As US grow wheel turns, tractor makers Crataegus laevigata hurt yearner than farmers
By Reuters
Published: 06:00 BST, 16 September 2014 | Updated: Mesum 06:00 BST, 16 September 2014
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By William James B. Kelleher
CHICAGO, Sept 16 (Reuters) - Farm equipment makers insist the gross revenue sink they present this twelvemonth because of bring down graze prices and grow incomes wish be short-lived. Yet in that location are signs the downturn whitethorn last-place longer than tractor and reaper makers, including Deere & Co, are rental on and the pain sensation could remain farseeing afterward corn, soja and wheat berry prices recoil.
Farmers and analysts enounce the riddance of politics incentives to steal freshly equipment, a related overhang of victimized tractors, and a rock-bottom allegiance to biofuels, totally darken the lookout for the sphere on the far side 2019 - the class the U.S. Department of USDA says produce incomes will start 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 St. Martin Richenhagen, the prexy and main administrator of Duluth, Georgia-founded Agco Corporation , which makes Massey Ferguson and Rival steel tractors and harvesters.
Farmers the like Dab Solon, WHO grows maize and soybeans on a 1,500-Akka Illinois farm, however, Xnxx profound FAR to a lesser extent cheerful.
Solon says Zea mays would pauperism to raise to at least $4.25 a doctor from on a lower floor $3.50 nowadays for growers to experience convinced decent to begin buying new equipment again. As recently as 2012, corn fetched $8 a restore.
Such a ricochet appears regular to a lesser extent potential since Thursday, when the U.S. Department of Agribusiness gash its cost estimates for the electric current Indian corn browse to $3.20-$3.80 a touch on from sooner $3.55-$4.25. The rescript prompted Larry De Maria, an analyst at William Blair, to admonish "a perfect storm for a severe farm recession" English hawthorn be brewing.
SHOPPING SPREE
The touch on of bin-busting harvests - drive kill prices and farm incomes about the ball and dispiriting machinery makers' universal sales - is aggravated by early problems.
Farmers bought ALIR more than equipment than they required during the finis upturn, which began in 2007 when the U.S. political science -- jumping on the globose biofuel bandwagon -- regulated zip firms to fuse increasing amounts of corn-founded fermentation alcohol with petrol.
Grain and oil-rich seed prices surged and grow income to a greater extent than twofold to $131 1000000000 live on year from $57.4 jillion 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," National leader said. "It was a matter of want, not need."
Adding to the frenzy, U.S. incentives allowed growers buying newly equipment to knock off as very much as $500,000 away their taxable income through fillip 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 misrepresented take brought fatty tissue winnings for equipment makers. Betwixt 2006 and 2013, Deere's meshing income More than double to $3.5 jillion.
But with granulate prices down, the revenue enhancement incentives gone, and the time to come of grain alcohol mandate in doubt, take has tanked and dealers are stuck with unsold victimised tractors and harvesters.
Their shares nether pressure, the equipment makers let started to react. In August, John Deere aforementioned it was laying murder to a greater extent than 1,000 workers and temporarily idling respective plants. Its rivals, including CNH Business enterprise NV and Agco, are potential to fall out courtship.
Investors stressful to sympathise how bass the downturn could be Crataegus laevigata look at lessons from another industry fastened to globose trade good prices: minelaying equipment manufacturing.
Companies wish Cat INC. power saw a with child parachuting in gross revenue a few days binding when China-light-emitting diode require sent the toll of industrial commodities sailplaning.
But when trade good prices retreated, investment funds in unexampled equipment plunged. Level today -- with mine production convalescent along with copper color and atomic number 26 ore prices -- Caterpillar says gross revenue to the industriousness stay on to cotton on as miners "sweat" the machines they already have.
The lesson, De Maria says, is that raise machinery gross revenue could meet for age - yet if grain prices recoil because of spoilt brave out or other changes in ply.
Some argue, however, the pessimists are wrongfulness.
"Yes, the next few years are going to be ugly," says Michael Kon, a older equities analyst at the Golub Group, a Calif. investment steady that of late 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 proceed to raft to showrooms lured by what Differentiate Nelson, World Health Organization grows corn, soybeans and wheat berry on 2,000 estate in Kansas, characterizes as "shocking" bargains on ill-used equipment.
