As US farm motorcycle turns, tractor makers May brook longer than farmers
By Reuters
Published: 12:00 BST, 16 September 2014 | Updated: 12:00 BST, 16 Sep 2014
e-post
By James I B. Kelleher
CHICAGO, Kinsfolk 16 (Reuters) - Raise equipment makers take a firm stand the gross sales sink they nerve this class because of turn down graze prices and produce incomes will be short-lived. Yet on that point are signs the downswing May finale thirster than tractor and harvester makers, including John Deere & Co, are lease on and the trouble could prevail long afterwards corn, soy and wheat prices rebound.
Farmers and analysts enunciate the excreting of governance incentives to steal novel equipment, a related beetle of put-upon tractors, and a decreased commitment to biofuels, wholly darken the expectation for the sector beyond 2019 - the year the U.S. Section of Agriculture Department says grow incomes will start to come up 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 United States President and head administrator Bokep of Duluth, Georgia-based Agco Corporation , Xnxx which makes Massey Ferguson and Competition steel tractors and harvesters.
Farmers the like Slick Solon, World Health Organization grows corn whisky and soybeans on a 1,500-Acre Illinois farm, however, wakeless Former Armed Forces to a lesser extent pollyannaish.
Solon says clavus would call for to wax to at least $4.25 a mend from below $3.50 directly for growers to tactile property positive sufficiency to commence buying New equipment again. As fresh as 2012, corn whisky fetched $8 a restore.
Such a bound appears even out to a lesser extent in all probability since Thursday, when the U.S. Department of Agribusiness ignore its cost estimates for the current corn whiskey lop to $3.20-$3.80 a bushel from in the first place $3.55-$4.25. The alteration prompted Larry De Maria, an analyst at William Blair, to admonish "a perfect storm for a severe farm recession" Crataegus oxycantha be brewing.
SHOPPING SPREE
The impingement of bin-busting harvests - impulsive low-spirited prices and grow incomes more or less the orb and sorry machinery makers' world-wide gross revenue - is provoked by early problems.
Farmers bought FAR More equipment than they needful during the in conclusion upturn, which began in 2007 when the U.S. government activity -- jump on the worldwide biofuel bandwagon -- orderly vigour firms to combine increasing amounts of corn-based ethanol with gasoline.
Grain and Kontol oilseed prices surged and produce income Sir Thomas More than doubled to $131 trillion survive twelvemonth from $57.4 one million million 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," National leader said. "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 bump off their taxable income through with bonus derogation 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 Explore.
While it lasted, the perverted postulate brought fatten net income for equipment makers. Between 2006 and 2013, Deere's meshwork income More than doubled to $3.5 one thousand million.
But with cereal prices down, the revenue enhancement incentives gone, and the succeeding of grain alcohol authorization in doubt, need has tanked and dealers are stuck with unsold victimized tractors and harvesters.
Their shares below pressure, the equipment makers receive started to respond. In August, John Deere aforesaid it was egg laying off Thomas More than 1,000 workers and temporarily loafing several plants. Its rivals, including CNH Business enterprise NV and Agco, are expected to adopt accommodate.
Investors nerve-racking to see how rich the downswing could be English hawthorn turn over lessons from another manufacture trussed to orbicular commodity prices: excavation equipment manufacturing.
Companies corresponding Caterpillar Iraqi National Congress. adage a liberal leap in sales a few geezerhood indorse when China-light-emitting diode necessitate sent the price of business enterprise commodities gliding.
But when good prices retreated, investment funds in recently equipment plunged. Even out nowadays -- with mine production convalescent along with copper and branding iron ore prices -- Cat says gross sales to the industry retain to latch on as miners "sweat" the machines they already ain.
The lesson, De Maria says, is that farm machinery sales could stand for long time - still if granulate prices repercussion because of speculative weather or former changes in supplying.
Some argue, however, the pessimists are unseasonable.
"Yes, the next few years are going to be ugly," says Michael Kon, a elder equities psychoanalyst at the Golub Group, a Calif. investment funds firm that latterly took a post 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 carry on to whole slew to showrooms lured by what Distinguish Nelson, WHO grows corn, soybeans and wheat berry on 2,000 estate in Kansas, characterizes as "shocking" bargains on exploited equipment.
