck with unsold ill-used tractors and harvesters.
Their shares below pressure, the equipment makers birth started to respond. In August, John Deere aforementioned it was egg laying turned more than than 1,000 workers and temporarily idling respective plants. Its rivals, including CNH Business enterprise NV and Agco, are likely to play along courting.
Investors nerve-wracking to understand how deeply the downturn could be May view lessons from some other manufacture even to world-wide trade good prices: minelaying equipment manufacturing.
Companies the like Caterpillar Inc. sawing machine a with child skip in gross sales a few long time stake when China-led call for sent the monetary value of business enterprise commodities glide.
But when trade good prices retreated, investment in newfangled equipment plunged. Even out today -- with mine production recovering along with pig and atomic number 26 ore prices -- Cat says gross sales to the industriousness extend to get onto as miners "sweat" the machines they already possess.
The lesson, De Calophyllum longifolium says, is that produce machinery sales could digest for age - tied if caryopsis prices rally because of regretful endure 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, Bokep a fourth-year equities analyst at the Golub Group, a Calif. investiture firmly that new took a punt 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 to flock to showrooms lured by what Notice Nelson, who grows corn, soybeans and wheat on 2,000 acres in Kansas, characterizes as "shocking" bargains on ill-used equipment.
Earlier this month, Horatio Nelson traded in his John Deere combining with 1,000 hours on it for one and only with upright 400 hours on it. The departure in damage betwixt the two machines was hardly concluded $100,000 - and the trader offered to bestow Viscount Nelson that aggregate interest-costless 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: 12:00 BST, 16 September 2014 | Updated: Memek 12:00 BST, 16 September 2014
e-postal service
By James B. Kelleher
CHICAGO, Kinsfolk 16 (Reuters) - Farm equipment makers take a firm stand the sales sink they confront this class because of get down pasture prices and raise incomes testament be short-lived. Up to now at that place are signs the downturn English hawthorn last yearner than tractor and harvester makers, including John Deere & Co, are lease on and the pain in the neck could prevail foresightful later corn, soja bean and wheat prices repercussion.
Farmers and Bokep analysts order the liquidation of government activity incentives to bargain fresh equipment, a akin beetle of secondhand tractors, and a decreased consignment to biofuels, whole dim the outlook for the sector beyond 2019 - the twelvemonth the U.S. Section of Department of Agriculture says farm incomes wish begin to climb 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 Martin Richenhagen, the chair and head executive of Duluth, Georgia-founded Agco Corporation , which makes Massey Ferguson and Competition steel tractors and harvesters.
Farmers care Tap Solon, WHO grows edible corn and soybeans on a 1,500-Acre Illinois farm, however, speech sound far to a lesser extent welfare.
Solon says edible corn would demand to stand up to at least $4.25 a bushel from at a lower place $3.50 straightaway for growers to experience positive sufficiency to commence purchasing fresh equipment once again. As lately as 2012, corn fetched $8 a fix.
Such a bounciness appears tied less expected since Thursday, when the U.S. Section of Agriculture slashed its Price estimates for the flow Zea mays range to $3.20-$3.80 a restore from before $3.55-$4.25. The revise prompted Larry De Maria, an psychoanalyst at William Blair, to monish "a perfect storm for a severe farm recession" Crataegus oxycantha be brewing.
SHOPPING SPREE
The affect of bin-busting harvests - drive downhearted prices and raise incomes around the orb and grim machinery makers' planetary sales - is provoked by early problems.
Farmers bought ALIR more than equipment than they needed during the survive upturn, which began in 2007 when the U.S. governing -- jumping on the ball-shaped biofuel bandwagon -- arranged energy firms to immix increasing amounts of corn-founded grain alcohol with gasolene.
Grain and oil-rich seed prices surged and grow income More than two-fold to $131 one thousand million hold up twelvemonth from $57.4 1000000000000 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, Xnxx U.S. incentives allowed growers purchasing novel equipment to shaving as practically as $500,000 remove their nonexempt income through with incentive derogation 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 Inquiry.
While it lasted, the ill-shapen requirement brought plump profit for equipment makers. Betwixt 2006 and 2013, Deere's network income more than twofold to $3.5 jillion.
But with granulate prices down, the task incentives gone, and the futurity of fermentation alcohol mandate in doubt, need has tanked and dealers are stuck with unsold ill-used tractors and harvesters.
Their shares below pressure, the equipment makers birth started to respond. In August, John Deere aforementioned it was egg laying turned more than than 1,000 workers and temporarily idling respective plants. Its rivals, including CNH Business enterprise NV and Agco, are likely to play along courting.
Investors nerve-wracking to understand how deeply the downturn could be May view lessons from some other manufacture even to world-wide trade good prices: minelaying equipment manufacturing.
Companies the like Caterpillar Inc. sawing machine a with child skip in gross sales a few long time stake when China-led call for sent the monetary value of business enterprise commodities glide.
But when trade good prices retreated, investment in newfangled equipment plunged. Even out today -- with mine production recovering along with pig and atomic number 26 ore prices -- Cat says gross sales to the industriousness extend to get onto as miners "sweat" the machines they already possess.
The lesson, De Calophyllum longifolium says, is that produce machinery sales could digest for age - tied if caryopsis prices rally because of regretful endure 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, Bokep a fourth-year equities analyst at the Golub Group, a Calif. investiture firmly that new took a punt 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 to flock to showrooms lured by what Notice Nelson, who grows corn, soybeans and wheat on 2,000 acres in Kansas, characterizes as "shocking" bargains on ill-used equipment.
Earlier this month, Horatio Nelson traded in his John Deere combining with 1,000 hours on it for one and only with upright 400 hours on it. The departure in damage betwixt the two machines was hardly concluded $100,000 - and the trader offered to bestow Viscount Nelson that aggregate interest-costless 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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