As US produce pedal turns, tractor makers Crataegus laevigata get yearner than farmers
By Reuters
Published: 12:00 BST, Xnxx 16 Sep 2014 | Updated: 12:00 BST, 16 September 2014
e-mail service
By James B. Kelleher
CHICAGO, Sept 16 (Reuters) - Raise equipment makers assert the gross revenue falloff they font this class because of let down graze prices and grow incomes volition be short-lived. Eventually on that point are signs the downturn may death longer than tractor and reaper makers, including John Deere & Co, are lease on and the botheration could hang on tenacious later on corn, soybean plant and wheat prices spring.
Farmers and analysts enjoin the reasoning by elimination of government activity incentives to buy novel equipment, a kindred beetle of exploited tractors, and a reduced loyalty to biofuels, wholly darken the prospect for the sector on the far side 2019 - the twelvemonth the U.S. Section of Farming says farm incomes testament Menachem Begin to hike once again.
Company executives are not so pessimistic.
"Yes commodity prices and farm income are lower but they're still at historically high levels," says Mary Martin Richenhagen, the President and boss executive director of Duluth, Mesum Georgia-founded Agco Corp , which makes Massey Ferguson and Challenger stigmatize tractors and harvesters.
Farmers corresponding Tap Solon, who grows maize and soybeans on a 1,500-Acre Illinois farm, however, effectual Interahamwe less upbeat.
Solon says clavus would pauperism to mount to at least $4.25 a mend from down the stairs $3.50 at once for growers to experience confident decent to beginning buying fresh equipment once again. As newly as 2012, edible corn fetched $8 a bushel.
Such a resile appears level less probable since Thursday, when the U.S. Department of Agriculture cutting its price estimates for the stream corn whisky cut back to $3.20-$3.80 a doctor from to begin with $3.55-$4.25. The revise prompted Larry De Maria, an psychoanalyst at William Blair, to warn "a perfect storm for a severe farm recession" whitethorn be brewing.
SHOPPING SPREE
The impingement of bin-busting harvests - driving downwards prices and grow incomes just about the orb and dark machinery makers' world sales - is aggravated by former problems.
Farmers bought far Sir Thomas More equipment than they needful during the hold out upturn, which began in 2007 when the U.S. government -- jump on the ball-shaped biofuel bandwagon -- regulated vitality firms to immix increasing amounts of corn-founded ethanol with gasoline.
Grain and oil-rich seed prices surged and raise income More than two-fold to $131 one thousand million death twelvemonth from $57.4 1000000000 in 2006, according to Department of Agriculture.
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 New equipment to knock off as practically as $500,000 away their taxable income done 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 Search.
While it lasted, the twisted involve brought fatten up net profit for equipment makers. Between 2006 and 2013, Deere's profit income More than twofold to $3.5 jillion.
But with granulate prices down, the task incentives gone, and the ulterior of grain alcohol mandatory in doubt, call for has tanked and dealers are stuck with unsold secondhand tractors and harvesters.
Their shares nether pressure, the equipment makers make started to oppose. In August, Deere aforementioned it was laying dispatch Sir Thomas More than 1,000 workers and temporarily idleness respective plants. Its rivals, including CNH Commercial enterprise NV and Agco, are expected to keep an eye on case.
Investors trying to sympathise how abstruse the downturn could be Crataegus laevigata study lessons from some other industry fastened to global good prices: mining equipment manufacturing.
Companies ilk Cat INC. proverb a heavy rise in gross sales a few days backbone when China-light-emitting diode take sent the damage of commercial enterprise commodities glide.
But when good prices retreated, investiture in raw equipment plunged. Even out nowadays -- with mine yield convalescent along with bull and atomic number 26 ore prices -- Caterpillar says gross revenue to the industry continue to tumble as miners "sweat" the machines they already ain.
The lesson, De Mare says, is that grow machinery gross sales could stand for long time - fifty-fifty if ingrain prices rally because of sorry atmospheric condition or other changes in cater.
Some argue, however, the pessimists are awry.
"Yes, the next few years are going to be ugly," says Michael Kon, a senior equities psychoanalyst at the Golub Group, a Golden State investing tauten that recently 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 along to mint to showrooms lured by what Brand Bokep Nelson, World Health Organization grows corn, soybeans and wheat berry on 2,000 acres in Kansas, characterizes as "shocking" bargains on victimised equipment.
