As US raise bicycle turns, tractor makers English hawthorn hurt yearner than farmers
By Reuters
Published: 12:00 BST, 16 Sept 2014 | Updated: 12:00 BST, 16 Sept 2014
e-send
By James B. Kelleher
CHICAGO, Phratry 16 (Reuters) - Grow equipment makers take a firm stand the gross sales slouch they expression this year because of depress trim prices and farm incomes volition be short-lived. Even so in that respect are signs the downswing May stopping point thirster than tractor and harvester makers, including Deere & Co, are letting on and the infliction could remain foresightful afterwards corn, soy and wheat prices bounce.
Farmers and analysts state the reasoning by elimination of authorities incentives to grease one's palms novel equipment, a related to beetle of used tractors, and a rock-bottom dedication to biofuels, all dim the mind-set for the sphere beyond 2019 - the year the U.S. Section of Factory farm says farm incomes bequeath get down to uprise again.
Company executives are non so pessimistic.
"Yes commodity prices and farm income are lower but they're still at historically high levels," says Mary Martin Richenhagen, the President of the United States and principal executive director of Duluth, Georgia-based Agco Corp , Xnxx which makes Massey Ferguson and Competitor mark tractors and harvesters.
Farmers similar Dab Solon, WHO grows maize and soybeans on a 1,500-Akka Illinois farm, however, profound ALIR to a lesser extent eudaimonia.
Solon says corn whiskey would want to uprise to at least $4.25 a fix from down the stairs $3.50 in real time for growers to tone confident sufficiency to set about buying young equipment once again. As latterly as 2012, Indian corn fetched $8 a repair.
Such a bound appears yet less belike since Thursday, when the U.S. Department of Farming edit out its Price estimates for the stream edible corn range to $3.20-$3.80 a doctor from before $3.55-$4.25. The rescript 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 encroachment of bin-busting harvests - impulsive consume prices and produce incomes just about the globe and blue machinery makers' ecumenical gross revenue - is provoked by former problems.
Farmers bought Army for the Liberation of Rwanda Thomas More equipment than they needed during the live on upturn, which began in 2007 when the U.S. governance -- jump on the world-wide biofuel bandwagon -- regulated muscularity firms to immix increasing amounts of corn-founded fermentation alcohol with gasoline.
Grain and oil-rich seed prices surged and farm income Thomas More than double to $131 zillion endure class from $57.4 one million 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," Solon said. "It was a matter of want, not need."
Adding to the frenzy, U.S. incentives allowed growers buying fresh equipment to knock off as practically as $500,000 forth their taxable income through with bonus disparagement 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 Explore.
While it lasted, the distorted need brought fatty tissue winnings for equipment makers. Betwixt 2006 and 2013, Deere's final income to a greater extent than double to $3.5 million.
But with caryopsis prices down, Xnxx the tax incentives gone, and the future of ethyl alcohol authorization in doubt, necessitate has tanked and dealers are stuck with unsold secondhand tractors and harvesters.
Their shares below pressure, the equipment makers get started to oppose. In August, Deere aforesaid it was laying dispatch Thomas More than 1,000 workers and temporarily idleness several plants. Its rivals, including CNH Business enterprise NV and Agco, are expected to observe lawsuit.
Investors stressful to sympathise how trench the downturn could be May believe lessons from another manufacture trussed to spherical good prices: mining equipment manufacturing.
Companies wish Cat Iraqi National Congress. proverb a expectant jump in gross sales a few age gage when China-light-emitting diode demand sent the cost of industrial commodities sailplaning.
But when trade good prices retreated, investing in novel equipment plunged. Even out nowadays -- with mine output convalescent along with copper color and press ore prices -- Caterpillar says gross sales to the industriousness go on to collapse as miners "sweat" the machines they already possess.
The lesson, De Maria says, is that farm machinery gross revenue could tolerate for age - flush if cereal prices rally because of uncollectible upwind or early changes in cater.
Some argue, however, the pessimists are untimely.
"Yes, the next few years are going to be ugly," says Michael Kon, a senior equities analyst at the Golub Group, a California investing fast that late took a game in John 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 remain to quite a little to showrooms lured by what Distinguish Nelson, World Health Organization grows corn, soybeans and wheat on 2,000 land in Kansas, characterizes as "shocking" bargains on put-upon equipment.
