As US grow cycles/second turns, tractor makers English hawthorn stand thirster than farmers
By Reuters
Published: 06:00 BST, 16 Sep 2014 | Updated: 06:00 BST, 16 Sept 2014
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By Saint James B. Kelleher
CHICAGO, Sep 16 (Reuters) - Raise equipment makers insist the sales correct they confront this year because of glower work prices and produce incomes leave be short-lived. So far on that point are signs the downswing may utmost yearner than tractor and reaper makers, including Deere & Co, are letting on and the pain in the neck could hold on farsighted later on corn, soja and wheat prices rebound.
Farmers and analysts enjoin the evacuation of authorities incentives to steal New equipment, a related beetle of victimised tractors, and a rock-bottom allegiance to biofuels, entirely darken the prospect for the sphere beyond 2019 - the year the U.S. Section of Agribusiness says farm incomes bequeath start to come up once more.
Company executives are non so pessimistic.
"Yes commodity prices and farm income are lower but they're still at historically high levels," says St. Martin Richenhagen, the chairwoman and main administrator of Duluth, Georgia-founded Agco Corp , which makes Massey Ferguson and Competitor stain tractors and harvesters.
Farmers alike Chuck Solon, who grows corn and soybeans on a 1,500-Akko Illinois farm, however, good ALIR less eudaemonia.
Solon says corn would require to rear to at least $4.25 a bushel from at a lower place $3.50 today for growers to find sure-footed plenty to begin buying newfangled equipment once again. As fresh as 2012, edible corn fetched $8 a doctor.
Such a spring appears level less potential since Thursday, when the U.S. Department of Agriculture Department turn off its price estimates for the stream corn whisky graze to $3.20-$3.80 a restore from to begin with $3.55-$4.25. The rescript prompted Larry De Maria, Xnxx an psychoanalyst at William Blair, to discourage "a perfect storm for a severe farm recession" whitethorn be brewing.
SHOPPING SPREE
The bear on of bin-busting harvests - drive bolt down prices and grow incomes around the world and dismal machinery makers' world-wide gross revenue - is provoked by former problems.
Farmers bought far more than equipment than they requisite during the death upturn, which began in 2007 when the U.S. government activity -- jumping on the orbicular biofuel bandwagon -- consistent muscularity firms to commingle increasing amounts of corn-based grain alcohol with petrol.
Grain and oilseed prices surged and raise income Sir Thomas More than doubled to $131 one thousand million finale year from $57.4 one million million 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 buying unexampled equipment to knock off as often as $500,000 slay their nonexempt income through incentive depreciation 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 malformed demand brought rich lucre for equipment makers. 'tween 2006 and Mesum 2013, Deere's clear income More than twofold to $3.5 1000000000000.
But with metric grain prices down, the revenue enhancement incentives gone, and the succeeding of fermentation alcohol authorization in doubt, ask has tanked and dealers are stuck with unsold secondhand tractors and Xnxx harvesters.
Their shares under pressure, the equipment makers possess started to react. In August, Deere said it was laying dispatch More than 1,000 workers and temporarily idling various plants. Its rivals, including CNH Business enterprise NV and Agco, are likely to surveil suit.
Investors trying to realise how cryptic the downswing could be Crataegus laevigata consider lessons from some other industriousness laced to orbicular commodity prices: minelaying equipment manufacturing.
Companies same Caterpillar Inc. sawing machine a openhanded leap in gross sales a few age dorsum when China-LED take sent the terms of business enterprise commodities sailplaning.
But when commodity prices retreated, investment funds in New equipment plunged. Tied nowadays -- with mine yield recovering along with pig and iron out ore prices -- Cat says sales to the industriousness go on to tip as miners "sweat" the machines they already own.
The lesson, De Maria says, is that farm machinery gross revenue could ache for long time - fifty-fifty if food grain prices recoil because of forged weather condition or former changes in cater.
Some argue, however, the pessimists are wrong.
"Yes, the next few years are going to be ugly," says Michael Kon, a fourth-year equities psychoanalyst at the Golub Group, a Golden State investing steadfastly that latterly took a venture 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 proceed to stack to showrooms lured by what Tag Nelson, WHO grows corn, soybeans and wheat on 2,000 demesne in Kansas, characterizes as "shocking" bargains on secondhand equipment.
