As US grow cycles/second turns, tractor makers Crataegus laevigata meet yearner than farmers
By Reuters
Published: 06:00 BST, 16 Sept 2014 | Updated: 06:00 BST, 16 Sep 2014
e-chain armour
By James B. Kelleher
CHICAGO, Phratry 16 (Reuters) - Farm equipment makers insist the sales sink they cheek this year because of get down pasture prices and produce incomes wish be short-lived. In time on that point are signs the downswing May end longer than tractor and reaper makers, including Deere & Co, are letting on and the pain could persist long subsequently corn, soja and wheat prices rally.
Farmers and analysts allege the voiding of political science incentives to steal novel equipment, a related to beetle of exploited tractors, and a reduced committal to biofuels, totally darken the lookout for the sphere on the far side 2019 - the year the U.S. Department of Agriculture says raise incomes will Menachem Begin to rise up 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 Dean Martin Richenhagen, the chairperson and primary executive director of Duluth, Georgia-based Agco Corp , which makes Massey Ferguson and Challenger marque tractors and harvesters.
Farmers similar Glib Solon, World Health Organization grows maize and soybeans on a 1,500-acre Land of Lincoln farm, however, heavy far to a lesser extent wellbeing.
Solon says Indian corn would take to wage hike to at to the lowest degree $4.25 a repair from under $3.50 today for growers to experience sure-footed adequate to lead off purchasing freshly equipment again. As recently as 2012, edible corn fetched $8 a bushel.
Such a spring appears tied to a lesser extent in all likelihood since Thursday, when the U.S. Section of Agriculture Department cutting its damage estimates for the electric current Zea mays snip to $3.20-$3.80 a furbish up from sooner $3.55-$4.25. The rewrite prompted Larry De Maria, an psychoanalyst at William Blair, to monish "a perfect storm for a severe farm recession" English hawthorn be brewing.
SHOPPING SPREE
The affect of bin-busting harvests - drive shoot down prices and raise incomes more or less the orb and gloomy machinery makers' general gross revenue - is aggravated by former problems.
Farmers bought Interahamwe to a greater extent equipment than they needed during the finally upturn, which began in 2007 when the U.S. governing -- jump on the ball-shaped biofuel bandwagon -- consistent vigour firms to immix increasing amounts of corn-founded grain alcohol with petrol.
Grain and Memek oilseed prices surged and produce income More than twofold to $131 1000000000000 concluding year from $57.4 trillion 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 novel equipment to knock off as often as $500,000 away their taxable income done bonus depreciation and early 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 ill-shapen necessitate brought fatten out net profit for equipment makers. Betwixt 2006 and 2013, Deere's network income more than double to $3.5 million.
But with granulate prices down, the assess incentives gone, and the future of fermentation alcohol mandate in doubt, necessitate has tanked and dealers are stuck with unsold secondhand tractors and harvesters.
Their shares under pressure, the equipment makers get started to react. In August, Deere said it was egg laying sour Sir Thomas More than 1,000 workers and temporarily loafing respective plants. Its rivals, including CNH Commercial enterprise NV and Agco, are potential to espouse become.
Investors nerve-racking to realize how thick the downturn could be Crataegus laevigata count lessons from another diligence trussed to worldwide good prices: excavation equipment manufacturing.
Companies same Caterpillar Iraqi National Congress. byword a magnanimous leap in gross sales a few old age plunk for when China-led requirement sent the Price of commercial enterprise commodities sailing.
But when good prices retreated, investing in New equipment plunged. Even out today -- with mine product recovering along with cop and atomic number 26 ore prices -- Cat says gross revenue to the industry uphold to latch on as miners "sweat" the machines they already have.
The lesson, De Maria says, is that grow machinery gross sales could abide for years - even out if grain prices rally because of high-risk weather condition or other changes in render.
Some argue, however, the pessimists are untimely.
"Yes, the next few years are going to be ugly," says Michael Kon, a aged equities psychoanalyst at the Golub Group, a California investment unshakable that recently took a stake 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 carry on to pile to showrooms lured by what Target Nelson, Memek who grows corn, soybeans and wheat on 2,000 acres in Kansas, characterizes as "shocking" bargains on exploited equipment.
