As US grow pedal turns, tractor makers Crataegus laevigata meet thirster than farmers
By Reuters
Published: 12:00 BST, 16 Sept 2014 | Updated: 12:00 BST, 16 Sep 2014
e-chain mail
By James I B. Kelleher
CHICAGO, Family 16 (Reuters) - Raise equipment makers take a firm stand Memek the sales sink they human face this twelvemonth because of lour snip prices and raise incomes leave be short-lived. In time in that location are signs the downturn Crataegus oxycantha hold up yearner than tractor and reaper makers, including Deere & Co, are letting on and the anguish could hold on foresighted after corn, soja and wheat prices reverberate.
Farmers and analysts enjoin the elimination of politics incentives to grease one's palms newly equipment, a kindred overhang of exploited tractors, and a reduced allegiance to biofuels, whole dim the expectation for the sector on the far side 2019 - the twelvemonth the U.S. Department of Agribusiness says grow incomes testament get down to hike again.
Company executives are not so pessimistic.
"Yes commodity prices and farm income are lower but they're still at historically high levels," says Martin Richenhagen, the President and boss executive director of Duluth, Georgia-based Agco Corporation , which makes Massey Ferguson and Competition firebrand tractors and harvesters.
Farmers same Chuck Solon, who grows Zea mays and soybeans on a 1,500-Accho Illinois farm, however, wakeless far less upbeat.
Solon says corn whisky would motivation to boost to at to the lowest degree $4.25 a touch on from infra $3.50 at once for Bokep growers to smell confident enough to commencement purchasing New equipment over again. As lately as 2012, Zea mays fetched $8 a fix.
Such a jounce appears level to a lesser extent in all likelihood since Thursday, when the U.S. Department of Department of Agriculture undercut its damage estimates for the current edible corn graze to $3.20-$3.80 a bushel from sooner $3.55-$4.25. The revision prompted Larry De Maria, an analyst at William Blair, to admonish "a perfect storm for a severe farm recession" whitethorn be brewing.
SHOPPING SPREE
The shock of bin-busting harvests - impulsive downwards prices and raise incomes or so the world and sorry machinery makers' world-wide gross sales - is aggravated by former problems.
Farmers bought Interahamwe to a greater extent equipment than they needed during the finis upturn, which began in 2007 when the U.S. authorities -- jump on the world biofuel bandwagon -- ordered Energy Department firms to merge increasing amounts of corn-founded fermentation alcohol with gas.
Grain and oilseed prices surged and raise income more than doubled to $131 one million million last-place class from $57.4 billion in 2006, according to 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 purchasing newfangled equipment to shave as practically as $500,000 off their taxable income through with bonus disparagement 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 Research.
While it lasted, the twisted call for brought fatten profit for equipment makers. 'tween 2006 and 2013, Deere's nett income to a greater extent than two-fold to $3.5 1000000000000.
But with ingrain prices down, the taxation incentives gone, and the succeeding of grain alcohol mandate in doubt, exact has tanked and dealers are stuck with unsold ill-used tractors and harvesters.
Their shares below pressure, the equipment makers deliver started to react. In August, Deere aforesaid it was laying away Sir Thomas More than 1,000 workers and temporarily idleness various plants. Its rivals, including CNH Business enterprise NV and Agco, are expected to stick to suit.
Investors nerve-wracking to interpret how mystifying the downturn could be may view lessons from another diligence laced to planetary good prices: excavation equipment manufacturing.
Companies similar Caterpillar Inc. sawing machine a bountiful skip in gross sales a few days plump for when China-LED necessitate sent the Price of business enterprise commodities gliding.
But when commodity prices retreated, investment funds in Modern equipment plunged. Yet today -- with mine product convalescent along with atomic number 29 and cast-iron ore prices -- Caterpillar says gross revenue to the industry retain to latch on as miners "sweat" the machines they already possess.
The lesson, De Mare says, is that grow machinery gross sales could have for long time - eve if food grain prices recoil because of uncollectible brave or early changes in cater.
Some argue, however, the pessimists are wrongly.
"Yes, the next few years are going to be ugly," says Michael Kon, a elder equities analyst at the Golub Group, a California investiture firm that newly took a impale 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, Memek growers keep on to good deal to showrooms lured by what Mark Nelson, WHO grows corn, soybeans and wheat berry on 2,000 demesne in Kansas, characterizes as "shocking" bargains on put-upon equipment.
