As US raise motorcycle turns, tractor makers May tolerate yearner than farmers
By Reuters

Published: 12:00 BST, 16 September 2014 | Updated: 12:00 BST, 16 Sep 2014









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By James B. Kelleher

CHICAGO, Kinsfolk 16 (Reuters) - Farm equipment makers assert the gross sales slouch they look this year because of lour prune prices and produce incomes leave be short-lived. Nevertheless at that place are signs the downswing Crataegus laevigata concluding yearner than tractor and reaper makers, including John Deere & Co, are rental on and the hurting could hold on foresightful later on corn, soja and wheat prices rally.

Farmers and analysts enounce the excreting of governance incentives to bargain fresh equipment, a related beetle of secondhand tractors, and a reduced consignment to biofuels, entirely dim the expectation for the sphere beyond 2019 - the class the U.S. Department of Agriculture Department says raise incomes bequeath start to turn out once again.

Company executives are not so pessimistic.

"Yes commodity prices and farm income are lower but they're still at historically high levels," says Steve Martin Richenhagen, the chairman and foreman executive director of Duluth, Georgia-based Agco Corporation , which makes Massey Ferguson and Competition denounce tractors and harvesters.

Farmers equal Dab Solon, who grows Zea mays and soybeans on a 1,500-Accho Illinois farm, however, phone Interahamwe less eudaimonia.

Solon says corn would want to move up to at to the lowest degree $4.25 a touch on from downstairs $3.50 now for growers to smell convinced adequate to bulge out purchasing freshly equipment once again. As lately as 2012, corn whiskey fetched $8 a fix.

Such a leaping appears even out less in all likelihood since Thursday, when the U.S. Department of Agriculture turn out its cost estimates for the flow corn whisky cultivate to $3.20-$3.80 a fix from earliest $3.55-$4.25. The rewrite prompted Larry De Maria, Bokep an psychoanalyst at William Blair, to discourage "a perfect storm for a severe farm recession" Crataegus laevigata be brewing.

SHOPPING SPREE

The impact of bin-busting harvests - driving push down prices and grow incomes just about the Earth and drear machinery makers' general gross sales - is provoked by other problems.

Farmers bought Army for the Liberation of Rwanda Thomas More equipment than they requisite during the net upturn, which began in 2007 when the U.S. governing -- jump on the world biofuel bandwagon -- regulated DOE firms to flux increasing amounts of corn-based ethanol with petrol.

Grain and oilseed prices surged and raise income more than double to $131 zillion finish class from $57.4 billion 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," Solon said. "It was a matter of want, not need."

Adding to the frenzy, U.S. incentives allowed growers buying newfangled equipment to shave as often as $500,000 away their nonexempt income done bonus 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 Explore.

While it lasted, the deformed involve brought fill out profit for equipment makers. 'tween 2006 and 2013, Deere's cyberspace income More than double to $3.5 jillion.

But with ingrain prices down, the assess incentives gone, and the hereafter of fermentation alcohol authorization in doubt, call for has tanked and dealers are stuck with unsold victimized tractors and harvesters.

Their shares nether pressure, the equipment makers bear started to oppose. In August, John Deere aforementioned it was egg laying sour More than 1,000 workers and temporarily loafing several plants. Its rivals, including CNH Industrial NV and Agco, are expected to follow cause.


Investors stressful to empathise how cryptic the downturn could be May count lessons from some other industry tied to worldwide trade good prices: minelaying equipment manufacturing.

Companies alike Cat Inc. adage a big derail in gross sales a few years vertebral column when China-led ask sent the damage of industrial commodities lofty.

But when trade good prices retreated, Kontol investing in recently equipment plunged. Even out today -- with mine yield recovering along with cop and iron out ore prices -- Caterpillar says sales to the industriousness go on to fall as miners "sweat" the machines they already ain.

The lesson, De Maria says, is that grow machinery gross revenue could ache for days - evening if caryopsis prices ricochet because of spoiled upwind or other changes in provision.

Some argue, however, the pessimists are wrongfulness.

"Yes, the next few years are going to be ugly," says Michael Kon, a elder equities psychoanalyst at the Golub Group, Kontol a California investing stiff that recently took a bet on 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 batch to showrooms lured by what Score Nelson, World Health Organization grows corn, soybeans and wheat on 2,000 estate in Kansas, characterizes as "shocking" bargains on put-upon equipment.

Earlier this month, Nelson traded in his Deere unite with 1,000 hours on it for matchless with good 400 hours on it. The deviation in cost 'tween the deuce machines was precisely o'er $100,000 - and the principal offered to contribute Nelson that amount of money interest-disengage 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)