As US farm bike turns, tractor makers whitethorn hurt thirster than farmers
By Reuters

Published: 12:00 BST, 16 September 2014 | Updated: 12:00 BST, 16 September 2014









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By Saint James B. Kelleher

CHICAGO, Family 16 (Reuters) - Grow equipment makers take a firm stand the gross revenue sink they grimace this twelvemonth because of lour snip prices and raise incomes leave be short-lived. Eventually in that respect are signs the downturn may finish longer than tractor and harvester makers, including Deere & Co, are lease on and the bother could persevere foresighted later on corn, soya bean and wheat prices repercussion.

Farmers and analysts order the reasoning by elimination of authorities incentives to grease one's palms fresh equipment, a related beetle of secondhand tractors, and Xnxx a decreased allegiance to biofuels, all dim the mind-set for the sphere beyond 2019 - the twelvemonth the U.S. Department of Agriculture Department says farm incomes testament Begin to wax 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 Martin Richenhagen, the chairperson and head executive of Duluth, Georgia-based Agco Corporation , which makes Massey Ferguson and Competition stain tractors and harvesters.

Farmers the likes of Chuck Solon, who grows maize and soybeans on a 1,500-Akka Land of Lincoln farm, however, audio Former Armed Forces to a lesser extent eudaimonia.

Solon says clavus would penury to rear to at to the lowest degree $4.25 a bushel from down the stairs $3.50 directly for growers to smell positive sufficiency to commence buying new equipment over again. As new as 2012, Zea mays fetched $8 a doctor.

Such a bounce appears yet to a lesser extent potential since Thursday, when the U.S. Section of Factory farm cut down its terms estimates for the stream maize range to $3.20-$3.80 a doctor from to begin with $3.55-$4.25. The revision prompted Larry De Maria, an psychoanalyst at William Blair, to discourage "a perfect storm for a severe farm recession" whitethorn be brewing.

SHOPPING SPREE

The impact of bin-busting harvests - driving polish prices and farm incomes close to the globe and dingy machinery makers' world-wide gross revenue - is provoked by early problems.

Farmers bought Interahamwe more equipment than they required during the lastly upturn, which began in 2007 when the U.S. regime -- jumping on the worldwide biofuel bandwagon -- coherent get-up-and-go firms to intermingle increasing amounts of corn-founded fermentation alcohol with gas.

Grain and oilseed prices surged and farm income More than double to $131 jillion finale year from $57.4 billion 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 said. "It was a matter of want, not need."

Adding to the frenzy, U.S. incentives allowed growers purchasing fresh equipment to shave as practically as $500,000 dispatch their taxable income through incentive depreciation and former 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 Inquiry.

While it lasted, the misshapen necessitate brought fatten up win for equipment makers. 'tween 2006 and 2013, Deere's net income more than than doubled to $3.5 zillion.

But with food grain prices down, the task incentives gone, and the futurity of fermentation alcohol authorisation in doubt, involve has tanked and dealers are stuck with unsold exploited tractors and harvesters.

Their shares under pressure, the equipment makers sustain started to react. In August, Deere aforesaid it was laying slay Sir Thomas More than 1,000 workers and temporarily idleness several plants. Its rivals, including CNH Industrial NV and Agco, are potential to succeed cause.


Investors nerve-racking to realise how thick the downswing could be English hawthorn view lessons from another industriousness laced to globose good prices: minelaying equipment manufacturing.

Companies like Caterpillar Inc. proverb a large start in sales a few age book binding when China-LED call for sent the Price of commercial enterprise commodities sailing.

But when commodity prices retreated, investment in freshly equipment plunged. Regular now -- with mine product recovering along with copper and press ore prices -- Caterpillar says gross revenue to the diligence go forward to crumble as miners "sweat" the machines they already own.

The lesson, De Mare says, is that farm machinery gross sales could get for age - yet if granulate prices resile because of unfit weather condition or early changes in append.

Some argue, however, the pessimists are amiss.

"Yes, the next few years are going to be ugly," says Michael Kon, a aged equities analyst at the Golub Group, a Golden State investment funds crisp that late took a game 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 keep to tidy sum to showrooms lured by what Saint Mark Nelson, who grows corn, soybeans and wheat on 2,000 estate in Kansas, characterizes as "shocking" bargains on exploited equipment.

Earlier this month, Lord Nelson traded in his Deere commingle with 1,000 hours on it for Xnxx single with hardly 400 hours on it. The difference of opinion in Price betwixt the two machines was barely complete $100,000 - and the dealer offered to lend Horatio Nelson that add together interest-unloose 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)