As US produce wheel turns, tractor makers May hurt longer than farmers
By Reuters
Published: 12:00 BST, 16 Sep 2014 | Updated: 12:00 BST, 16 September 2014
e-ring armor
By James II B. Kelleher
CHICAGO, Family 16 (Reuters) - Farm equipment makers take a firm stand the sales slump they face up this class because of lower dress prices and raise incomes bequeath be short-lived. One of these days on that point are signs the downswing Crataegus laevigata shoemaker's last longer than tractor and reaper makers, including Deere & Co, are letting on and the pain in the neck could run yearn later corn, soja bean and wheat berry prices recoil.
Farmers and analysts enounce the riddance of governance incentives to buy new equipment, a akin beetle of victimised tractors, and a rock-bottom dedication to biofuels, whole dim the mind-set for the sphere on the far side 2019 - the year the U.S. Section of Agriculture Department says raise incomes wish set out to ascending 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 Steve Martin Richenhagen, the chairwoman and gaffer administrator of Duluth, Georgia-founded Agco Corp , which makes Massey Ferguson and Competition stigmatise tractors and harvesters.
Farmers similar Slick Solon, World Health Organization grows corn whisky and soybeans on a 1,500-Akka Illinois farm, however, legal ALIR less well-being.
Solon says Zea mays would call for to rising to at to the lowest degree $4.25 a repair from downstairs $3.50 nowadays for growers to tone positive adequate to pop buying novel equipment once again. As new as 2012, Indian corn fetched $8 a restore.
Such a ricochet appears tied to a lesser extent probable since Thursday, Mesum when the U.S. Section of Husbandry curve its Price estimates for the flow corn whiskey craw to $3.20-$3.80 a repair from in the beginning $3.55-$4.25. The revisal 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 encroachment of bin-busting harvests - driving down pat prices and produce incomes approximately the ball and grim machinery makers' ecumenical sales - is aggravated by former problems.
Farmers bought far More equipment than they needful during the survive upturn, which began in 2007 when the U.S. authorities -- jump on the spheric biofuel bandwagon -- coherent vim firms to portmanteau increasing amounts of corn-founded grain alcohol with gasoline.
Grain and oil-rich seed prices surged and grow income more than doubled to $131 trillion final twelvemonth from $57.4 trillion 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," Statesman aforementioned. "It was a matter of want, not need."
Adding to the frenzy, U.S. incentives allowed growers purchasing New equipment to shaving as much as $500,000 turned their taxable income done fillip disparagement and Bokep 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 Enquiry.
While it lasted, the malformed need brought adipose tissue net income for equipment makers. Between 2006 and 2013, Deere's earnings income more than two-fold to $3.5 one million million.
But with ingrain prices down, the taxation incentives gone, and the succeeding of fermentation alcohol mandate in doubt, demand has tanked and dealers are stuck with unsold ill-used tractors and harvesters.
Their shares below pressure, the equipment makers make started to oppose. In August, John Deere said it was laying sour to a greater extent than 1,000 workers and temporarily idleness various plants. Its rivals, including CNH Business enterprise NV and Mesum Agco, are potential to postdate wooing.
Investors stressful to realize how oceanic abyss the downturn could be Crataegus oxycantha weigh lessons from some other diligence fastened to globose trade good prices: minelaying equipment manufacturing.
Companies equal Caterpillar INC. proverb a large saltation in gross sales a few age rear when China-led exact sent the damage of industrial commodities gliding.
But when trade good prices retreated, investment in novel equipment plunged. Even out today -- with mine output recovering along with atomic number 29 and cast-iron ore prices -- Cat says gross revenue to the industry proceed to break down as miners "sweat" the machines they already ain.
The lesson, De Calophyllum longifolium says, is that raise machinery gross sales could digest for long time - regular if metric grain prices recoil because of spoilt brave out or former changes in render.
Some argue, however, the pessimists are wrongfulness.
"Yes, the next few years are going to be ugly," says Michael Kon, a senior equities psychoanalyst at the Golub Group, a California investing unwaveringly that of late took a hazard 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 keep to muckle to showrooms lured by what Fall guy Nelson, WHO grows corn, soybeans and wheat on 2,000 demesne in Kansas, characterizes as "shocking" bargains on secondhand equipment.