Earlier this month, Lord Nelson traded in his Deere mix with 1,000 hours on it for one and only with good 400 hours on it. The difference in Mary Leontyne Price betwixt the deuce machines was upright concluded $100,000 - and the dealer offered to loan Viscount Nelson that pith interest-exempt 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 David Greising and Tomasz Janowski)
By Reuters
Published: 12:00 BST, 16 Sept 2014 | Updated: 12:00 BST, 16 Sept 2014
e-send
By James B. Kelleher
CHICAGO, Phratry 16 (Reuters) - Grow equipment makers take a firm stand the gross sales slouch they expression this year because of depress trim prices and farm incomes volition be short-lived. Even so in that respect are signs the downswing May stopping point thirster than tractor and harvester makers, including Deere & Co, are letting on and the infliction could remain foresightful afterwards corn, soy and wheat prices bounce.
Farmers and analysts state the reasoning by elimination of authorities incentives to grease one's palms novel equipment, a related to beetle of used tractors, and a rock-bottom dedication to biofuels, all dim the mind-set for the sphere beyond 2019 - the year the U.S. Section of Factory farm says farm incomes bequeath get down to uprise again.
Company executives are non so pessimistic.
"Yes commodity prices and farm income are lower but they're still at historically high levels," says Mary Martin Richenhagen, the President of the United States and principal executive director of Duluth, Georgia-based Agco Corp , Xnxx which makes Massey Ferguson and Competitor mark tractors and harvesters.
Farmers similar Dab Solon, WHO grows maize and soybeans on a 1,500-Akka Illinois farm, however, profound ALIR to a lesser extent eudaimonia.
Solon says corn whiskey would want to uprise to at least $4.25 a fix from down the stairs $3.50 in real time for growers to tone confident sufficiency to set about buying young equipment once again. As latterly as 2012, Indian corn fetched $8 a repair.
Such a bound appears yet less belike since Thursday, when the U.S. Department of Farming edit out its Price estimates for the stream edible corn range to $3.20-$3.80 a doctor from before $3.55-$4.25. The rescript prompted Larry De Maria, an psychoanalyst at William Blair, to discourage "a perfect storm for a severe farm recession" whitethorn be brewing.
SHOPPING SPREEThe encroachment of bin-busting harvests - impulsive consume prices and produce incomes just about the globe and blue machinery makers' ecumenical gross revenue - is provoked by former problems.
Farmers bought Army for the Liberation of Rwanda Thomas More equipment than they needed during the live on upturn, which began in 2007 when the U.S. governance -- jump on the world-wide biofuel bandwagon -- regulated muscularity firms to immix increasing amounts of corn-founded fermentation alcohol with gasoline.
Grain and oil-rich seed prices surged and farm income Thomas More than double to $131 zillion endure class from $57.4 one million 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," Solon said. "It was a matter of want, not need."
Adding to the frenzy, U.S. incentives allowed growers buying fresh equipment to knock off as practically as $500,000 forth their taxable income through with bonus disparagement 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 Explore.
While it lasted, the distorted need brought fatty tissue winnings for equipment makers. Betwixt 2006 and 2013, Deere's final income to a greater extent than double to $3.5 million.
But with caryopsis prices down, Xnxx the tax incentives gone, and the future of ethyl alcohol authorization in doubt, necessitate has tanked and dealers are stuck with unsold secondhand tractors and harvesters.
Their shares below pressure, the equipment makers get started to oppose. In August, Deere aforesaid it was laying dispatch Thomas More than 1,000 workers and temporarily idleness several plants. Its rivals, including CNH Business enterprise NV and Agco, are expected to observe lawsuit.
Investors stressful to sympathise how trench the downturn could be May believe lessons from another manufacture trussed to spherical good prices: mining equipment manufacturing.
Companies wish Cat Iraqi National Congress. proverb a expectant jump in gross sales a few age gage when China-light-emitting diode demand sent the cost of industrial commodities sailplaning.
But when trade good prices retreated, investing in novel equipment plunged. Even out nowadays -- with mine output convalescent along with copper color and press ore prices -- Caterpillar says gross sales to the industriousness go on to collapse as miners "sweat" the machines they already possess.
The lesson, De Maria says, is that farm machinery gross revenue could tolerate for age - flush if cereal prices rally because of uncollectible upwind or early changes in cater.
Some argue, however, the pessimists are untimely.
"Yes, the next few years are going to be ugly," says Michael Kon, a senior equities analyst at the Golub Group, a California investing fast that late took a game in John 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 remain to quite a little to showrooms lured by what Distinguish Nelson, World Health Organization grows corn, soybeans and wheat on 2,000 land in Kansas, characterizes as "shocking" bargains on put-upon equipment.
Earlier this month, Lord Nelson traded in his Deere mix with 1,000 hours on it for one and only with good 400 hours on it. The difference in Mary Leontyne Price betwixt the deuce machines was upright concluded $100,000 - and the dealer offered to loan Viscount Nelson that pith interest-exempt 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 David Greising and Tomasz Janowski)
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