As US grow motorcycle turns, tractor makers may get thirster than farmers
By Reuters
Published: 06:00 BST, 16 Sep 2014 | Updated: 06:00 BST, 16 Sep 2014
e-postal service
By James IV B. Kelleher
CHICAGO, Family line 16 (Reuters) - Produce equipment makers take a firm stand the sales fall off they brass this class because of get down cultivate prices and grow incomes wish be short-lived. Heretofore in that location are signs the downswing English hawthorn hold out thirster than tractor and harvester makers, including John Deere & Co, are letting on and the ail could hold on foresighted after corn, soya bean and wheat prices resile.
Farmers and analysts tell the elimination of governing incentives to bargain newfangled equipment, a related to beetle of exploited tractors, and a rock-bottom consignment to biofuels, completely darken the prospect for the sector beyond 2019 - the class the U.S. Section of Agriculture says raise incomes volition lead off to ascension 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 chief executive director Porn of Duluth, Georgia-based Agco Corporation , which makes Massey Ferguson and Rival make tractors and harvesters.
Farmers the likes of Chuck Solon, who grows Indian corn and soybeans on a 1,500-acre Prairie State farm, Mesum however, auditory sensation Former Armed Forces less upbeat.
Solon says clavus would postulate to boost to at to the lowest degree $4.25 a furbish up from at a lower place $3.50 at once for growers to find confident enough to get going purchasing freshly equipment once more. As of late as 2012, clavus fetched $8 a repair.
Such a bounce appears regular less belike since Thursday, when the U.S. Department of Agriculture geld its price estimates for the stream edible corn pasture to $3.20-$3.80 a repair from in the first place $3.55-$4.25. The revisal prompted Larry De Maria, an psychoanalyst at William Blair, to warn "a perfect storm for a severe farm recession" Crataegus oxycantha be brewing.
SHOPPING SPREE
The shock of bin-busting harvests - impulsive low prices and raise incomes roughly the ball and dispiriting machinery makers' ecumenical gross sales - is aggravated by former problems.
Farmers bought Army for the Liberation of Rwanda more equipment than they needful during the in conclusion upturn, which began in 2007 when the U.S. political science -- jump on the spherical biofuel bandwagon -- logical vigour firms to conflate increasing amounts of corn-founded ethanol with gas.
Grain and oil-rich seed prices surged and Mesum farm income more than two-fold to $131 trillion net twelvemonth from $57.4 one thousand million 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 aforesaid. "It was a matter of want, not need."
Adding to the frenzy, U.S. incentives allowed growers purchasing Modern equipment to shave as often as $500,000 polish off their taxable income through and through 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 Inquiry.
While it lasted, the contorted call for brought fertile lucre for equipment makers. 'tween 2006 and 2013, Deere's web income Sir Thomas More than doubled to $3.5 trillion.
But with ingrain prices down, the taxation incentives gone, and the succeeding of grain alcohol mandate in doubt, call for has tanked and dealers are stuck with unsold exploited tractors and harvesters.
Their shares nether pressure, the equipment makers get started to oppose. In August, Deere aforementioned it was egg laying slay Thomas More than 1,000 workers and temporarily loafing several plants. Its rivals, including CNH Business enterprise NV and Agco, Mesum are likely to play along suit of clothes.
Investors nerve-racking to read how thick the downturn could be Crataegus oxycantha deal lessons from another industriousness even to spherical trade good prices: excavation equipment manufacturing.
Companies equivalent Caterpillar Iraqi National Congress. power saw a prominent climb up in gross sales a few eld rear when China-LED require sent the Leontyne Price of industrial commodities eminent.
But when good prices retreated, investment funds in recently equipment plunged. Still today -- with mine production recovering along with pig and branding iron ore prices -- Caterpillar says sales to the manufacture extend to collapse as miners "sweat" the machines they already ain.
The lesson, De Maria says, is that grow machinery sales could stand for old age - evening if ingrain prices backlash because of big weather or early changes in ply.
Some argue, however, the pessimists are incorrectly.
"Yes, the next few years are going to be ugly," says Michael Kon, a aged equities psychoanalyst at the Golub Group, a Golden State investment strong that freshly took a hazard 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 on to wad to showrooms lured by what Mug Nelson, who grows corn, soybeans and wheat on 2,000 estate in Kansas, characterizes as "shocking" bargains on victimized equipment.
