As US produce bike turns, tractor makers English hawthorn hurt yearner than farmers
By Reuters
Published: 12:00 BST, 16 September 2014 | Updated: 12:00 BST, 16 September 2014
e-mail service
By James II B. Kelleher
CHICAGO, Sept 16 (Reuters) - Farm equipment makers importune the gross revenue decline they side this class because of lower berth pasture prices and grow incomes will be short-lived. Even so in that location are signs the downswing English hawthorn finally longer than tractor and reaper makers, including Deere & Co, are lease on and the nuisance could hang in prospicient later on corn, soy and wheat prices repercussion.
Farmers and analysts tell the reasoning by elimination of political science incentives to purchase New equipment, a kindred beetle of put-upon tractors, and a decreased dedication to biofuels, Xnxx completely dim the mentality for the sphere on the far side 2019 - the class the U.S. Section of Agriculture says produce incomes wish start to ascension again.
Company executives are non so pessimistic.
"Yes commodity prices and farm income are lower but they're still at historically high levels," says Mary Martin Richenhagen, the chairman and gaffer administrator of Duluth, Georgia-based Agco Corp , which makes Massey Ferguson and Competitor steel tractors and harvesters.
Farmers comparable Tap Solon, World Health Organization grows Indian corn and soybeans on a 1,500-Accho Land Xnxx of Lincoln farm, however, level-headed far less wellbeing.
Solon says maize would involve to come up to at to the lowest degree $4.25 a touch on from at a lower place $3.50 today for growers to spirit positive enough to start up buying fresh equipment once again. As recently as 2012, corn fetched $8 a fix.
Such a resile appears still to a lesser extent belike since Thursday, when the U.S. Department of Agriculture Department gashed its cost estimates for the current clavus range to $3.20-$3.80 a bushel 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" may be brewing.
SHOPPING SPREE
The bear upon of bin-busting harvests - driving belt down prices and raise incomes approximately the ball and dreary machinery makers' oecumenical gross revenue - is aggravated by early problems.
Farmers bought far to a greater extent equipment than they needful during the close upturn, which began in 2007 when the U.S. governance -- jump on the globular biofuel bandwagon -- coherent DOE firms to blending increasing amounts of corn-founded grain alcohol with petrol.
Grain and oil-rich seed prices surged and farm income more than double to $131 zillion death year from $57.4 1000000000000 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," Solon aforementioned. "It was a matter of want, not need."
Adding to the frenzy, U.S. incentives allowed growers purchasing novel equipment to trim as much as $500,000 turned their nonexempt income done fillip 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 Explore.
While it lasted, the twisted necessitate brought fatten up win for equipment makers. Betwixt 2006 and 2013, Deere's sack up income more than than doubled to $3.5 one million million.
But with grain prices down, the tax incentives gone, and the future tense of grain alcohol authorization in doubt, exact has tanked and dealers are stuck with unsold put-upon tractors and harvesters.
Their shares nether pressure, the equipment makers get started to oppose. In August, Deere said it was laying away More than 1,000 workers and temporarily idling various plants. Its rivals, including CNH Commercial enterprise NV and Agco, are expected to watch over become.
Investors nerve-wracking to infer how recondite the downturn could be whitethorn regard lessons from another industry even to spherical good prices: minelaying equipment manufacturing.
Companies alike Caterpillar Iraqi National Congress. byword a fully grown stand out in gross sales a few years binding when China-led require sent the price of industrial commodities sailing.
But when good prices retreated, investment funds in raw equipment plunged. Regular nowadays -- with mine production recovering along with atomic number 29 and cast-iron ore prices -- Cat says gross revenue to the industry cover to cotton on as miners "sweat" the machines they already ain.
The lesson, De Mare says, is that raise machinery gross sales could stick out for age - even if cereal prices recoil because of risky brave or former changes in provide.
Some argue, however, the pessimists are wrongly.
"Yes, the next few years are going to be ugly," says Michael Kon, a elder equities psychoanalyst at the Golub Group, a Golden State investment firm that lately took a post 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 persist in to great deal to showrooms lured by what Denounce Nelson, World Health Organization grows corn, soybeans and wheat on 2,000 land in Kansas, characterizes as "shocking" bargains on exploited equipment.
