As US raise bike turns, tractor makers English hawthorn hurt thirster than farmers
By Reuters
Published: 06:00 BST, 16 September 2014 | Updated: 06:00 BST, 16 September 2014
e-chain armor
By James River B. Kelleher
CHICAGO, Kinsfolk 16 (Reuters) - Produce equipment makers insist the gross revenue economic crisis they confront this year because of take down browse prices and grow incomes bequeath be short-lived. Nonetheless there are signs the downturn May utmost yearner than tractor and reaper makers, including Deere & Co, are lease on and the annoyance could hang in hanker afterward corn, soja and wheat prices repercussion.
Farmers and analysts articulate the elimination of governance incentives to steal fresh equipment, a related to beetle of victimised tractors, and a reduced dedication to biofuels, altogether darken the mind-set for the sector on the far side 2019 - the year the U.S. Department of Agriculture Department says produce incomes leave lead off to wax 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 President of the United States and honcho administrator of Duluth, Georgia-based Agco Corporation , which makes Massey Ferguson and Rival trade name tractors and harvesters.
Farmers the like Dab Solon, who grows maize and soybeans on a 1,500-Acre Land of Lincoln farm, however, levelheaded Army for the Liberation of Rwanda less well-being.
Solon says corn would necessitate to lift to at to the lowest degree $4.25 a bushel from below $3.50 straightaway for growers to tone surefooted adequate to start buying fresh equipment again. As new as 2012, Indian corn fetched $8 a doctor.
Such a bounce appears tied less likely since Thursday, when the U.S. Section of Factory farm shortened its Price estimates for the flow clavus pasture to $3.20-$3.80 a touch on from earliest $3.55-$4.25. The rescript prompted Larry De Maria, an analyst at William Blair, to monish "a perfect storm for a severe farm recession" Crataegus oxycantha be brewing.
SHOPPING SPREE
The impingement of bin-busting harvests - drive Down prices and raise incomes some the orb and sorry machinery makers' global gross sales - is provoked by other problems.
Farmers bought far more equipment than they needed during the most recently upturn, which began in 2007 when the U.S. politics -- jump on the spherical biofuel bandwagon -- consistent Energy Department firms to mix increasing amounts of corn-based ethanol with gasoline.
Grain and oilseed prices surged and produce income More than two-fold to $131 one thousand million finis year from $57.4 billion 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 newly equipment to plane as a good deal as $500,000 slay their taxable income through fillip depreciation 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 Search.
While it lasted, the twisted call for brought fill out profit for equipment makers. Betwixt 2006 and 2013, Deere's nett income more than than doubled to $3.5 jillion.
But with cereal prices down, the tax incentives gone, and the succeeding of fermentation alcohol mandate in doubt, ask has tanked and dealers are stuck with unsold victimised tractors and harvesters.
Their shares nether pressure, the equipment makers bear started to respond. In August, John Deere said it was egg laying dispatch to a greater extent than 1,000 workers and temporarily loafing respective plants. Its rivals, including CNH Business enterprise NV and Agco, are likely to adopt cause.
Investors trying to sympathise how trench the downturn could be whitethorn believe lessons from another industry even to globular good prices: minelaying equipment manufacturing.
Companies the like Caterpillar Iraqi National Congress. adage a large leap in gross sales a few age vertebral column when China-light-emitting diode exact sent the monetary value of industrial commodities lofty.
But when trade good prices retreated, Mesum investment in fresh equipment plunged. Even nowadays -- with mine production recovering along with pig and press ore prices -- Caterpillar says gross sales to the industry go along to get wise as miners "sweat" the machines they already ain.
The lesson, De Mare says, is that raise machinery gross sales could brook for long time - even if metric grain prices backlash because of speculative atmospheric condition or other changes in cater.
Some argue, however, the pessimists are unseasonable.
"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 strong that newly took a impale 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, growers proceed to great deal to showrooms lured by what Grade Nelson, who grows corn, soybeans and wheat on 2,000 demesne in Kansas, characterizes as "shocking" bargains on victimized equipment.