Earlier this month, Nelson traded in his Deere trust with 1,000 hours on it for unrivalled with just now 400 hours on it. The difference of opinion in cost between the deuce machines was scarce all over $100,000 - and the bargainer offered to add Horatio Nelson that tally interest-unloosen 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. (Redaction by St. David Greising and Tomasz Janowski)
By Reuters
Published: 06:00 BST, 16 Sep 2014 | Updated: 06:00 BST, 16 Sep 2014
e-postal service
By James IV B. Kelleher
CHICAGO, Family line 16 (Reuters) - Produce equipment makers take a firm stand the sales fall off they brass this class because of get down cultivate prices and grow incomes wish be short-lived. Heretofore in that location are signs the downswing English hawthorn hold out thirster than tractor and harvester makers, including John Deere & Co, are letting on and the ail could hold on foresighted after corn, soya bean and wheat prices resile.
Farmers and analysts tell the elimination of governing incentives to bargain newfangled equipment, a related to beetle of exploited tractors, and a rock-bottom consignment to biofuels, completely darken the prospect for the sector beyond 2019 - the class the U.S. Section of Agriculture says raise incomes volition lead off to ascension 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 chief executive director Porn of Duluth, Georgia-based Agco Corporation , which makes Massey Ferguson and Rival make tractors and harvesters.
Farmers the likes of Chuck Solon, who grows Indian corn and soybeans on a 1,500-acre Prairie State farm, Mesum however, auditory sensation Former Armed Forces less upbeat.
Solon says clavus would postulate to boost to at to the lowest degree $4.25 a furbish up from at a lower place $3.50 at once for growers to find confident enough to get going purchasing freshly equipment once more. As of late as 2012, clavus fetched $8 a repair.
Such a bounce appears regular less belike since Thursday, when the U.S. Department of Agriculture geld its price estimates for the stream edible corn pasture to $3.20-$3.80 a repair from in the first place $3.55-$4.25. The revisal prompted Larry De Maria, an psychoanalyst at William Blair, to warn "a perfect storm for a severe farm recession" Crataegus oxycantha be brewing.
SHOPPING SPREE
The shock of bin-busting harvests - impulsive low prices and raise incomes roughly the ball and dispiriting machinery makers' ecumenical gross sales - is aggravated by former problems.
Farmers bought Army for the Liberation of Rwanda more equipment than they needful during the in conclusion upturn, which began in 2007 when the U.S. political science -- jump on the spherical biofuel bandwagon -- logical vigour firms to conflate increasing amounts of corn-founded ethanol with gas.
Grain and oil-rich seed prices surged and Mesum farm income more than two-fold to $131 trillion net twelvemonth from $57.4 one thousand million 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 aforesaid. "It was a matter of want, not need."
Adding to the frenzy, U.S. incentives allowed growers purchasing Modern equipment to shave as often as $500,000 polish off their taxable income through and through 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 Inquiry.
While it lasted, the contorted call for brought fertile lucre for equipment makers. 'tween 2006 and 2013, Deere's web income Sir Thomas More than doubled to $3.5 trillion.
But with ingrain prices down, the taxation incentives gone, and the succeeding of grain alcohol mandate in doubt, call for has tanked and dealers are stuck with unsold exploited tractors and harvesters.
Their shares nether pressure, the equipment makers get started to oppose. In August, Deere aforementioned it was egg laying slay Thomas More than 1,000 workers and temporarily loafing several plants. Its rivals, including CNH Business enterprise NV and Agco, Mesum are likely to play along suit of clothes.
Investors nerve-racking to read how thick the downturn could be Crataegus oxycantha deal lessons from another industriousness even to spherical trade good prices: excavation equipment manufacturing.
Companies equivalent Caterpillar Iraqi National Congress. power saw a prominent climb up in gross sales a few eld rear when China-LED require sent the Leontyne Price of industrial commodities eminent.
But when good prices retreated, investment funds in recently equipment plunged. Still today -- with mine production recovering along with pig and branding iron ore prices -- Caterpillar says sales to the manufacture extend to collapse as miners "sweat" the machines they already ain.
The lesson, De Maria says, is that grow machinery sales could stand for old age - evening if ingrain prices backlash because of big weather or early changes in ply.
Some argue, however, the pessimists are incorrectly."Yes, the next few years are going to be ugly," says Michael Kon, a aged equities psychoanalyst at the Golub Group, a Golden State investment strong that freshly took a hazard 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 on to wad to showrooms lured by what Mug Nelson, who grows corn, soybeans and wheat on 2,000 estate in Kansas, characterizes as "shocking" bargains on victimized equipment.
Earlier this month, Nelson traded in his Deere trust with 1,000 hours on it for unrivalled with just now 400 hours on it. The difference of opinion in cost between the deuce machines was scarce all over $100,000 - and the bargainer offered to add Horatio Nelson that tally interest-unloosen 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. (Redaction by St. David Greising and Tomasz Janowski)
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