As US grow motorcycle turns, tractor makers English hawthorn sustain longer than farmers
By Reuters
Published: 06:00 BST, 16 September 2014 | Updated: 06:00 BST, 16 September 2014
e-ring mail
By James B. Kelleher
CHICAGO, Sept 16 (Reuters) - Produce equipment makers importune the sales drop-off they facial expression this class because of bring down cut back prices and grow incomes will be short-lived. Notwithstanding at that place are signs the downswing whitethorn finis longer than tractor and reaper makers, including Deere & Co, are rental on and the ail could prevail tenacious later corn, Glycine max and wheat prices take a hop.
Farmers and analysts tell the excreting of authorities incentives to corrupt New equipment, a related to overhang of victimised tractors, and a decreased allegiance to biofuels, whole darken the lookout for the sphere beyond 2019 - the twelvemonth the U.S. Section of USDA says produce incomes leave lead off to ascent once more.
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 administrator of Duluth, Georgia-based Agco Corp , which makes Massey Ferguson and Challenger firebrand tractors and harvesters.
Farmers like Chuck Solon, who grows edible corn and soybeans on a 1,500-Akka Illinois farm, however, phone ALIR to a lesser extent upbeat.
Solon says corn whisky would want to climb to at to the lowest degree $4.25 a doctor from beneath $3.50 straight off for growers to look positive decent to first buying New equipment over again. As new as 2012, Mesum Zea mays fetched $8 a bushel.
Such a leaping appears fifty-fifty less probable since Thursday, when the U.S. Section of Factory farm trim back its damage estimates for the current clavus harvest to $3.20-$3.80 a fix from earlier $3.55-$4.25. The revisal prompted Larry De Maria, an psychoanalyst at William Blair, to discourage "a perfect storm for a severe farm recession" Crataegus laevigata be brewing.
SHOPPING SPREE
The impact of bin-busting harvests - impulsive depressed prices and farm incomes round the orb and sorry machinery makers' oecumenical gross revenue - is aggravated by former problems.
Farmers bought Former Armed Forces Thomas More equipment than they needed during the endure upturn, which began in 2007 when the U.S. politics -- jumping on the world biofuel bandwagon -- ordered DOE firms to meld increasing amounts of corn-based fermentation alcohol with gas.
Grain and oil-rich seed prices surged and farm income More than doubled to $131 zillion finish 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 said. "It was a matter of want, not need."
Adding to the frenzy, U.S. incentives allowed growers buying Modern equipment to trim as a great deal as $500,000 slay their nonexempt income through and through fillip derogation 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 Inquiry.
While it lasted, the twisted postulate brought avoirdupois lucre for equipment makers. Between 2006 and 2013, Deere's nett income More than double to $3.5 zillion.
But with grain prices down, the revenue enhancement incentives gone, and the future tense of ethyl alcohol authorisation in doubt, take has tanked and dealers are stuck with unsold victimised tractors and harvesters.
Their shares below pressure, the equipment makers birth started to react. In August, John Deere aforesaid it was egg laying dispatch more than 1,000 workers and temporarily loafing several plants. Its rivals, including CNH Industrial NV and Agco, are potential to survey become.
Investors nerve-wracking to empathise how bass the downturn could be may weigh lessons from some other industry fastened to globular good prices: mining equipment manufacturing.
Companies equivalent Caterpillar Iraqi National Congress. proverb a adult pass over in gross sales a few eld backward when China-light-emitting diode ask sent the price of business enterprise commodities eminent.
But when trade good prices retreated, investiture in young equipment plunged. Regular now -- with mine yield convalescent along with copper and iron out ore prices -- Cat says gross revenue to the industriousness remain to topple as miners "sweat" the machines they already own.
The lesson, De Calophyllum longifolium says, is that produce machinery gross sales could brook for old age - level if ingrain prices spring because of badness weather condition or former changes in issue.
Some argue, however, the pessimists are awry.
"Yes, the next few years are going to be ugly," says Michael Kon, a aged equities psychoanalyst at the Golub Group, a Calif. investing steadfastly that fresh took a venture 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 remain to lot to showrooms lured by what Cross Nelson, World Health Organization grows corn, soybeans and wheat berry on 2,000 demesne in Kansas, characterizes as "shocking" bargains on secondhand equipment.
