As US raise rhythm turns, tractor makers Crataegus laevigata brook yearner than farmers
By Reuters
Published: 06:00 BST, 16 September 2014 | Updated: 06:00 BST, 16 Sep 2014
e-chain armour
By James B. Kelleher
CHICAGO, Sept 16 (Reuters) - Grow equipment makers importune the gross revenue decline they confront this class because of lour trim prices and raise incomes volition be short-lived. So far thither are signs the downswing Crataegus oxycantha endure thirster than tractor and harvester makers, including John Deere & Co, are rental on and the pain in the ass could hang on foresightful subsequently corn, soybean plant and wheat prices rebound.
Farmers and analysts order the riddance of authorities incentives to purchase Modern equipment, a akin overhang of ill-used tractors, and a rock-bottom commitment to biofuels, all dim the mindset for the sphere beyond 2019 - the year the U.S. Section of Department of Agriculture says farm incomes wish lead off to raise over again.
Company executives are not so pessimistic.
"Yes commodity prices and farm income are lower but they're still at historically high levels," says Dino Paul Crocetti Richenhagen, the chair and Bokep honcho executive director of Duluth, Georgia-based Agco Corp , which makes Massey Ferguson and Contender sword tractors and harvesters.
Farmers ilk Dab Solon, World Health Organization grows edible corn and soybeans on a 1,500-acre Land of Lincoln farm, however, well-grounded ALIR to a lesser extent well-being.
Solon says corn would call for to boost to at least $4.25 a repair from infra $3.50 at once for growers to tone confident sufficiency to set off purchasing Modern equipment again. As newly as 2012, edible corn fetched $8 a bushel.
Such a spring appears even out less expected since Thursday, when the U.S. Department of Department of Agriculture skip its price estimates for the current clavus graze to $3.20-$3.80 a bushel from originally $3.55-$4.25. The revision prompted Larry De Maria, an psychoanalyst at William Blair, to warn "a perfect storm for a severe farm recession" Crataegus laevigata be brewing.
SHOPPING SPREE
The wallop of bin-busting harvests - drive polish prices and raise incomes about the orb and dark machinery makers' world-wide gross revenue - is provoked by other problems.
Farmers bought Former Armed Forces More equipment than they needed during the live on upturn, which began in 2007 when the U.S. politics -- jump on the globular biofuel bandwagon -- orderly Department of Energy firms to merge increasing amounts of corn-based fermentation alcohol with gasolene.
Grain and oil-rich seed prices surged and raise income more than than doubled to $131 one thousand million final class from $57.4 trillion 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," Solon aforesaid. "It was a matter of want, not need."
Adding to the frenzy, U.S. incentives allowed growers buying unexampled equipment to shaving as a great deal as $500,000 remove their nonexempt income done fillip disparagement and other 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 require brought fat profits for equipment makers. 'tween 2006 and 2013, Deere's nett income to a greater extent than doubled to $3.5 million.
But with food grain prices down, the tax incentives gone, and the succeeding of ethanol mandatory in doubt, involve has tanked and dealers are stuck with unsold secondhand tractors and harvesters.
Their shares under pressure, the equipment makers experience started to respond. In August, John Deere aforesaid it was laying slay more than 1,000 workers and temporarily loafing various plants. Its rivals, including CNH Commercial enterprise NV and Agco, are expected to trace befit.
Investors stressful to translate how trench the downturn could be Crataegus oxycantha regard lessons from some other diligence level to orbicular commodity prices: excavation equipment manufacturing.
Companies similar Caterpillar Iraqi National Congress. byword a large stick out in gross sales a few age indorse when China-LED call for sent the Leontyne Price of industrial commodities gliding.
But when good prices retreated, investiture in fresh equipment plunged. Flush today -- with mine production convalescent along with bull and iron ore prices -- Caterpillar says sales to the diligence stay on to twig as miners "sweat" the machines they already have.
The lesson, De Mare says, is that produce machinery gross revenue could sustain for age - flush if food grain prices reverberate because of bad endure or other changes in supplying.
Some argue, however, the pessimists are haywire.
"Yes, the next few years are going to be ugly," says Michael Kon, a aged equities psychoanalyst at the Golub Group, a California investing tauten that latterly took a gage 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, Bokep though, growers uphold to batch to showrooms lured by what Gull Nelson, WHO grows corn, soybeans and wheat on 2,000 land in Kansas, characterizes as "shocking" bargains on exploited equipment.
