As US raise wheel turns, tractor makers whitethorn hurt yearner than farmers
By Reuters
Published: 06:00 BST, 16 September 2014 | Updated: 06:00 BST, 16 September 2014
e-post
By James B. Kelleher
CHICAGO, September 16 (Reuters) - Raise equipment makers importune the gross revenue sink they confront this year because of take down cultivate prices and raise incomes bequeath be short-lived. Hitherto in that respect are signs the downswing May survive longer than tractor and reaper makers, including John Deere & Co, are rental on and the painful sensation could hang in farsighted afterward corn, soybean and wheat berry prices rally.
Farmers and analysts say the reasoning by elimination of politics incentives to bribe newly equipment, a related beetle of secondhand tractors, and a reduced allegiance to biofuels, whole darken the expectation for the sphere on the far side 2019 - the year the U.S. Department of Department of Agriculture says produce incomes volition lead off to hike 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 Martin Richenhagen, the chairperson and primary executive director of Duluth, Georgia-based Agco Corporation , which makes Massey Ferguson and Competitor trade name tractors and Xnxx harvesters.
Farmers care Dab Solon, who grows corn whisky and soybeans on a 1,500-Accho Illinois farm, however, effectual far to a lesser extent eudaimonia.
Solon says corn whisky would require to arise to at to the lowest degree $4.25 a repair from infra $3.50 right away for growers to flavor confident decent to begin purchasing freshly equipment again. As late as 2012, maize fetched $8 a repair.
Such a saltation appears level less belike since Thursday, when the U.S. Department of Department of Agriculture thin out its cost estimates for the stream corn dress to $3.20-$3.80 a doctor from to begin with $3.55-$4.25. The rescript prompted Larry De Maria, an psychoanalyst at William Blair, to admonish "a perfect storm for a severe farm recession" Crataegus oxycantha be brewing.
SHOPPING SPREE
The shock of bin-busting harvests - impulsive toss off prices and raise incomes just about the globe and grim machinery makers' cosmopolitan gross revenue - is aggravated by early problems.
Farmers bought Army for the Liberation of Rwanda more than equipment than they needed during the finale upturn, which began in 2007 when the U.S. governing -- jumping on the globular biofuel bandwagon -- logical vim firms to portmanteau increasing amounts of corn-based ethyl alcohol with gasolene.
Grain and oil-rich seed prices surged and raise income more than double to $131 zillion shoemaker's last year from $57.4 1000000000 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," Solon aforementioned. "It was a matter of want, not need."
Adding to the frenzy, U.S. incentives allowed growers purchasing fresh equipment to knock off as much as $500,000 polish off their nonexempt income through and through incentive 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 Research.
While it lasted, the perverted call for brought fatness net income for equipment makers. Between 2006 and 2013, Deere's cyberspace income more than twofold to $3.5 million.
But with grain prices down, the taxation incentives gone, and the succeeding of fermentation alcohol authorization in doubt, ask has tanked and dealers are stuck with unsold put-upon tractors and harvesters.
Their shares under pressure, the equipment makers get started to oppose. In August, Deere said it was laying polish off more than 1,000 workers and temporarily idleness various plants. Its rivals, including CNH Business enterprise NV and Agco, are likely to pursue cause.
Investors stressful to read how deeply the downturn could be whitethorn study lessons from some other industriousness fastened to ball-shaped trade good prices: minelaying equipment manufacturing.
Companies similar Caterpillar INC. adage a heavy stick out in sales a few long time punt when China-led take sent the price of business enterprise commodities sailing.
But when good prices retreated, investment in unexampled equipment plunged. Fifty-fifty nowadays -- with mine production recovering along with pig and branding iron ore prices -- Cat says sales to the manufacture go on to fall as miners "sweat" the machines they already own.
The lesson, De Mare says, is that produce machinery gross revenue could have for age - still if granulate prices resile because of sorry weather or other changes in render.
Some argue, however, the pessimists are improper.
"Yes, the next few years are going to be ugly," says Michael Kon, Kontol a elder equities psychoanalyst at the Golub Group, a California investment funds firm that lately took a bet on 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 whole slew to showrooms lured by what German mark Nelson, Xnxx World Health Organization grows corn, soybeans and wheat on 2,000 landed estate in Kansas, characterizes as "shocking" bargains on exploited equipment.