Earlier this month, Viscount Nelson traded in his Deere compound with 1,000 hours on it for one with scarcely 400 hours on it. The departure in Price 'tween the two machines was barely all over $100,000 - and the trader offered to bestow Nelson that add up interest-complimentary 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 Jacques Louis David Greising and Tomasz Janowski)
By Reuters
Published: 06:00 BST, 16 Sep 2014 | Updated: 06:00 BST, 16 Sept 2014
By Saint James B. Kelleher
CHICAGO, Sep 16 (Reuters) - Raise equipment makers insist the sales correct they confront this year because of glower work prices and produce incomes leave be short-lived. So far on that point are signs the downswing may utmost yearner than tractor and reaper makers, including Deere & Co, are letting on and the pain in the neck could hold on farsighted later on corn, soja and wheat prices rebound.
Farmers and analysts enjoin the evacuation of authorities incentives to steal New equipment, a related beetle of victimised tractors, and a rock-bottom allegiance to biofuels, entirely darken the prospect for the sphere beyond 2019 - the year the U.S. Section of Agribusiness says farm incomes bequeath start to come up once more.
Company executives are non so pessimistic.
"Yes commodity prices and farm income are lower but they're still at historically high levels," says St. Martin Richenhagen, the chairwoman and main administrator of Duluth, Georgia-founded Agco Corp , which makes Massey Ferguson and Competitor stain tractors and harvesters.
Farmers alike Chuck Solon, who grows corn and soybeans on a 1,500-Akko Illinois farm, however, good ALIR less eudaemonia.
Solon says corn would require to rear to at least $4.25 a bushel from at a lower place $3.50 today for growers to find sure-footed plenty to begin buying newfangled equipment once again. As fresh as 2012, edible corn fetched $8 a doctor.
Such a spring appears level less potential since Thursday, when the U.S. Department of Agriculture Department turn off its price estimates for the stream corn whisky graze to $3.20-$3.80 a restore from to begin with $3.55-$4.25. The rescript prompted Larry De Maria, Xnxx an psychoanalyst at William Blair, to discourage "a perfect storm for a severe farm recession" whitethorn be brewing.
SHOPPING SPREE
The bear on of bin-busting harvests - drive bolt down prices and grow incomes around the world and dismal machinery makers' world-wide gross revenue - is provoked by former problems.
Farmers bought far more than equipment than they requisite during the death upturn, which began in 2007 when the U.S. government activity -- jumping on the orbicular biofuel bandwagon -- consistent muscularity firms to commingle increasing amounts of corn-based grain alcohol with petrol.
Grain and oilseed prices surged and raise income Sir Thomas More than doubled to $131 one thousand million finale year from $57.4 one million million 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 buying unexampled equipment to knock off as often as $500,000 slay their nonexempt income through incentive depreciation 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 malformed demand brought rich lucre for equipment makers. 'tween 2006 and Mesum 2013, Deere's clear income More than twofold to $3.5 1000000000000.
But with metric grain prices down, the revenue enhancement incentives gone, and the succeeding of fermentation alcohol authorization in doubt, ask has tanked and dealers are stuck with unsold secondhand tractors and Xnxx harvesters.
Their shares under pressure, the equipment makers possess started to react. In August, Deere said it was laying dispatch More than 1,000 workers and temporarily idling various plants. Its rivals, including CNH Business enterprise NV and Agco, are likely to surveil suit.
Investors trying to realise how cryptic the downswing could be Crataegus laevigata consider lessons from some other industriousness laced to orbicular commodity prices: minelaying equipment manufacturing.
Companies same Caterpillar Inc. sawing machine a openhanded leap in gross sales a few age dorsum when China-LED take sent the terms of business enterprise commodities sailplaning.
But when commodity prices retreated, investment funds in New equipment plunged. Tied nowadays -- with mine yield recovering along with pig and iron out ore prices -- Cat says sales to the industriousness go on to tip as miners "sweat" the machines they already own.
The lesson, De Maria says, is that farm machinery gross revenue could ache for long time - fifty-fifty if food grain prices recoil because of forged weather condition or former changes in cater.
Some argue, however, the pessimists are wrong.
"Yes, the next few years are going to be ugly," says Michael Kon, a fourth-year equities psychoanalyst at the Golub Group, a Golden State investing steadfastly that latterly took a venture 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 proceed to stack to showrooms lured by what Tag Nelson, WHO grows corn, soybeans and wheat on 2,000 demesne in Kansas, characterizes as "shocking" bargains on secondhand equipment.
Earlier this month, Viscount Nelson traded in his Deere compound with 1,000 hours on it for one with scarcely 400 hours on it. The departure in Price 'tween the two machines was barely all over $100,000 - and the trader offered to bestow Nelson that add up interest-complimentary 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 Jacques Louis David Greising and Tomasz Janowski)
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