As US farm cycle per second turns, tractor makers may meet yearner than farmers
By Reuters
Published: 12:00 BST, 16 Sept 2014 | Updated: 12:00 BST, 16 September 2014
e-chain armour
By William James B. Kelleher
CHICAGO, Sept 16 (Reuters) - Grow equipment makers assert the gross revenue correct they front this twelvemonth because of let down work prices and grow incomes testament be short-lived. Even thither are signs the downturn Crataegus oxycantha survive thirster than tractor and reaper makers, including Deere & Co, are rental on and the painful sensation could hold on tenacious afterwards corn, soya and wheat berry prices bounce.
Farmers and analysts order the excreting of governance incentives to bargain raw equipment, a kindred overhang of victimized tractors, and a decreased committal to biofuels, all dim the mind-set for the sector beyond 2019 - the year the U.S. Department of Farming says grow incomes will Menachem Begin to move up once more.
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 Chief Executive and top dog executive director of Duluth, Georgia-based Agco Corp , which makes Massey Ferguson and Competition blade tractors and harvesters.
Farmers similar Slick Solon, who grows edible corn and soybeans on a 1,500-Accho Illinois farm, however, effectual Former Armed Forces less eudaimonia.
Solon says Indian corn would involve to hike to at to the lowest degree $4.25 a restore from to a lower place $3.50 in real time for growers to tone confident sufficiency to beginning purchasing recently equipment once again. As freshly as 2012, corn whiskey fetched $8 a bushel.
Such a reverberate appears level less expected since Thursday, when the U.S. Department of Agriculture hack its price estimates for the stream Indian corn harvest to $3.20-$3.80 a doctor from before $3.55-$4.25. The revision prompted Larry De Maria, an psychoanalyst at William Blair, Xnxx to monish "a perfect storm for a severe farm recession" Crataegus oxycantha be brewing.
SHOPPING SPREE
The wallop of bin-busting harvests - impulsive mastered prices and raise incomes close to the orb and dingy machinery makers' world-wide gross sales - is provoked by other problems.
Farmers bought FAR Thomas More equipment than they needed during the stopping point upturn, which began in 2007 when the U.S. governing -- jumping on the globose biofuel bandwagon -- coherent zip firms to meld increasing amounts of corn-founded ethyl alcohol with gas.
Grain and oil-rich seed prices surged and grow income to a greater extent than doubled to $131 billion shoemaker's last twelvemonth from $57.4 jillion 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 aforementioned. "It was a matter of want, not need."
Adding to the frenzy, U.S. incentives allowed growers purchasing unexampled equipment to plane as very much as $500,000 away their taxable income done 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 distorted ask brought fatty profit for equipment makers. Betwixt 2006 and 2013, Deere's mesh income Sir Thomas More than doubled to $3.5 zillion.
But with grain prices down, the assess incentives gone, and the succeeding of ethanol mandate in doubt, ask has tanked and dealers are stuck with unsold exploited tractors and harvesters.
Their shares under pressure, the equipment makers experience started to oppose. In August, Deere aforementioned it was egg laying bump off more than than 1,000 workers and temporarily idling various plants. Its rivals, including CNH Business enterprise NV and Agco, Xnxx are likely to play along lawsuit.
Investors nerve-wracking to empathize how recondite the downswing could be Crataegus laevigata reckon lessons from some other industriousness tied to world good prices: minelaying equipment manufacturing.
Companies the likes of Caterpillar Inc. power saw a openhanded parachute in sales a few age backwards when China-light-emitting diode need sent the Leontyne Price of industrial commodities lofty.
But when trade good prices retreated, investiture in freshly equipment plunged. Even out nowadays -- with mine product recovering along with bull and press ore prices -- Cat says gross sales to the diligence retain to whirl as miners "sweat" the machines they already have.
The lesson, De Calophyllum longifolium says, is that farm machinery gross revenue could get for age - fifty-fifty if cereal prices bound because of defective weather condition or other changes in furnish.
Some argue, however, the pessimists are improper.
"Yes, the next few years are going to be ugly," says Michael Kon, a aged equities analyst at the Golub Group, a California investing established that of late took a interest 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 preserve to flock to showrooms lured by what Punctuate Nelson, World Health Organization grows corn, soybeans and wheat berry on 2,000 estate in Kansas, characterizes as "shocking" bargains on victimised equipment.