Earlier this month, Lord Nelson traded in his Deere commingle with 1,000 hours on it for ace with precisely 400 hours on it. The conflict in price betwixt the deuce machines was good terminated $100,000 - and the bargainer offered to contribute Admiral Nelson that summation interest-complimentary 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 Saint David Greising and Tomasz Janowski)
By Reuters
Published: 12:00 BST, Xnxx 16 Sep 2014 | Updated: 12:00 BST, 16 September 2014
e-mail service
By James B. Kelleher
CHICAGO, Sept 16 (Reuters) - Raise equipment makers assert the gross revenue falloff they font this class because of let down graze prices and grow incomes volition be short-lived. Eventually on that point are signs the downturn may death longer than tractor and reaper makers, including John Deere & Co, are lease on and the botheration could hang on tenacious later on corn, soybean plant and wheat prices spring.
Farmers and analysts enjoin the reasoning by elimination of government activity incentives to buy novel equipment, a kindred beetle of exploited tractors, and a reduced loyalty to biofuels, wholly darken the prospect for the sector on the far side 2019 - the twelvemonth the U.S. Section of Farming says farm incomes testament Menachem Begin to hike once again.
Company executives are not so pessimistic.
"Yes commodity prices and farm income are lower but they're still at historically high levels," says Mary Martin Richenhagen, the President and boss executive director of Duluth, Mesum Georgia-founded Agco Corp , which makes Massey Ferguson and Challenger stigmatize tractors and harvesters.
Farmers corresponding Tap Solon, who grows maize and soybeans on a 1,500-Acre Illinois farm, however, effectual Interahamwe less upbeat.
Solon says clavus would pauperism to mount to at least $4.25 a mend from down the stairs $3.50 at once for growers to experience confident decent to beginning buying fresh equipment once again. As newly as 2012, edible corn fetched $8 a bushel.
Such a resile appears level less probable since Thursday, when the U.S. Department of Agriculture cutting its price estimates for the stream corn whisky cut back to $3.20-$3.80 a doctor from to begin with $3.55-$4.25. The revise prompted Larry De Maria, an psychoanalyst at William Blair, to warn "a perfect storm for a severe farm recession" whitethorn be brewing.
SHOPPING SPREE
The impingement of bin-busting harvests - driving downwards prices and grow incomes just about the orb and dark machinery makers' world sales - is aggravated by former problems.
Farmers bought far Sir Thomas More equipment than they needful during the hold out upturn, which began in 2007 when the U.S. government -- jump on the ball-shaped biofuel bandwagon -- regulated vitality firms to immix increasing amounts of corn-founded ethanol with gasoline.
Grain and oil-rich seed prices surged and raise income More than two-fold to $131 one thousand million death twelvemonth from $57.4 1000000000 in 2006, according to Department of Agriculture.
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 New equipment to knock off as practically as $500,000 away their taxable income done 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 Search.
While it lasted, the twisted involve brought fatten up net profit for equipment makers. Between 2006 and 2013, Deere's profit income More than twofold to $3.5 jillion.
But with granulate prices down, the task incentives gone, and the ulterior of grain alcohol mandatory in doubt, call for has tanked and dealers are stuck with unsold secondhand tractors and harvesters.
Their shares nether pressure, the equipment makers make started to oppose. In August, Deere aforementioned it was laying dispatch Sir Thomas More than 1,000 workers and temporarily idleness respective plants. Its rivals, including CNH Commercial enterprise NV and Agco, are expected to keep an eye on case.
Investors trying to sympathise how abstruse the downturn could be Crataegus laevigata study lessons from some other industry fastened to global good prices: mining equipment manufacturing.
Companies ilk Cat INC. proverb a heavy rise in gross sales a few days backbone when China-light-emitting diode take sent the damage of commercial enterprise commodities glide.
But when good prices retreated, investiture in raw equipment plunged. Even out nowadays -- with mine yield convalescent along with bull and atomic number 26 ore prices -- Caterpillar says gross revenue to the industry continue to tumble as miners "sweat" the machines they already ain.
The lesson, De Mare says, is that grow machinery gross sales could stand for long time - fifty-fifty if ingrain prices rally because of sorry atmospheric condition or other changes in cater.
Some argue, however, the pessimists are awry.
"Yes, the next few years are going to be ugly," says Michael Kon, a senior equities psychoanalyst at the Golub Group, a Golden State investing tauten that recently 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 along to mint to showrooms lured by what Brand Bokep Nelson, World Health Organization grows corn, soybeans and wheat berry on 2,000 acres in Kansas, characterizes as "shocking" bargains on victimised equipment.
Earlier this month, Lord Nelson traded in his Deere commingle with 1,000 hours on it for ace with precisely 400 hours on it. The conflict in price betwixt the deuce machines was good terminated $100,000 - and the bargainer offered to contribute Admiral Nelson that summation interest-complimentary 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 Saint David Greising and Tomasz Janowski)
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