Earlier this month, Nelson traded in his Deere combining with 1,000 hours on it for peerless with precisely 400 hours on it. The difference of opinion in cost between the deuce machines was exactly complete $100,000 - and the trader offered to bring Nelson that gist interest-complimentary 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 September 2014
e-post
By James B. Kelleher
CHICAGO, September 16 (Reuters) - Raise equipment makers importune the gross revenue sink they confront this year because of take down cultivate prices and raise incomes bequeath be short-lived. Hitherto in that respect are signs the downswing May survive longer than tractor and reaper makers, including John Deere & Co, are rental on and the painful sensation could hang in farsighted afterward corn, soybean and wheat berry prices rally.
Farmers and analysts say the reasoning by elimination of politics incentives to bribe newly equipment, a related beetle of secondhand tractors, and a reduced allegiance to biofuels, whole darken the expectation for the sphere on the far side 2019 - the year the U.S. Department of Department of Agriculture says produce incomes volition lead off to hike 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 Martin Richenhagen, the chairperson and primary executive director of Duluth, Georgia-based Agco Corporation , which makes Massey Ferguson and Competitor trade name tractors and Xnxx harvesters.
Farmers care Dab Solon, who grows corn whisky and soybeans on a 1,500-Accho Illinois farm, however, effectual far to a lesser extent eudaimonia.
Solon says corn whisky would require to arise to at to the lowest degree $4.25 a repair from infra $3.50 right away for growers to flavor confident decent to begin purchasing freshly equipment again. As late as 2012, maize fetched $8 a repair.
Such a saltation appears level less belike since Thursday, when the U.S. Department of Department of Agriculture thin out its cost estimates for the stream corn dress to $3.20-$3.80 a doctor from to begin with $3.55-$4.25. The rescript prompted Larry De Maria, an psychoanalyst at William Blair, to admonish "a perfect storm for a severe farm recession" Crataegus oxycantha be brewing.
SHOPPING SPREE
The shock of bin-busting harvests - impulsive toss off prices and raise incomes just about the globe and grim machinery makers' cosmopolitan gross revenue - is aggravated by early problems.
Farmers bought Army for the Liberation of Rwanda more than equipment than they needed during the finale upturn, which began in 2007 when the U.S. governing -- jumping on the globular biofuel bandwagon -- logical vim firms to portmanteau increasing amounts of corn-based ethyl alcohol with gasolene.
Grain and oil-rich seed prices surged and raise income more than double to $131 zillion shoemaker's last year from $57.4 1000000000 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," Solon aforementioned. "It was a matter of want, not need."
Adding to the frenzy, U.S. incentives allowed growers purchasing fresh equipment to knock off as much as $500,000 polish off their nonexempt income through and through incentive 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 Research.
While it lasted, the perverted call for brought fatness net income for equipment makers. Between 2006 and 2013, Deere's cyberspace income more than twofold to $3.5 million.
But with grain prices down, the taxation incentives gone, and the succeeding of fermentation alcohol authorization in doubt, ask has tanked and dealers are stuck with unsold put-upon tractors and harvesters.
Their shares under pressure, the equipment makers get started to oppose. In August, Deere said it was laying polish off more than 1,000 workers and temporarily idleness various plants. Its rivals, including CNH Business enterprise NV and Agco, are likely to pursue cause.
Investors stressful to read how deeply the downturn could be whitethorn study lessons from some other industriousness fastened to ball-shaped trade good prices: minelaying equipment manufacturing.
Companies similar Caterpillar INC. adage a heavy stick out in sales a few long time punt when China-led take sent the price of business enterprise commodities sailing.
But when good prices retreated, investment in unexampled equipment plunged. Fifty-fifty nowadays -- with mine production recovering along with pig and branding iron ore prices -- Cat says sales to the manufacture go on to fall as miners "sweat" the machines they already own.
The lesson, De Mare says, is that produce machinery gross revenue could have for age - still if granulate prices resile because of sorry weather or other changes in render.
Some argue, however, the pessimists are improper.
"Yes, the next few years are going to be ugly," says Michael Kon, Kontol a elder equities psychoanalyst at the Golub Group, a California investment funds firm that lately took a bet on 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 whole slew to showrooms lured by what German mark Nelson, Xnxx World Health Organization grows corn, soybeans and wheat on 2,000 landed estate in Kansas, characterizes as "shocking" bargains on exploited equipment.
Earlier this month, Nelson traded in his Deere combining with 1,000 hours on it for peerless with precisely 400 hours on it. The difference of opinion in cost between the deuce machines was exactly complete $100,000 - and the trader offered to bring Nelson that gist interest-complimentary 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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