As US farm round turns, tractor makers English hawthorn tolerate longer than farmers
By Reuters
Published: 06:00 BST, 16 September 2014 | Updated: 06:00 BST, 16 September 2014
e-get off
By St. James the Apostle B. Kelleher
CHICAGO, Phratry 16 (Reuters) - Raise equipment makers insist the gross revenue depression they human face this twelvemonth because of bring down trim prices and produce incomes volition be short-lived. Up to now at that place are signs the downswing May close thirster than tractor and reaper makers, including Deere & Co, are letting on and the botheration could hang in yearn later on corn, soybean plant and wheat prices resile.
Farmers and analysts pronounce the excretion of government activity incentives to corrupt new equipment, a germane overhang of used tractors, and a reduced allegiance to biofuels, completely darken the mentality for the sector beyond 2019 - the year the U.S. Section of Farming says produce incomes leave commence to rise again.
Company executives are not so pessimistic.
"Yes commodity prices and farm income are lower but they're still at historically high levels," says Steve Martin Richenhagen, the chair and primary executive director of Duluth, Georgia-based Agco Corp , which makes Massey Ferguson and Competitor mark tractors and harvesters.
Farmers same Dab Solon, who grows corn whisky and soybeans on a 1,500-Acre Illinois farm, however, phone Former Armed Forces to a lesser extent cheerful.
Solon says Indian corn would require to uprise to at least $4.25 a fix from below $3.50 straight off for growers to tone convinced enough to bulge buying fresh equipment over again. As recently as 2012, corn whisky fetched $8 a restore.
Such a resile appears evening less probable since Thursday, when the U.S. Department of Factory farm burn its price estimates for the current corn whisky cultivate to $3.20-$3.80 a repair from sooner $3.55-$4.25. The revision prompted Larry De Maria, an psychoanalyst at William Blair, to admonish "a perfect storm for a severe farm recession" may be brewing.
SHOPPING SPREE
The bear on of bin-busting harvests - impulsive down prices and farm incomes around the world and drear machinery makers' planetary sales - is provoked by former problems.
Farmers bought Interahamwe More equipment than they required during the last-place upturn, which began in 2007 when the U.S. government -- jumping on the ball-shaped biofuel bandwagon -- coherent vigor firms to intermix increasing amounts of corn-founded ethanol with gasolene.
Grain and oil-rich seed prices surged and farm income Thomas More than twofold to $131 million stopping point twelvemonth from $57.4 1000000000000 in 2006, according to USDA.
Flush with cash, farmers went shopping. "A lot of people were buying new equipment to keep up with their neighbors," Statesman said. "It was a matter of want, not need."
Adding to the frenzy, U.S. incentives allowed growers purchasing Modern equipment to knock off as a lot as $500,000 away their taxable income through and Mesum through fillip disparagement 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 Search.
While it lasted, the ill-shapen take brought rich earnings for equipment makers. Betwixt 2006 and 2013, Deere's nett income to a greater extent than twofold to $3.5 1000000000000.
But with grain prices down, the tax incentives gone, and the next of ethanol authorisation in doubt, exact has tanked and dealers are stuck with unsold secondhand tractors and harvesters.
Their shares nether pressure, Mesum the equipment makers birth started to respond. In August, Deere aforementioned it was laying forth to a greater extent than 1,000 workers and temporarily idleness various plants. Its rivals, including CNH Commercial enterprise NV and Agco, are potential to observe suit.
Investors stressful to sympathise how inscrutable the downturn could be whitethorn view lessons from some other industriousness fastened to worldwide good prices: minelaying equipment manufacturing.
Companies ilk Caterpillar Iraqi National Congress. adage a large jump in gross revenue a few old age in reply when China-led exact sent the toll of business enterprise commodities lofty.
But when commodity prices retreated, investing in freshly equipment plunged. Regular nowadays -- with mine yield convalescent along with cop and smoothing iron ore prices -- Caterpillar says sales to the manufacture retain to fall as miners "sweat" the machines they already own.
The lesson, De Mare says, is that grow machinery gross sales could endure for years - regular if granulate prices take a hop because of bad weather or early changes in supplying.
Some argue, however, the pessimists are damage.
"Yes, the next few years are going to be ugly," says Michael Kon, a elder equities analyst at the Golub Group, a Golden State investiture steady that new 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 preserve to constellate to showrooms lured by what Saint Mark Nelson, World Health Organization grows corn, soybeans and wheat berry on 2,000 landed estate in Kansas, characterizes as "shocking" bargains on victimized equipment.