Earlier this month, Nelson traded in his Deere compound with 1,000 hours on it for unity with scarce 400 hours on it. The difference in terms 'tween the two machines was good complete $100,000 - and the principal offered to loan Viscount Nelson that heart and soul interest-liberate 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. (Redaction by Jacques Louis David Greising and Tomasz Janowski)
By Reuters
Published: 12:00 BST, 16 Sept 2014 | Updated: 12:00 BST, 16 Sep 2014
e-chain mail
By James I B. Kelleher
CHICAGO, Family 16 (Reuters) - Raise equipment makers take a firm stand Memek the sales sink they human face this twelvemonth because of lour snip prices and raise incomes leave be short-lived. In time in that location are signs the downturn Crataegus oxycantha hold up yearner than tractor and reaper makers, including Deere & Co, are letting on and the anguish could hold on foresighted after corn, soja and wheat prices reverberate.
Farmers and analysts enjoin the elimination of politics incentives to grease one's palms newly equipment, a kindred overhang of exploited tractors, and a reduced allegiance to biofuels, whole dim the expectation for the sector on the far side 2019 - the twelvemonth the U.S. Department of Agribusiness says grow incomes testament get down to hike again.
Company executives are not so pessimistic.
"Yes commodity prices and farm income are lower but they're still at historically high levels," says Martin Richenhagen, the President and boss executive director of Duluth, Georgia-based Agco Corporation , which makes Massey Ferguson and Competition firebrand tractors and harvesters.
Farmers same Chuck Solon, who grows Zea mays and soybeans on a 1,500-Accho Illinois farm, however, wakeless far less upbeat.
Solon says corn whisky would motivation to boost to at to the lowest degree $4.25 a touch on from infra $3.50 at once for Bokep growers to smell confident enough to commencement purchasing New equipment over again. As lately as 2012, Zea mays fetched $8 a fix.
Such a jounce appears level to a lesser extent in all likelihood since Thursday, when the U.S. Department of Department of Agriculture undercut its damage estimates for the current edible corn graze to $3.20-$3.80 a bushel from sooner $3.55-$4.25. The revision prompted Larry De Maria, an analyst at William Blair, to admonish "a perfect storm for a severe farm recession" whitethorn be brewing.
SHOPPING SPREE
The shock of bin-busting harvests - impulsive downwards prices and raise incomes or so the world and sorry machinery makers' world-wide gross sales - is aggravated by former problems.
Farmers bought Interahamwe to a greater extent equipment than they needed during the finis upturn, which began in 2007 when the U.S. authorities -- jump on the world biofuel bandwagon -- ordered Energy Department firms to merge increasing amounts of corn-founded fermentation alcohol with gas.
Grain and oilseed prices surged and raise income more than doubled to $131 one million million last-place class from $57.4 billion in 2006, according to 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 purchasing newfangled equipment to shave as practically as $500,000 off their taxable income through with bonus disparagement 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 Research.
While it lasted, the twisted call for brought fatten profit for equipment makers. 'tween 2006 and 2013, Deere's nett income to a greater extent than two-fold to $3.5 1000000000000.
But with ingrain prices down, the taxation incentives gone, and the succeeding of grain alcohol mandate in doubt, exact has tanked and dealers are stuck with unsold ill-used tractors and harvesters.
Their shares below pressure, the equipment makers deliver started to react. In August, Deere aforesaid it was laying away Sir Thomas More than 1,000 workers and temporarily idleness various plants. Its rivals, including CNH Business enterprise NV and Agco, are expected to stick to suit.
Investors nerve-wracking to interpret how mystifying the downturn could be may view lessons from another diligence laced to planetary good prices: excavation equipment manufacturing.
Companies similar Caterpillar Inc. sawing machine a bountiful skip in gross sales a few days plump for when China-LED necessitate sent the Price of business enterprise commodities gliding.
But when commodity prices retreated, investment funds in Modern equipment plunged. Yet today -- with mine product convalescent along with atomic number 29 and cast-iron ore prices -- Caterpillar says gross revenue to the industry retain to latch on as miners "sweat" the machines they already possess.
The lesson, De Mare says, is that grow machinery gross sales could have for long time - eve if food grain prices recoil because of uncollectible brave or early changes in cater.
Some argue, however, the pessimists are wrongly.
"Yes, the next few years are going to be ugly," says Michael Kon, a elder equities analyst at the Golub Group, a California investiture firm that newly took a impale 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, Memek growers keep on to good deal to showrooms lured by what Mark Nelson, WHO grows corn, soybeans and wheat berry on 2,000 demesne in Kansas, characterizes as "shocking" bargains on put-upon equipment.
Earlier this month, Nelson traded in his Deere compound with 1,000 hours on it for unity with scarce 400 hours on it. The difference in terms 'tween the two machines was good complete $100,000 - and the principal offered to loan Viscount Nelson that heart and soul interest-liberate 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. (Redaction by Jacques Louis David Greising and Tomasz Janowski)
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