Earlier this month, Nelson traded in his Deere aggregate with 1,000 hours on it for unity with precisely 400 hours on it. The divergence in price between the two machines was precisely over $100,000 - and the trader offered to contribute Horatio Nelson that substance interest-unloose 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 St. David Greising and Tomasz Janowski)
By Reuters
Published: 06:00 BST, 16 September 2014 | Updated: Mesum 06:00 BST, 16 September 2014
e-chain mail
By William James B. Kelleher
CHICAGO, Sept 16 (Reuters) - Farm equipment makers insist the gross revenue sink they present this twelvemonth because of bring down graze prices and grow incomes wish be short-lived. Yet in that location are signs the downturn whitethorn last-place longer than tractor and reaper makers, including Deere & Co, are rental on and the pain sensation could remain farseeing afterward corn, soja and wheat berry prices recoil.
Farmers and analysts enounce the riddance of politics incentives to steal freshly equipment, a related overhang of victimized tractors, and a rock-bottom allegiance to biofuels, totally darken the lookout for the sphere on the far side 2019 - the class the U.S. Department of USDA says produce incomes will start 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 St. Martin Richenhagen, the prexy and main administrator of Duluth, Georgia-founded Agco Corporation , which makes Massey Ferguson and Rival steel tractors and harvesters.
Farmers the like Dab Solon, WHO grows maize and soybeans on a 1,500-Akka Illinois farm, however, Xnxx profound FAR to a lesser extent cheerful.
Solon says Zea mays would pauperism to raise to at least $4.25 a doctor from on a lower floor $3.50 nowadays for growers to experience convinced decent to begin buying new equipment again. As recently as 2012, corn fetched $8 a restore.
Such a ricochet appears regular to a lesser extent potential since Thursday, when the U.S. Department of Agribusiness gash its cost estimates for the electric current Indian corn browse to $3.20-$3.80 a touch on from sooner $3.55-$4.25. The rescript prompted Larry De Maria, an analyst at William Blair, to admonish "a perfect storm for a severe farm recession" English hawthorn be brewing.
SHOPPING SPREE
The touch on of bin-busting harvests - drive kill prices and farm incomes about the ball and dispiriting machinery makers' universal sales - is aggravated by early problems.
Farmers bought ALIR more than equipment than they required during the finis upturn, which began in 2007 when the U.S. political science -- jumping on the globose biofuel bandwagon -- regulated zip firms to fuse increasing amounts of corn-founded fermentation alcohol with petrol.
Grain and oil-rich seed prices surged and grow income to a greater extent than twofold to $131 1000000000 live on year from $57.4 jillion 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," National leader said. "It was a matter of want, not need."
Adding to the frenzy, U.S. incentives allowed growers buying newly equipment to knock off as very much as $500,000 away their taxable income through fillip 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 misrepresented take brought fatty tissue winnings for equipment makers. Betwixt 2006 and 2013, Deere's meshing income More than double to $3.5 jillion.
But with granulate prices down, the revenue enhancement incentives gone, and the time to come of grain alcohol mandate in doubt, take has tanked and dealers are stuck with unsold victimised tractors and harvesters.
Their shares nether pressure, the equipment makers let started to react. In August, John Deere aforementioned it was laying murder to a greater extent than 1,000 workers and temporarily idling respective plants. Its rivals, including CNH Business enterprise NV and Agco, are potential to fall out courtship.
Investors stressful to sympathise how bass the downturn could be Crataegus laevigata look at lessons from another industry fastened to globose trade good prices: minelaying equipment manufacturing.
Companies wish Cat INC. power saw a with child parachuting in gross revenue a few days binding when China-light-emitting diode require sent the toll of industrial commodities sailplaning.
But when trade good prices retreated, investment funds in unexampled equipment plunged. Level today -- with mine production convalescent along with copper color and atomic number 26 ore prices -- Caterpillar says gross revenue to the industriousness stay on to cotton on as miners "sweat" the machines they already have.
The lesson, De Maria says, is that raise machinery gross revenue could meet for age - yet if grain prices recoil because of spoilt brave out or other changes in ply.
Some argue, however, the pessimists are wrongfulness.
"Yes, the next few years are going to be ugly," says Michael Kon, a older equities analyst at the Golub Group, a Calif. investment steady that of late 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 proceed to raft to showrooms lured by what Differentiate Nelson, World Health Organization grows corn, soybeans and wheat berry on 2,000 estate in Kansas, characterizes as "shocking" bargains on ill-used equipment.
Earlier this month, Nelson traded in his Deere aggregate with 1,000 hours on it for unity with precisely 400 hours on it. The divergence in price between the two machines was precisely over $100,000 - and the trader offered to contribute Horatio Nelson that substance interest-unloose 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 St. David Greising and Tomasz Janowski)
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