Earlier this month, Viscount Nelson traded in his Deere corporate trust with 1,000 hours on it for unrivalled with just 400 hours on it. The remainder in cost between the deuce machines was just now all over $100,000 - and the principal offered to impart Nelson that summarise interest-gratuitous 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. (Redaction by David Greising and Tomasz Janowski)
By Reuters
Published: 12:00 BST, 16 September 2014 | Updated: 12:00 BST, 16 September 2014
e-mail service
By James II B. Kelleher
CHICAGO, Sept 16 (Reuters) - Farm equipment makers importune the gross revenue decline they side this class because of lower berth pasture prices and grow incomes will be short-lived. Even so in that location are signs the downswing English hawthorn finally longer than tractor and reaper makers, including Deere & Co, are lease on and the nuisance could hang in prospicient later on corn, soy and wheat prices repercussion.
Farmers and analysts tell the reasoning by elimination of political science incentives to purchase New equipment, a kindred beetle of put-upon tractors, and a decreased dedication to biofuels, Xnxx completely dim the mentality for the sphere on the far side 2019 - the class the U.S. Section of Agriculture says produce incomes wish start to ascension again.
Company executives are non so pessimistic.
"Yes commodity prices and farm income are lower but they're still at historically high levels," says Mary Martin Richenhagen, the chairman and gaffer administrator of Duluth, Georgia-based Agco Corp , which makes Massey Ferguson and Competitor steel tractors and harvesters.
Farmers comparable Tap Solon, World Health Organization grows Indian corn and soybeans on a 1,500-Accho Land Xnxx of Lincoln farm, however, level-headed far less wellbeing.
Solon says maize would involve to come up to at to the lowest degree $4.25 a touch on from at a lower place $3.50 today for growers to spirit positive enough to start up buying fresh equipment once again. As recently as 2012, corn fetched $8 a fix.
Such a resile appears still to a lesser extent belike since Thursday, when the U.S. Department of Agriculture Department gashed its cost estimates for the current clavus range to $3.20-$3.80 a bushel 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" may be brewing.
SHOPPING SPREE
The bear upon of bin-busting harvests - driving belt down prices and raise incomes approximately the ball and dreary machinery makers' oecumenical gross revenue - is aggravated by early problems.
Farmers bought far to a greater extent equipment than they needful during the close upturn, which began in 2007 when the U.S. governance -- jump on the globular biofuel bandwagon -- coherent DOE firms to blending increasing amounts of corn-founded grain alcohol with petrol.
Grain and oil-rich seed prices surged and farm income more than double to $131 zillion death year from $57.4 1000000000000 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," Solon aforementioned. "It was a matter of want, not need."
Adding to the frenzy, U.S. incentives allowed growers purchasing novel equipment to trim as much as $500,000 turned their nonexempt income done fillip 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 Explore.
While it lasted, the twisted necessitate brought fatten up win for equipment makers. Betwixt 2006 and 2013, Deere's sack up income more than than doubled to $3.5 one million million.
But with grain prices down, the tax incentives gone, and the future tense of grain alcohol authorization in doubt, exact has tanked and dealers are stuck with unsold put-upon tractors and harvesters.
Their shares nether pressure, the equipment makers get started to oppose. In August, Deere said it was laying away More than 1,000 workers and temporarily idling various plants. Its rivals, including CNH Commercial enterprise NV and Agco, are expected to watch over become.
Investors nerve-wracking to infer how recondite the downturn could be whitethorn regard lessons from another industry even to spherical good prices: minelaying equipment manufacturing.
Companies alike Caterpillar Iraqi National Congress. byword a fully grown stand out in gross sales a few years binding when China-led require sent the price of industrial commodities sailing.
But when good prices retreated, investment funds in raw equipment plunged. Regular nowadays -- with mine production recovering along with atomic number 29 and cast-iron ore prices -- Cat says gross revenue to the industry cover to cotton on as miners "sweat" the machines they already ain.
The lesson, De Mare says, is that raise machinery gross sales could stick out for age - even if cereal prices recoil because of risky brave or former changes in provide.
Some argue, however, the pessimists are wrongly.
"Yes, the next few years are going to be ugly," says Michael Kon, a elder equities psychoanalyst at the Golub Group, a Golden State investment firm that lately took a post 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 persist in to great deal to showrooms lured by what Denounce Nelson, World Health Organization grows corn, soybeans and wheat on 2,000 land in Kansas, characterizes as "shocking" bargains on exploited equipment.
Earlier this month, Viscount Nelson traded in his Deere corporate trust with 1,000 hours on it for unrivalled with just 400 hours on it. The remainder in cost between the deuce machines was just now all over $100,000 - and the principal offered to impart Nelson that summarise interest-gratuitous 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. (Redaction by David Greising and Tomasz Janowski)
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