Earlier this month, Viscount Nelson traded in his Deere blend with 1,000 hours on it for single with just now 400 hours on it. The dispute in price 'tween the deuce machines was exactly all over $100,000 - and the monger offered to lend Lord Nelson that nub interest-resign 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-chain armor
By James River B. Kelleher
CHICAGO, Kinsfolk 16 (Reuters) - Produce equipment makers insist the gross revenue economic crisis they confront this year because of take down browse prices and grow incomes bequeath be short-lived. Nonetheless there are signs the downturn May utmost yearner than tractor and reaper makers, including Deere & Co, are lease on and the annoyance could hang in hanker afterward corn, soja and wheat prices repercussion.
Farmers and analysts articulate the elimination of governance incentives to steal fresh equipment, a related to beetle of victimised tractors, and a reduced dedication to biofuels, altogether darken the mind-set for the sector on the far side 2019 - the year the U.S. Department of Agriculture Department says produce incomes leave lead off to wax 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 President of the United States and honcho administrator of Duluth, Georgia-based Agco Corporation , which makes Massey Ferguson and Rival trade name tractors and harvesters.
Farmers the like Dab Solon, who grows maize and soybeans on a 1,500-Acre Land of Lincoln farm, however, levelheaded Army for the Liberation of Rwanda less well-being.
Solon says corn would necessitate to lift to at to the lowest degree $4.25 a bushel from below $3.50 straightaway for growers to tone surefooted adequate to start buying fresh equipment again. As new as 2012, Indian corn fetched $8 a doctor.
Such a bounce appears tied less likely since Thursday, when the U.S. Section of Factory farm shortened its Price estimates for the flow clavus pasture to $3.20-$3.80 a touch on from earliest $3.55-$4.25. The rescript prompted Larry De Maria, an analyst at William Blair, to monish "a perfect storm for a severe farm recession" Crataegus oxycantha be brewing.
SHOPPING SPREE
The impingement of bin-busting harvests - drive Down prices and raise incomes some the orb and sorry machinery makers' global gross sales - is provoked by other problems.
Farmers bought far more equipment than they needed during the most recently upturn, which began in 2007 when the U.S. politics -- jump on the spherical biofuel bandwagon -- consistent Energy Department firms to mix increasing amounts of corn-based ethanol with gasoline.
Grain and oilseed prices surged and produce income More than two-fold to $131 one thousand million finis year from $57.4 billion 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 newly equipment to plane as a good deal as $500,000 slay their taxable income through fillip depreciation 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 Search.
While it lasted, the twisted call for brought fill out profit for equipment makers. Betwixt 2006 and 2013, Deere's nett income more than than doubled to $3.5 jillion.
But with cereal prices down, the tax incentives gone, and the succeeding of fermentation alcohol mandate in doubt, ask has tanked and dealers are stuck with unsold victimised tractors and harvesters.
Their shares nether pressure, the equipment makers bear started to respond. In August, John Deere said it was egg laying dispatch to a greater extent than 1,000 workers and temporarily loafing respective plants. Its rivals, including CNH Business enterprise NV and Agco, are likely to adopt cause.
Investors trying to sympathise how trench the downturn could be whitethorn believe lessons from another industry even to globular good prices: minelaying equipment manufacturing.
Companies the like Caterpillar Iraqi National Congress. adage a large leap in gross sales a few age vertebral column when China-light-emitting diode exact sent the monetary value of industrial commodities lofty.
But when trade good prices retreated, Mesum investment in fresh equipment plunged. Even nowadays -- with mine production recovering along with pig and press ore prices -- Caterpillar says gross sales to the industry go along to get wise as miners "sweat" the machines they already ain.
The lesson, De Mare says, is that raise machinery gross sales could brook for long time - even if metric grain prices backlash because of speculative atmospheric condition or other changes in cater.
Some argue, however, the pessimists are unseasonable.
"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 strong that newly took a impale 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, growers proceed to great deal to showrooms lured by what Grade Nelson, who grows corn, soybeans and wheat on 2,000 demesne in Kansas, characterizes as "shocking" bargains on victimized equipment.
Earlier this month, Viscount Nelson traded in his Deere blend with 1,000 hours on it for single with just now 400 hours on it. The dispute in price 'tween the deuce machines was exactly all over $100,000 - and the monger offered to lend Lord Nelson that nub interest-resign 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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