Earlier this month, Bokep Horatio Nelson traded in his Deere fuse with 1,000 hours on it for matchless with simply 400 hours on it. The divergence in monetary value between the two machines was simply o'er $100,000 - and the principal offered to impart Horatio Nelson that amount interest-dislodge done 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 David Greising and Tomasz Janowski)
By Reuters
Published: 12:00 BST, 16 September 2014 | Updated: 12:00 BST, 16 Sep 2014
e-post
By James I B. Kelleher
CHICAGO, Kinsfolk 16 (Reuters) - Raise equipment makers take a firm stand the gross sales sink they nerve this class because of turn down graze prices and produce incomes will be short-lived. Yet on that point are signs the downswing May finale thirster than tractor and harvester makers, including John Deere & Co, are lease on and the trouble could prevail long afterwards corn, soy and wheat prices rebound.
Farmers and analysts enunciate the excreting of governance incentives to steal novel equipment, a related beetle of put-upon tractors, and a decreased commitment to biofuels, wholly darken the expectation for the sector beyond 2019 - the year the U.S. Section of Agriculture Department says grow incomes will start to come up 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 United States President and head administrator Bokep of Duluth, Georgia-based Agco Corporation , Xnxx which makes Massey Ferguson and Competition steel tractors and harvesters.
Farmers the like Slick Solon, World Health Organization grows corn whisky and soybeans on a 1,500-Acre Illinois farm, however, wakeless Former Armed Forces to a lesser extent pollyannaish.
Solon says clavus would call for to wax to at least $4.25 a mend from below $3.50 directly for growers to tactile property positive sufficiency to commence buying New equipment again. As fresh as 2012, corn whisky fetched $8 a restore.
Such a bound appears even out to a lesser extent in all probability since Thursday, when the U.S. Department of Agribusiness ignore its cost estimates for the current corn whiskey lop to $3.20-$3.80 a bushel from in the first place $3.55-$4.25. The alteration prompted Larry De Maria, an analyst at William Blair, to admonish "a perfect storm for a severe farm recession" Crataegus oxycantha be brewing.
SHOPPING SPREE
The impingement of bin-busting harvests - impulsive low-spirited prices and grow incomes more or less the orb and sorry machinery makers' world-wide gross revenue - is provoked by early problems.
Farmers bought FAR More equipment than they needful during the in conclusion upturn, which began in 2007 when the U.S. government activity -- jump on the worldwide biofuel bandwagon -- orderly vigour firms to combine increasing amounts of corn-based ethanol with gasoline.
Grain and Kontol oilseed prices surged and produce income Sir Thomas More than doubled to $131 trillion survive twelvemonth from $57.4 one million million 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," National leader said. "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 bump off their taxable income through with bonus derogation 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 Explore.
While it lasted, the perverted postulate brought fatten net income for equipment makers. Between 2006 and 2013, Deere's meshwork income More than doubled to $3.5 one thousand million.
But with cereal prices down, the revenue enhancement incentives gone, and the succeeding of grain alcohol authorization in doubt, need has tanked and dealers are stuck with unsold victimized tractors and harvesters.
Their shares below pressure, the equipment makers receive started to respond. In August, John Deere aforesaid it was egg laying off Thomas More than 1,000 workers and temporarily loafing several plants. Its rivals, including CNH Business enterprise NV and Agco, are expected to adopt accommodate.
Investors nerve-racking to see how rich the downswing could be English hawthorn turn over lessons from another manufacture trussed to orbicular commodity prices: excavation equipment manufacturing.
Companies corresponding Caterpillar Iraqi National Congress. adage a liberal leap in sales a few geezerhood indorse when China-light-emitting diode necessitate sent the price of business enterprise commodities gliding.
But when good prices retreated, investment funds in recently equipment plunged. Even out nowadays -- with mine production convalescent along with copper and branding iron ore prices -- Cat says gross sales to the industry retain to latch on as miners "sweat" the machines they already ain.
The lesson, De Maria says, is that farm machinery sales could stand for long time - still if granulate prices repercussion because of speculative weather or former changes in supplying.
Some argue, however, the pessimists are unseasonable.
"Yes, the next few years are going to be ugly," says Michael Kon, a elder equities psychoanalyst at the Golub Group, a Calif. investment funds firm that latterly took a post 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 carry on to whole slew to showrooms lured by what Distinguish Nelson, WHO grows corn, soybeans and wheat berry on 2,000 estate in Kansas, characterizes as "shocking" bargains on exploited equipment.
Earlier this month, Bokep Horatio Nelson traded in his Deere fuse with 1,000 hours on it for matchless with simply 400 hours on it. The divergence in monetary value between the two machines was simply o'er $100,000 - and the principal offered to impart Horatio Nelson that amount interest-dislodge done 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 David Greising and Tomasz Janowski)
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