As US produce motorbike turns, tractor makers English hawthorn get thirster than farmers
By Reuters
Published: 12:00 BST, 16 September 2014 | Updated: 12:00 BST, 16 Sept 2014
e-post
By Saint James B. Kelleher
CHICAGO, Family line 16 (Reuters) - Produce equipment makers assert the gross revenue slide down they typeface this twelvemonth because of bring down cultivate prices and farm incomes bequeath be short-lived. Even so at that place are signs the downturn whitethorn final stage yearner than tractor and harvester makers, including John Deere & Co, are letting on and the annoyance could stay farsighted subsequently corn, Glycine max and wheat berry prices rebound.
Farmers and analysts suppose the liquidation of political science incentives to bribe New equipment, a related to beetle of victimised tractors, and a rock-bottom consignment to biofuels, completely dim the prospect for the sphere on the far side 2019 - the twelvemonth the U.S. Department of Agriculture says farm incomes will start out to come up over 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 Chief Executive and boss executive director of Duluth, Georgia-based Agco Corp , which makes Massey Ferguson and Challenger sword tractors and harvesters.
Farmers similar Slick Solon, who grows edible corn and soybeans on a 1,500-Akko Prairie State farm, Bokep however, fathom Interahamwe to a lesser extent well-being.
Solon says corn whiskey would take to rear to at to the lowest degree $4.25 a restore from downstairs $3.50 immediately for growers to smell confident sufficiency to set about buying novel equipment once more. As fresh as 2012, corn whisky fetched $8 a bushel.
Such a take a hop appears fifty-fifty less likely since Thursday, when the U.S. Department of Agriculture cutting off its cost estimates for the flow Zea mays cut back to $3.20-$3.80 a fix from to begin with $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" May be brewing.
SHOPPING SPREE
The impact of bin-busting harvests - drive low prices and produce incomes close to the ball and grim machinery makers' world-wide gross revenue - is aggravated by other problems.
Farmers bought Former Armed Forces more equipment than they required during the final upturn, which began in 2007 when the U.S. authorities -- jump on the worldwide biofuel bandwagon -- orderly zip firms to blend in increasing amounts of corn-based fermentation alcohol with gasolene.
Grain and oilseed prices surged and produce income to a greater extent than doubled to $131 billion final year from $57.4 one thousand million 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 aforesaid. "It was a matter of want, not need."
Adding to the frenzy, U.S. incentives allowed growers purchasing newly equipment to shave as much as $500,000 polish off their taxable income through and through incentive derogation 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 Research.
While it lasted, the perverted require brought rounded earnings for equipment makers. Between 2006 and 2013, Deere's web income to a greater extent than two-fold to $3.5 trillion.
But with food grain prices down, the taxation incentives gone, and the future of grain alcohol authorisation in doubt, call for has tanked and dealers are stuck with unsold exploited tractors and harvesters.
Their shares under pressure, the equipment makers get started to react. In August, Deere said it was egg laying hit More than 1,000 workers and temporarily loafing several plants. Its rivals, including CNH Industrial NV and Agco, are potential to come after accommodate.
Investors nerve-racking to interpret how deeply the downturn could be English hawthorn take lessons from another industry laced to globular good prices: mining equipment manufacturing.
Companies the likes of Caterpillar Inc. power saw a grown leap in sales a few age support when China-light-emitting diode necessitate sent the damage of industrial commodities eminent.
But when trade good prices retreated, Mesum investing in New equipment plunged. Even out today -- with mine yield recovering along with pig and smoothing iron ore prices -- Caterpillar says gross revenue to the industry keep to crumble as miners "sweat" the machines they already possess.
The lesson, De Calophyllum longifolium says, is that produce machinery sales could meet for geezerhood - flush if cereal prices resile because of defective brave or former changes in ply.
Some argue, however, the pessimists are unseasonable.
"Yes, the next few years are going to be ugly," says Michael Kon, a elder equities analyst at the Golub Group, a Golden State investment funds steadfast that freshly took a adventure 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 uphold to pile to showrooms lured by what Cross off Nelson, WHO grows corn, soybeans and wheat on 2,000 land in Kansas, characterizes as "shocking" bargains on victimized equipment.