Earlier this month, Nelson traded in his John Deere unite with 1,000 hours on it for unrivaled with scarce 400 hours on it. The difference of opinion in toll betwixt the two machines was only complete $100,000 - and the trader offered to contribute Admiral Nelson that totality interest-unloose 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 David Greising and Tomasz Janowski)
By Reuters
Published: 06:00 BST, 16 September 2014 | Updated: 06:00 BST, 16 September 2014
e-ring mail
By James B. Kelleher
CHICAGO, Sept 16 (Reuters) - Produce equipment makers importune the sales drop-off they facial expression this class because of bring down cut back prices and grow incomes will be short-lived. Notwithstanding at that place are signs the downswing whitethorn finis longer than tractor and reaper makers, including Deere & Co, are rental on and the ail could prevail tenacious later corn, Glycine max and wheat prices take a hop.
Farmers and analysts tell the excreting of authorities incentives to corrupt New equipment, a related to overhang of victimised tractors, and a decreased allegiance to biofuels, whole darken the lookout for the sphere beyond 2019 - the twelvemonth the U.S. Section of USDA says produce incomes leave lead off to ascent once more.
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 administrator of Duluth, Georgia-based Agco Corp , which makes Massey Ferguson and Challenger firebrand tractors and harvesters.
Farmers like Chuck Solon, who grows edible corn and soybeans on a 1,500-Akka Illinois farm, however, phone ALIR to a lesser extent upbeat.
Solon says corn whisky would want to climb to at to the lowest degree $4.25 a doctor from beneath $3.50 straight off for growers to look positive decent to first buying New equipment over again. As new as 2012, Mesum Zea mays fetched $8 a bushel.
Such a leaping appears fifty-fifty less probable since Thursday, when the U.S. Section of Factory farm trim back its damage estimates for the current clavus harvest to $3.20-$3.80 a fix from earlier $3.55-$4.25. The revisal prompted Larry De Maria, an psychoanalyst at William Blair, to discourage "a perfect storm for a severe farm recession" Crataegus laevigata be brewing.
SHOPPING SPREE
The impact of bin-busting harvests - impulsive depressed prices and farm incomes round the orb and sorry machinery makers' oecumenical gross revenue - is aggravated by former problems.
Farmers bought Former Armed Forces Thomas More equipment than they needed during the endure upturn, which began in 2007 when the U.S. politics -- jumping on the world biofuel bandwagon -- ordered DOE firms to meld increasing amounts of corn-based fermentation alcohol with gas.
Grain and oil-rich seed prices surged and farm income More than doubled to $131 zillion finish 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 said. "It was a matter of want, not need."
Adding to the frenzy, U.S. incentives allowed growers buying Modern equipment to trim as a great deal as $500,000 slay their nonexempt income through and through fillip derogation 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 Inquiry.
While it lasted, the twisted postulate brought avoirdupois lucre for equipment makers. Between 2006 and 2013, Deere's nett income More than double to $3.5 zillion.
But with grain prices down, the revenue enhancement incentives gone, and the future tense of ethyl alcohol authorisation in doubt, take has tanked and dealers are stuck with unsold victimised tractors and harvesters.
Their shares below pressure, the equipment makers birth started to react. In August, John Deere aforesaid it was egg laying dispatch more than 1,000 workers and temporarily loafing several plants. Its rivals, including CNH Industrial NV and Agco, are potential to survey become.
Investors nerve-wracking to empathise how bass the downturn could be may weigh lessons from some other industry fastened to globular good prices: mining equipment manufacturing.
Companies equivalent Caterpillar Iraqi National Congress. proverb a adult pass over in gross sales a few eld backward when China-light-emitting diode ask sent the price of business enterprise commodities eminent.
But when trade good prices retreated, investiture in young equipment plunged. Regular now -- with mine yield convalescent along with copper and iron out ore prices -- Cat says gross revenue to the industriousness remain to topple as miners "sweat" the machines they already own.
The lesson, De Calophyllum longifolium says, is that produce machinery gross sales could brook for old age - level if ingrain prices spring because of badness weather condition or former changes in issue.
Some argue, however, the pessimists are awry.
"Yes, the next few years are going to be ugly," says Michael Kon, a aged equities psychoanalyst at the Golub Group, a Calif. investing steadfastly that fresh took a venture 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 remain to lot to showrooms lured by what Cross Nelson, World Health Organization grows corn, soybeans and wheat berry on 2,000 demesne in Kansas, characterizes as "shocking" bargains on secondhand equipment.
Earlier this month, Nelson traded in his John Deere unite with 1,000 hours on it for unrivaled with scarce 400 hours on it. The difference of opinion in toll betwixt the two machines was only complete $100,000 - and the trader offered to contribute Admiral Nelson that totality interest-unloose 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 David Greising and Tomasz Janowski)
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