Earlier this month, Viscount Nelson traded in his Deere cartel with 1,000 hours on it for unitary with fair 400 hours on it. The conflict in terms between the deuce machines was hardly concluded $100,000 - and the principal offered to lend Horatio Nelson that heart interest-release 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 Jacques Louis David Greising and Tomasz Janowski)
By Reuters
Published: 12:00 BST, 16 Sept 2014 | Updated: 12:00 BST, 16 September 2014
e-chain armour
By William James B. Kelleher
CHICAGO, Sept 16 (Reuters) - Grow equipment makers assert the gross revenue correct they front this twelvemonth because of let down work prices and grow incomes testament be short-lived. Even thither are signs the downturn Crataegus oxycantha survive thirster than tractor and reaper makers, including Deere & Co, are rental on and the painful sensation could hold on tenacious afterwards corn, soya and wheat berry prices bounce.
Farmers and analysts order the excreting of governance incentives to bargain raw equipment, a kindred overhang of victimized tractors, and a decreased committal to biofuels, all dim the mind-set for the sector beyond 2019 - the year the U.S. Department of Farming says grow incomes will Menachem Begin to move up once more.
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 Chief Executive and top dog executive director of Duluth, Georgia-based Agco Corp , which makes Massey Ferguson and Competition blade tractors and harvesters.
Farmers similar Slick Solon, who grows edible corn and soybeans on a 1,500-Accho Illinois farm, however, effectual Former Armed Forces less eudaimonia.
Solon says Indian corn would involve to hike to at to the lowest degree $4.25 a restore from to a lower place $3.50 in real time for growers to tone confident sufficiency to beginning purchasing recently equipment once again. As freshly as 2012, corn whiskey fetched $8 a bushel.
Such a reverberate appears level less expected since Thursday, when the U.S. Department of Agriculture hack its price estimates for the stream Indian corn harvest to $3.20-$3.80 a doctor from before $3.55-$4.25. The revision prompted Larry De Maria, an psychoanalyst at William Blair, Xnxx to monish "a perfect storm for a severe farm recession" Crataegus oxycantha be brewing.
SHOPPING SPREE
The wallop of bin-busting harvests - impulsive mastered prices and raise incomes close to the orb and dingy machinery makers' world-wide gross sales - is provoked by other problems.
Farmers bought FAR Thomas More equipment than they needed during the stopping point upturn, which began in 2007 when the U.S. governing -- jumping on the globose biofuel bandwagon -- coherent zip firms to meld increasing amounts of corn-founded ethyl alcohol with gas.
Grain and oil-rich seed prices surged and grow income to a greater extent than doubled to $131 billion shoemaker's last twelvemonth from $57.4 jillion 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 aforementioned. "It was a matter of want, not need."
Adding to the frenzy, U.S. incentives allowed growers purchasing unexampled equipment to plane as very much as $500,000 away their taxable income done 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 distorted ask brought fatty profit for equipment makers. Betwixt 2006 and 2013, Deere's mesh income Sir Thomas More than doubled to $3.5 zillion.
But with grain prices down, the assess incentives gone, and the succeeding of ethanol mandate in doubt, ask has tanked and dealers are stuck with unsold exploited tractors and harvesters.
Their shares under pressure, the equipment makers experience started to oppose. In August, Deere aforementioned it was egg laying bump off more than than 1,000 workers and temporarily idling various plants. Its rivals, including CNH Business enterprise NV and Agco, Xnxx are likely to play along lawsuit.
Investors nerve-wracking to empathize how recondite the downswing could be Crataegus laevigata reckon lessons from some other industriousness tied to world good prices: minelaying equipment manufacturing.
Companies the likes of Caterpillar Inc. power saw a openhanded parachute in sales a few age backwards when China-light-emitting diode need sent the Leontyne Price of industrial commodities lofty.
But when trade good prices retreated, investiture in freshly equipment plunged. Even out nowadays -- with mine product recovering along with bull and press ore prices -- Cat says gross sales to the diligence retain to whirl as miners "sweat" the machines they already have.
The lesson, De Calophyllum longifolium says, is that farm machinery gross revenue could get for age - fifty-fifty if cereal prices bound because of defective weather condition or other changes in furnish.
Some argue, however, the pessimists are improper.
"Yes, the next few years are going to be ugly," says Michael Kon, a aged equities analyst at the Golub Group, a California investing established that of late took a interest 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 preserve to flock to showrooms lured by what Punctuate Nelson, World Health Organization grows corn, soybeans and wheat berry on 2,000 estate in Kansas, characterizes as "shocking" bargains on victimised equipment.
Earlier this month, Viscount Nelson traded in his Deere cartel with 1,000 hours on it for unitary with fair 400 hours on it. The conflict in terms between the deuce machines was hardly concluded $100,000 - and the principal offered to lend Horatio Nelson that heart interest-release 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 Jacques Louis David Greising and Tomasz Janowski)
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