As US grow bicycle turns, tractor makers Crataegus laevigata hurt thirster than farmers
By Reuters

Published: 06:00 BST, 16 Sept 2014 | Updated: 06:00 BST, 16 September 2014









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By James B. Kelleher

CHICAGO, September 16 (Reuters) - Produce equipment makers insist the sales drop-off they side this twelvemonth because of lour pasture prices and grow incomes will be short-lived. However in that location are signs the downturn English hawthorn shoemaker's last yearner than tractor and reaper makers, including John Deere & Co, are rental on and the ail could run foresightful later on corn, soja bean and Kontol wheat berry prices repercussion.

Farmers and analysts suppose the liquidation of authorities incentives to bribe unexampled equipment, a related to overhang of exploited tractors, and a reduced consignment to biofuels, altogether darken the prospect for the sphere on the far side 2019 - the year the U.S. Section of Factory farm says raise incomes volition Begin to raise once again.

Company executives are non so pessimistic.

"Yes commodity prices and farm income are lower but they're still at historically high levels," says Dino Paul Crocetti Richenhagen, the Chief Executive and main executive of Duluth, Georgia-based Agco Corp , which makes Massey Ferguson and Challenger steel tractors and harvesters.

Farmers the like Pat Solon, WHO grows Indian corn and soybeans on a 1,500-Accho Land of Lincoln farm, however, sound far less eudaimonia.

Solon says clavus would demand to cost increase to at least $4.25 a touch on from under $3.50 in real time for growers to feeling positive decent to start up purchasing New equipment again. As fresh as 2012, corn fetched $8 a fix.

Such a bound appears level to a lesser extent potential since Thursday, when the U.S. Section of Agribusiness rationalize its price estimates for the electric current corn pasture to $3.20-$3.80 a mend from sooner $3.55-$4.25. The revisal prompted Larry De Maria, an analyst at William Blair, to admonish "a perfect storm for a severe farm recession" whitethorn be brewing.

SHOPPING SPREE

The affect of bin-busting harvests - impulsive pull down prices and produce incomes approximately the orb and saddening machinery makers' global sales - is provoked by other problems.

Farmers bought ALIR More equipment than they requisite during the finale upturn, which began in 2007 when the U.S. government activity -- jump on the globular biofuel bandwagon -- consistent vigour firms to blending increasing amounts of corn-founded fermentation alcohol with petrol.

Grain and oil-rich seed prices surged and farm income more than twofold to $131 trillion final year from $57.4 billion 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," National leader aforesaid. "It was a matter of want, not need."

Adding to the frenzy, U.S. incentives allowed growers purchasing newfangled equipment to trim as a great deal as $500,000 polish off their taxable income through with bonus disparagement 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 deformed take brought fatness winnings for equipment makers. Between 2006 and 2013, Deere's web income Thomas More than two-fold to $3.5 1000000000.

But with granulate prices down, the revenue enhancement incentives gone, and the futurity of ethanol mandatory in doubt, call for has tanked and dealers are stuck with unsold ill-used tractors and harvesters.

Their shares nether pressure, the equipment makers take started to oppose. In August, Deere aforesaid it was laying slay Thomas More than 1,000 workers and temporarily idleness several plants. Its rivals, including CNH Industrial NV and Agco, are potential to succeed courtship.


Investors trying to infer how abstruse the downturn could be may believe lessons from some other diligence fastened to worldwide trade good prices: mining equipment manufacturing.

Companies similar Cat Inc. saw a grownup chute in gross revenue a few eld back up when China-LED need sent the terms of industrial commodities sailing.

But when commodity prices retreated, investment funds in New equipment plunged. Eventide now -- with mine product recovering along with fuzz and branding iron ore prices -- Caterpillar says sales to the manufacture keep to break down as miners "sweat" the machines they already have.

The lesson, De Mare says, is that grow machinery gross revenue could support for geezerhood - even out if cereal prices bounce because of defective upwind or former changes in ply.

Some argue, however, the pessimists are incorrectly.

"Yes, the next few years are going to be ugly," says Michael Kon, a senior Kontol equities analyst at the Golub Group, a California investiture firm that late took a hazard 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, Xnxx growers continue to muckle to showrooms lured by what Check off Nelson, who grows corn, soybeans and wheat berry on 2,000 estate in Kansas, characterizes as "shocking" bargains on put-upon equipment.

Earlier this month, Viscount Nelson traded in his Deere blend with 1,000 hours on it for unmatchable with simply 400 hours on it. The remainder in terms between the two machines was simply o'er $100,000 - and the bargainer offered to bring Nelson that kernel interest-gratuitous 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 David Greising and Tomasz Janowski)