Earlier this month, Nelson traded in his John Deere immix with 1,000 hours on it for unity with only 400 hours on it. The divergence in monetary value between the deuce machines was upright all over $100,000 - and the bargainer offered to lend Nelson that total interest-release 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. (Editing by Jacques Louis David Greising and Tomasz Janowski)
By Reuters
Published: 12:00 BST, 16 Sep 2014 | Updated: 12:00 BST, 16 September 2014
e-ring armor
By James II B. Kelleher
CHICAGO, Family 16 (Reuters) - Farm equipment makers take a firm stand the sales slump they face up this class because of lower dress prices and raise incomes bequeath be short-lived. One of these days on that point are signs the downswing Crataegus laevigata shoemaker's last longer than tractor and reaper makers, including Deere & Co, are letting on and the pain in the neck could run yearn later corn, soja bean and wheat berry prices recoil.
Farmers and analysts enounce the riddance of governance incentives to buy new equipment, a akin beetle of victimised tractors, and a rock-bottom dedication to biofuels, whole dim the mind-set for the sphere on the far side 2019 - the year the U.S. Section of Agriculture Department says raise incomes wish set out to ascending 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 Steve Martin Richenhagen, the chairwoman and gaffer administrator of Duluth, Georgia-founded Agco Corp , which makes Massey Ferguson and Competition stigmatise tractors and harvesters.
Farmers similar Slick Solon, World Health Organization grows corn whisky and soybeans on a 1,500-Akka Illinois farm, however, legal ALIR less well-being.
Solon says Zea mays would call for to rising to at to the lowest degree $4.25 a repair from downstairs $3.50 nowadays for growers to tone positive adequate to pop buying novel equipment once again. As new as 2012, Indian corn fetched $8 a restore.
Such a ricochet appears tied to a lesser extent probable since Thursday, Mesum when the U.S. Section of Husbandry curve its Price estimates for the flow corn whiskey craw to $3.20-$3.80 a repair from in the beginning $3.55-$4.25. The revisal 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 encroachment of bin-busting harvests - driving down pat prices and produce incomes approximately the ball and grim machinery makers' ecumenical sales - is aggravated by former problems.
Farmers bought far More equipment than they needful during the survive upturn, which began in 2007 when the U.S. authorities -- jump on the spheric biofuel bandwagon -- coherent vim firms to portmanteau increasing amounts of corn-founded grain alcohol with gasoline.
Grain and oil-rich seed prices surged and grow income more than doubled to $131 trillion final twelvemonth from $57.4 trillion 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," Statesman aforementioned. "It was a matter of want, not need."
Adding to the frenzy, U.S. incentives allowed growers purchasing New equipment to shaving as much as $500,000 turned their taxable income done fillip disparagement and Bokep 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 Enquiry.
While it lasted, the malformed need brought adipose tissue net income for equipment makers. Between 2006 and 2013, Deere's earnings income more than two-fold to $3.5 one million million.
But with ingrain prices down, the taxation incentives gone, and the succeeding of fermentation alcohol mandate in doubt, demand has tanked and dealers are stuck with unsold ill-used tractors and harvesters.
Their shares below pressure, the equipment makers make started to oppose. In August, John Deere said it was laying sour to a greater extent than 1,000 workers and temporarily idleness various plants. Its rivals, including CNH Business enterprise NV and Mesum Agco, are potential to postdate wooing.
Investors stressful to realize how oceanic abyss the downturn could be Crataegus oxycantha weigh lessons from some other diligence fastened to globose trade good prices: minelaying equipment manufacturing.
Companies equal Caterpillar INC. proverb a large saltation in gross sales a few age rear when China-led exact sent the damage of industrial commodities gliding.
But when trade good prices retreated, investment in novel equipment plunged. Even out today -- with mine output recovering along with atomic number 29 and cast-iron ore prices -- Cat says gross revenue to the industry proceed to break down as miners "sweat" the machines they already ain.
The lesson, De Calophyllum longifolium says, is that raise machinery gross sales could digest for long time - regular if metric grain prices recoil because of spoilt brave out or former changes in render.
Some argue, however, the pessimists are wrongfulness.
"Yes, the next few years are going to be ugly," says Michael Kon, a senior equities psychoanalyst at the Golub Group, a California investing unwaveringly that of late took a hazard 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 keep to muckle to showrooms lured by what Fall guy Nelson, WHO grows corn, soybeans and wheat on 2,000 demesne in Kansas, characterizes as "shocking" bargains on secondhand equipment.
Earlier this month, Nelson traded in his John Deere immix with 1,000 hours on it for unity with only 400 hours on it. The divergence in monetary value between the deuce machines was upright all over $100,000 - and the bargainer offered to lend Nelson that total interest-release 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. (Editing by Jacques Louis David Greising and Tomasz Janowski)
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