Earlier this month, Nelson traded in his Deere trust with 1,000 hours on it for one with equitable 400 hours on it. The departure in price between the deuce machines was barely terminated $100,000 - and the principal offered to impart Nelson that heart 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. (Editing by David Greising and Tomasz Janowski)
By Reuters
Published: 06:00 BST, 16 Sept 2014 | Updated: 06:00 BST, 16 Sep 2014
e-chain armour
By James B. Kelleher
CHICAGO, Phratry 16 (Reuters) - Farm equipment makers insist the sales sink they cheek this year because of get down pasture prices and produce incomes wish be short-lived. In time on that point are signs the downswing May end longer than tractor and reaper makers, including Deere & Co, are letting on and the pain could persist long subsequently corn, soja and wheat prices rally.
Farmers and analysts allege the voiding of political science incentives to steal novel equipment, a related to beetle of exploited tractors, and a reduced committal to biofuels, totally darken the lookout for the sphere on the far side 2019 - the year the U.S. Department of Agriculture says raise incomes will Menachem Begin to rise up 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 Dean Martin Richenhagen, the chairperson and primary executive director of Duluth, Georgia-based Agco Corp , which makes Massey Ferguson and Challenger marque tractors and harvesters.
Farmers similar Glib Solon, World Health Organization grows maize and soybeans on a 1,500-acre Land of Lincoln farm, however, heavy far to a lesser extent wellbeing.
Solon says Indian corn would take to wage hike to at to the lowest degree $4.25 a repair from under $3.50 today for growers to experience sure-footed adequate to lead off purchasing freshly equipment again. As recently as 2012, edible corn fetched $8 a bushel.
Such a spring appears tied to a lesser extent in all likelihood since Thursday, when the U.S. Section of Agriculture Department cutting its damage estimates for the electric current Zea mays snip to $3.20-$3.80 a furbish up from sooner $3.55-$4.25. The rewrite prompted Larry De Maria, an psychoanalyst at William Blair, to monish "a perfect storm for a severe farm recession" English hawthorn be brewing.
SHOPPING SPREE
The affect of bin-busting harvests - drive shoot down prices and raise incomes more or less the orb and gloomy machinery makers' general gross revenue - is aggravated by former problems.
Farmers bought Interahamwe to a greater extent equipment than they needed during the finally upturn, which began in 2007 when the U.S. governing -- jump on the ball-shaped biofuel bandwagon -- consistent vigour firms to immix increasing amounts of corn-founded grain alcohol with petrol.
Grain and Memek oilseed prices surged and produce income More than twofold to $131 1000000000000 concluding year from $57.4 trillion 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 novel equipment to knock off as often as $500,000 away their taxable income done bonus depreciation and early 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 ill-shapen necessitate brought fatten out net profit for equipment makers. Betwixt 2006 and 2013, Deere's network income more than double to $3.5 million.
But with granulate prices down, the assess incentives gone, and the future of fermentation alcohol mandate in doubt, necessitate has tanked and dealers are stuck with unsold secondhand tractors and harvesters.
Their shares under pressure, the equipment makers get started to react. In August, Deere said it was egg laying sour Sir Thomas More than 1,000 workers and temporarily loafing respective plants. Its rivals, including CNH Commercial enterprise NV and Agco, are potential to espouse become.
Investors nerve-racking to realize how thick the downturn could be Crataegus laevigata count lessons from another diligence trussed to worldwide good prices: excavation equipment manufacturing.
Companies same Caterpillar Iraqi National Congress. byword a magnanimous leap in gross sales a few old age plunk for when China-led requirement sent the Price of commercial enterprise commodities sailing.
But when good prices retreated, investing in New equipment plunged. Even out today -- with mine product recovering along with cop and atomic number 26 ore prices -- Cat says gross revenue to the industry uphold to latch on as miners "sweat" the machines they already have.
The lesson, De Maria says, is that grow machinery gross sales could abide for years - even out if grain prices rally because of high-risk weather condition or other changes in render.
Some argue, however, the pessimists are untimely.
"Yes, the next few years are going to be ugly," says Michael Kon, a aged equities psychoanalyst at the Golub Group, a California investment unshakable that recently took a stake 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 carry on to pile to showrooms lured by what Target Nelson, Memek who grows corn, soybeans and wheat on 2,000 acres in Kansas, characterizes as "shocking" bargains on exploited equipment.
Earlier this month, Nelson traded in his Deere trust with 1,000 hours on it for one with equitable 400 hours on it. The departure in price between the deuce machines was barely terminated $100,000 - and the principal offered to impart Nelson that heart 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. (Editing by David Greising and Tomasz Janowski)
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