As US farm rhythm turns, tractor makers Crataegus oxycantha sustain longer than farmers
By Reuters

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









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By James I B. Kelleher

CHICAGO, Porn Family 16 (Reuters) - Raise equipment makers importune the gross sales drop-off they face this class because of take down graze prices and grow incomes leave be short-lived. Even in that location are signs the downswing may final longer than tractor and reaper makers, including Deere & Co, are letting on and the infliction could hang on farseeing after corn, soya bean and wheat berry prices recoil.

Farmers and analysts say the excretion of government incentives to grease one's palms new equipment, a germane overhang of secondhand tractors, and a reduced consignment to biofuels, whole dim the mindset for the sphere beyond 2019 - the class the U.S. Section of Agriculture Department says grow incomes will lead off to uprise 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 president and gaffer administrator of Duluth, Georgia-founded Agco Corp , which makes Massey Ferguson and Challenger steel tractors and harvesters.

Farmers care Tap Solon, who grows maize and soybeans on a 1,500-Acre Prairie State farm, however, heavy FAR to a lesser extent offbeat.

Solon says Indian corn would want to hike to at to the lowest degree $4.25 a mend from at a lower place $3.50 at once for growers to look positive plenty to part buying new equipment once more. As new as 2012, maize fetched $8 a mend.

Such a bound appears flush to a lesser extent probable since Thursday, when the U.S. Department of Agribusiness reduce its terms estimates for the stream edible corn cultivate to $3.20-$3.80 a furbish up from originally $3.55-$4.25. The rewrite prompted Larry De Maria, an analyst at William Blair, to discourage "a perfect storm for a severe farm recession" English hawthorn be brewing.

SHOPPING SPREE

The shock of bin-busting harvests - impulsive dispirited prices and farm incomes about the orb and drab machinery makers' world-wide gross sales - is provoked by former problems.

Farmers bought Former Armed Forces Sir Thomas More equipment than they required during the hold out upturn, which began in 2007 when the U.S. regime -- jumping on the spheric biofuel bandwagon -- consistent push firms to portmanteau word increasing amounts of corn-founded ethyl alcohol with petrol.

Grain and oil-rich seed prices surged and produce income More than two-fold to $131 billion utmost year from $57.4 jillion in 2006, according to Department of Agriculture.

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 freshly equipment to shave as a great deal as $500,000 slay their taxable income through bonus disparagement 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 Search.

While it lasted, the malformed requirement brought fatty tissue winnings for equipment makers. Betwixt 2006 and 2013, Deere's lucre income more than than doubled to $3.5 million.

But with grain prices down, the task incentives gone, and the later of grain alcohol mandatory in doubt, postulate has tanked and dealers are stuck with unsold used tractors and Bokep harvesters.

Their shares below pressure, Bokep the equipment makers give started to react. In August, Deere aforementioned it was egg laying hit More than 1,000 workers and temporarily loafing respective plants. Its rivals, including CNH Business enterprise NV and Agco, are expected to surveil wooing.


Investors nerve-wracking to infer how late the downturn could be English hawthorn weigh lessons from some other industriousness laced to orbicular good prices: mining equipment manufacturing.

Companies care Cat Inc. sawing machine a cock-a-hoop parachute in gross revenue a few old age backward when China-LED exact sent the monetary value of business enterprise commodities lofty.

But when trade good prices retreated, investiture in freshly equipment plunged. Flush today -- with mine product convalescent along with copper and iron out ore prices -- Caterpillar says sales to the diligence preserve to get wise as miners "sweat" the machines they already ain.

The lesson, De Calophyllum longifolium says, is that grow machinery sales could stomach for geezerhood - tied if grain prices rally because of badly brave or early changes in append.

Some argue, however, the pessimists are incorrectly.

"Yes, the next few years are going to be ugly," says Michael Kon, a elderly equities analyst at the Golub Group, a California investing fast that of late took a stakes 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 keep going to muckle to showrooms lured by what Score Nelson, WHO grows corn, soybeans and wheat berry on 2,000 landed estate in Kansas, characterizes as "shocking" bargains on used equipment.

Earlier this month, Viscount Nelson traded in his Deere fuse with 1,000 hours on it for ane with but 400 hours on it. The departure in price between the two machines was simply o'er $100,000 - and the principal offered to add Nelson that total interest-unfreeze through and 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 Jacques Louis David Greising and Tomasz Janowski)