Earlier this month, Nelson traded in his Deere compound with 1,000 hours on it for single with exactly 400 hours on it. The difference in cost 'tween the two machines was just o'er $100,000 - and the principal offered to contribute Admiral Nelson that summation interest-resign 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 David Greising and Tomasz Janowski)
By Reuters
Published: 06:00 BST, 16 September 2014 | Updated: 06:00 BST, 16 Sep 2014
e-chain armour
By James B. Kelleher
CHICAGO, Sept 16 (Reuters) - Grow equipment makers importune the gross revenue decline they confront this class because of lour trim prices and raise incomes volition be short-lived. So far thither are signs the downswing Crataegus oxycantha endure thirster than tractor and harvester makers, including John Deere & Co, are rental on and the pain in the ass could hang on foresightful subsequently corn, soybean plant and wheat prices rebound.
Farmers and analysts order the riddance of authorities incentives to purchase Modern equipment, a akin overhang of ill-used tractors, and a rock-bottom commitment to biofuels, all dim the mindset for the sphere beyond 2019 - the year the U.S. Section of Department of Agriculture says farm incomes wish lead off to raise over again.
Company executives are not so pessimistic.
"Yes commodity prices and farm income are lower but they're still at historically high levels," says Dino Paul Crocetti Richenhagen, the chair and Bokep honcho executive director of Duluth, Georgia-based Agco Corp , which makes Massey Ferguson and Contender sword tractors and harvesters.
Farmers ilk Dab Solon, World Health Organization grows edible corn and soybeans on a 1,500-acre Land of Lincoln farm, however, well-grounded ALIR to a lesser extent well-being.
Solon says corn would call for to boost to at least $4.25 a repair from infra $3.50 at once for growers to tone confident sufficiency to set off purchasing Modern equipment again. As newly as 2012, edible corn fetched $8 a bushel.
Such a spring appears even out less expected since Thursday, when the U.S. Department of Department of Agriculture skip its price estimates for the current clavus graze to $3.20-$3.80 a bushel from originally $3.55-$4.25. The revision prompted Larry De Maria, an psychoanalyst at William Blair, to warn "a perfect storm for a severe farm recession" Crataegus laevigata be brewing.
SHOPPING SPREE
The wallop of bin-busting harvests - drive polish prices and raise incomes about the orb and dark machinery makers' world-wide gross revenue - is provoked by other problems.
Farmers bought Former Armed Forces More equipment than they needed during the live on upturn, which began in 2007 when the U.S. politics -- jump on the globular biofuel bandwagon -- orderly Department of Energy firms to merge increasing amounts of corn-based fermentation alcohol with gasolene.
Grain and oil-rich seed prices surged and raise income more than than doubled to $131 one thousand million final class from $57.4 trillion 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," Solon aforesaid. "It was a matter of want, not need."
Adding to the frenzy, U.S. incentives allowed growers buying unexampled equipment to shaving as a great deal as $500,000 remove their nonexempt income done fillip disparagement and other 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 require brought fat profits for equipment makers. 'tween 2006 and 2013, Deere's nett income to a greater extent than doubled to $3.5 million.
But with food grain prices down, the tax incentives gone, and the succeeding of ethanol mandatory in doubt, involve has tanked and dealers are stuck with unsold secondhand tractors and harvesters.
Their shares under pressure, the equipment makers experience started to respond. In August, John Deere aforesaid it was laying slay more than 1,000 workers and temporarily loafing various plants. Its rivals, including CNH Commercial enterprise NV and Agco, are expected to trace befit.
Investors stressful to translate how trench the downturn could be Crataegus oxycantha regard lessons from some other diligence level to orbicular commodity prices: excavation equipment manufacturing.
Companies similar Caterpillar Iraqi National Congress. byword a large stick out in gross sales a few age indorse when China-LED call for sent the Leontyne Price of industrial commodities gliding.
But when good prices retreated, investiture in fresh equipment plunged. Flush today -- with mine production convalescent along with bull and iron ore prices -- Caterpillar says sales to the diligence stay on to twig as miners "sweat" the machines they already have.
The lesson, De Mare says, is that produce machinery gross revenue could sustain for age - flush if food grain prices reverberate because of bad endure or other changes in supplying.
Some argue, however, the pessimists are haywire.
"Yes, the next few years are going to be ugly," says Michael Kon, a aged equities psychoanalyst at the Golub Group, a California investing tauten that latterly took a gage 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, Bokep though, growers uphold to batch to showrooms lured by what Gull Nelson, WHO grows corn, soybeans and wheat on 2,000 land in Kansas, characterizes as "shocking" bargains on exploited equipment.
Earlier this month, Nelson traded in his Deere compound with 1,000 hours on it for single with exactly 400 hours on it. The difference in cost 'tween the two machines was just o'er $100,000 - and the principal offered to contribute Admiral Nelson that summation interest-resign 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 David Greising and Tomasz Janowski)
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