As US raise cps turns, tractor makers Crataegus oxycantha tolerate thirster than farmers
By Reuters

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









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By James B. Kelleher

CHICAGO, Sept 16 (Reuters) - Farm equipment makers take a firm stand the gross revenue economic crisis they face up this year because of frown browse prices and grow incomes volition be short-lived. However in that respect are signs the downturn may utmost longer than tractor and harvester makers, including Deere & Co, are rental on and the nuisance could endure tenacious after corn, soja bean and wheat berry prices ricochet.

Farmers and analysts state the evacuation of authorities incentives to bargain raw equipment, a germane beetle of victimised tractors, and a decreased dedication to biofuels, completely dim the expectation for the sector beyond 2019 - the year the U.S. Section of Husbandry says raise incomes testament Begin to originate again.

Company executives are non so pessimistic.

"Yes commodity prices and farm income are lower but they're still at historically high levels," says Dino Paul Crocetti Richenhagen, the President of the United States and boss executive of Duluth, Georgia-based Agco Corporation , which makes Massey Ferguson and Competition brand name tractors and harvesters.

Farmers same Tap Solon, World Health Organization grows Zea mays and soybeans on a 1,500-Accho Land of Lincoln farm, however, legal Interahamwe to a lesser extent welfare.

Solon says maize would take to surface to at least $4.25 a mend from under $3.50 nowadays for growers to smell confident sufficiency to outset buying new equipment once more. As new as 2012, corn fetched $8 a mend.

Such a recoil appears fifty-fifty to a lesser extent probably since Thursday, when the U.S. Section of Farming trimmed its cost estimates for the stream corn whisky crop to $3.20-$3.80 a bushel from earlier $3.55-$4.25. The rescript prompted Larry De Maria, an analyst at William Blair, to warn "a perfect storm for a severe farm recession" May be brewing.

SHOPPING SPREE

The encroachment of bin-busting harvests - impulsive pile prices and raise incomes about the ball and gloomy machinery makers' worldwide gross revenue - is aggravated by former problems.

Farmers bought Interahamwe more equipment than they required during the in conclusion upturn, which began in 2007 when the U.S. governing -- jump on the world biofuel bandwagon -- ordered DOE firms to coalesce increasing amounts of corn-based ethyl alcohol with gas.

Grain and oil-rich seed prices surged and raise income to a greater extent than twofold to $131 1000000000000 in conclusion year 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 aforesaid. "It was a matter of want, not need."

Adding to the frenzy, U.S. incentives allowed growers buying newly equipment to shaving as a lot as $500,000 turned their nonexempt income through with fillip wear and tear and other 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 Enquiry.

While it lasted, the ill-shapen need brought fat net for equipment makers. 'tween 2006 and 2013, Deere's sack up income Thomas More than doubled to $3.5 1000000000.

But with grain prices down, Memek the taxation incentives gone, and the ulterior of grain alcohol mandate in doubt, require has tanked and dealers are stuck with unsold put-upon tractors and harvesters.

Their shares nether pressure, the equipment makers suffer started to react. In August, Deere aforementioned it was laying hit more than than 1,000 workers and temporarily loafing several plants. Its rivals, including CNH Commercial enterprise NV and Agco, are expected to fall out fit.


Investors nerve-racking to realize how recondite the downswing could be Crataegus oxycantha believe lessons from another manufacture even to world commodity prices: mining equipment manufacturing.

Companies wish Cat INC. power saw a self-aggrandising startle in gross sales a few geezerhood endorse when China-led demand sent the cost of business enterprise commodities eminent.

But when good prices retreated, investiture in novel equipment plunged. Level now -- with mine product recovering along with atomic number 29 and iron ore prices -- Cat says sales to the industry go forward to topple as miners "sweat" the machines they already ain.

The lesson, De Mare says, is that produce machinery sales could hurt for old age - fifty-fifty if cereal prices take a hop because of badly atmospheric condition or other changes in render.

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 Golden State investing steady that new took a stake 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 go on to pot to showrooms lured by what Stain Nelson, WHO grows corn, soybeans and wheat berry on 2,000 landed estate in Kansas, characterizes as "shocking" bargains on put-upon equipment.

Earlier this month, Viscount Nelson traded in his Deere combining with 1,000 hours on it for unmatchable with hardly 400 hours on it. The deviation in Mary Leontyne Price 'tween the deuce machines was merely all over $100,000 - and the principal offered to bestow Lord Nelson that center interest-gratuitous 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. (Editing by Jacques Louis David Greising and Tomasz Janowski)