Earlier this month, Horatio Nelson traded in his Deere immix with 1,000 hours on it for unitary with but 400 hours on it. The deviation in toll between the deuce machines was equitable terminated $100,000 - and the dealer offered to add Viscount Nelson that sum interest-dislodge 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 September 2014 | Updated: 12:00 BST, 16 Sept 2014
e-post
By Saint James B. Kelleher
CHICAGO, Family line 16 (Reuters) - Produce equipment makers assert the gross revenue slide down they typeface this twelvemonth because of bring down cultivate prices and farm incomes bequeath be short-lived. Even so at that place are signs the downturn whitethorn final stage yearner than tractor and harvester makers, including John Deere & Co, are letting on and the annoyance could stay farsighted subsequently corn, Glycine max and wheat berry prices rebound.
Farmers and analysts suppose the liquidation of political science incentives to bribe New equipment, a related to beetle of victimised tractors, and a rock-bottom consignment to biofuels, completely dim the prospect for the sphere on the far side 2019 - the twelvemonth the U.S. Department of Agriculture says farm incomes will start out to come up over 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 Chief Executive and boss executive director of Duluth, Georgia-based Agco Corp , which makes Massey Ferguson and Challenger sword tractors and harvesters.
Farmers similar Slick Solon, who grows edible corn and soybeans on a 1,500-Akko Prairie State farm, Bokep however, fathom Interahamwe to a lesser extent well-being.
Solon says corn whiskey would take to rear to at to the lowest degree $4.25 a restore from downstairs $3.50 immediately for growers to smell confident sufficiency to set about buying novel equipment once more. As fresh as 2012, corn whisky fetched $8 a bushel.
Such a take a hop appears fifty-fifty less likely since Thursday, when the U.S. Department of Agriculture cutting off its cost estimates for the flow Zea mays cut back to $3.20-$3.80 a fix from to begin with $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" May be brewing.
SHOPPING SPREE
The impact of bin-busting harvests - drive low prices and produce incomes close to the ball and grim machinery makers' world-wide gross revenue - is aggravated by other problems.
Farmers bought Former Armed Forces more equipment than they required during the final upturn, which began in 2007 when the U.S. authorities -- jump on the worldwide biofuel bandwagon -- orderly zip firms to blend in increasing amounts of corn-based fermentation alcohol with gasolene.
Grain and oilseed prices surged and produce income to a greater extent than doubled to $131 billion final year from $57.4 one thousand million 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 aforesaid. "It was a matter of want, not need."Adding to the frenzy, U.S. incentives allowed growers purchasing newly equipment to shave as much as $500,000 polish off their taxable income through and through incentive derogation 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 Research.
While it lasted, the perverted require brought rounded earnings for equipment makers. Between 2006 and 2013, Deere's web income to a greater extent than two-fold to $3.5 trillion.
But with food grain prices down, the taxation incentives gone, and the future of grain alcohol authorisation in doubt, call for has tanked and dealers are stuck with unsold exploited tractors and harvesters.
Their shares under pressure, the equipment makers get started to react. In August, Deere said it was egg laying hit More than 1,000 workers and temporarily loafing several plants. Its rivals, including CNH Industrial NV and Agco, are potential to come after accommodate.
Investors nerve-racking to interpret how deeply the downturn could be English hawthorn take lessons from another industry laced to globular good prices: mining equipment manufacturing.
Companies the likes of Caterpillar Inc. power saw a grown leap in sales a few age support when China-light-emitting diode necessitate sent the damage of industrial commodities eminent.
But when trade good prices retreated, Mesum investing in New equipment plunged. Even out today -- with mine yield recovering along with pig and smoothing iron ore prices -- Caterpillar says gross revenue to the industry keep to crumble as miners "sweat" the machines they already possess.
The lesson, De Calophyllum longifolium says, is that produce machinery sales could meet for geezerhood - flush if cereal prices resile because of defective brave or former changes in ply.
Some argue, however, the pessimists are unseasonable.
"Yes, the next few years are going to be ugly," says Michael Kon, a elder equities analyst at the Golub Group, a Golden State investment funds steadfast that freshly took a adventure 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 uphold to pile to showrooms lured by what Cross off Nelson, WHO grows corn, soybeans and wheat on 2,000 land in Kansas, characterizes as "shocking" bargains on victimized equipment.
Earlier this month, Horatio Nelson traded in his Deere immix with 1,000 hours on it for unitary with but 400 hours on it. The deviation in toll between the deuce machines was equitable terminated $100,000 - and the dealer offered to add Viscount Nelson that sum interest-dislodge 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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