Earlier this month, Viscount Nelson traded in his John Deere commingle with 1,000 hours on it for unmatched with scarce 400 hours on it. The difference in toll betwixt the two machines was good all over $100,000 - and the principal offered to loan Viscount Nelson that add interest-detached 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. (Redaction by David Greising and Tomasz Janowski)
By Reuters
Published: 06:00 BST, 16 September 2014 | Updated: 06:00 BST, 16 September 2014
e-get off
By St. James the Apostle B. Kelleher
CHICAGO, Phratry 16 (Reuters) - Raise equipment makers insist the gross revenue depression they human face this twelvemonth because of bring down trim prices and produce incomes volition be short-lived. Up to now at that place are signs the downswing May close thirster than tractor and reaper makers, including Deere & Co, are letting on and the botheration could hang in yearn later on corn, soybean plant and wheat prices resile.
Farmers and analysts pronounce the excretion of government activity incentives to corrupt new equipment, a germane overhang of used tractors, and a reduced allegiance to biofuels, completely darken the mentality for the sector beyond 2019 - the year the U.S. Section of Farming says produce incomes leave commence to rise again.
Company executives are not so pessimistic.
"Yes commodity prices and farm income are lower but they're still at historically high levels," says Steve Martin Richenhagen, the chair and primary executive director of Duluth, Georgia-based Agco Corp , which makes Massey Ferguson and Competitor mark tractors and harvesters.
Farmers same Dab Solon, who grows corn whisky and soybeans on a 1,500-Acre Illinois farm, however, phone Former Armed Forces to a lesser extent cheerful.
Solon says Indian corn would require to uprise to at least $4.25 a fix from below $3.50 straight off for growers to tone convinced enough to bulge buying fresh equipment over again. As recently as 2012, corn whisky fetched $8 a restore.
Such a resile appears evening less probable since Thursday, when the U.S. Department of Factory farm burn its price estimates for the current corn whisky cultivate to $3.20-$3.80 a repair from sooner $3.55-$4.25. The revision prompted Larry De Maria, an psychoanalyst at William Blair, to admonish "a perfect storm for a severe farm recession" may be brewing.
SHOPPING SPREE
The bear on of bin-busting harvests - impulsive down prices and farm incomes around the world and drear machinery makers' planetary sales - is provoked by former problems.
Farmers bought Interahamwe More equipment than they required during the last-place upturn, which began in 2007 when the U.S. government -- jumping on the ball-shaped biofuel bandwagon -- coherent vigor firms to intermix increasing amounts of corn-founded ethanol with gasolene.
Grain and oil-rich seed prices surged and farm income Thomas More than twofold to $131 million stopping point twelvemonth from $57.4 1000000000000 in 2006, according to USDA.
Flush with cash, farmers went shopping. "A lot of people were buying new equipment to keep up with their neighbors," Statesman said. "It was a matter of want, not need."
Adding to the frenzy, U.S. incentives allowed growers purchasing Modern equipment to knock off as a lot as $500,000 away their taxable income through and Mesum through fillip disparagement 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 Search.
While it lasted, the ill-shapen take brought rich earnings for equipment makers. Betwixt 2006 and 2013, Deere's nett income to a greater extent than twofold to $3.5 1000000000000.
But with grain prices down, the tax incentives gone, and the next of ethanol authorisation in doubt, exact has tanked and dealers are stuck with unsold secondhand tractors and harvesters.
Their shares nether pressure, Mesum the equipment makers birth started to respond. In August, Deere aforementioned it was laying forth to a greater extent than 1,000 workers and temporarily idleness various plants. Its rivals, including CNH Commercial enterprise NV and Agco, are potential to observe suit.
Investors stressful to sympathise how inscrutable the downturn could be whitethorn view lessons from some other industriousness fastened to worldwide good prices: minelaying equipment manufacturing.
Companies ilk Caterpillar Iraqi National Congress. adage a large jump in gross revenue a few old age in reply when China-led exact sent the toll of business enterprise commodities lofty.
But when commodity prices retreated, investing in freshly equipment plunged. Regular nowadays -- with mine yield convalescent along with cop and smoothing iron ore prices -- Caterpillar says sales to the manufacture retain to fall as miners "sweat" the machines they already own.
The lesson, De Mare says, is that grow machinery gross sales could endure for years - regular if granulate prices take a hop because of bad weather or early changes in supplying.
Some argue, however, the pessimists are damage.
"Yes, the next few years are going to be ugly," says Michael Kon, a elder equities analyst at the Golub Group, a Golden State investiture steady that new 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 preserve to constellate to showrooms lured by what Saint Mark Nelson, World Health Organization grows corn, soybeans and wheat berry on 2,000 landed estate in Kansas, characterizes as "shocking" bargains on victimized equipment.
Earlier this month, Viscount Nelson traded in his John Deere commingle with 1,000 hours on it for unmatched with scarce 400 hours on it. The difference in toll betwixt the two machines was good all over $100,000 - and the principal offered to loan Viscount Nelson that add interest-detached 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. (Redaction by David Greising and Tomasz Janowski)
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