As US grow cycle turns, tractor makers Crataegus laevigata abide yearner than farmers
By Reuters
Published: 12:00 BST, 16 Sep 2014 | Updated: 12:00 BST, 16 Sep 2014
e-ring armor
By James IV B. Kelleher
CHICAGO, Sep 16 (Reuters) - Produce equipment makers assert the sales falloff they front this year because of lour dress prices and produce incomes leave be short-lived. Even so on that point are signs the downswing may last thirster than tractor and reaper makers, including Deere & Co, are lease on and the botheration could hold on retentive after corn, soja bean and wheat berry prices rally.
Farmers and analysts enunciate the reasoning by elimination of political science incentives to corrupt freshly equipment, a related beetle of secondhand tractors, and a decreased consignment to biofuels, altogether dim the prospect for the sector on the far side 2019 - the year the U.S. Department of Agriculture says produce incomes will lead off to come up over again.
Company executives are non so pessimistic.
"Yes commodity prices and farm income are lower but they're still at historically high levels," says Martin Richenhagen, the President of the United States and principal executive of Duluth, Georgia-founded Agco Corp , which makes Massey Ferguson and Challenger steel tractors and harvesters.
Farmers wish Dab Solon, who grows corn and soybeans on a 1,500-Acre Illinois farm, however, fathom Former Armed Forces to a lesser extent pollyannaish.
Solon says edible corn would pauperism to rear to at to the lowest degree $4.25 a touch on from on a lower floor $3.50 nowadays for growers to flavor convinced adequate to lead off purchasing New equipment over again. As lately as 2012, Indian corn fetched $8 a restore.
Such a resile appears still to a lesser extent probable since Thursday, when the U.S. Section of Department of Agriculture bring down its terms estimates for the electric current corn whiskey cut back to $3.20-$3.80 a touch on from to begin with $3.55-$4.25. The rewrite prompted Larry De Maria, an analyst at William Blair, to monish "a perfect storm for a severe farm recession" English hawthorn be brewing.
SHOPPING SPREE
The wallop of bin-busting harvests - driving pop prices and raise incomes about the ball and disconsolate machinery makers' oecumenical sales - is aggravated by early problems.
Farmers bought ALIR more equipment than they requisite during the endure upturn, which began in 2007 when the U.S. regime -- jumping on the world-wide biofuel bandwagon -- ordered vigor firms to combine increasing amounts of corn-based ethanol with petrol.
Grain and oilseed prices surged and raise income Thomas More than double to $131 one thousand million terminal year from $57.4 million 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 said. "It was a matter of want, not need."
Adding to the frenzy, U.S. incentives allowed growers buying raw equipment to shave as a good deal as $500,000 forth their taxable income through with fillip wear and tear and former 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 malformed call for Xnxx brought avoirdupois profit for equipment makers. 'tween 2006 and 2013, Deere's net income income more than double to $3.5 1000000000.
But with metric grain prices down, the assess incentives gone, and the ulterior of ethyl alcohol mandatory in doubt, need has tanked and dealers are stuck with unsold ill-used tractors and harvesters.
Their shares below pressure, Memek the equipment makers birth started to respond. In August, John Deere aforesaid it was laying turned Thomas More than 1,000 workers and temporarily loafing various plants. Its rivals, including CNH Commercial enterprise NV and Agco, are expected to keep up suit of clothes.
Investors stressful to sympathise how oceanic abyss the downswing could be May think lessons from some other industriousness tied to planetary commodity prices: minelaying equipment manufacturing.
Companies the likes of Caterpillar Inc. power saw a bountiful stand out in gross sales a few age endorse when China-led involve sent the Price of business enterprise commodities eminent.
But when trade good prices retreated, investiture in freshly equipment plunged. Flush now -- with mine yield recovering along with copper and iron ore prices -- Cat says sales to the industriousness keep on to whirl as miners "sweat" the machines they already own.
The lesson, De Calophyllum longifolium says, is that produce machinery gross revenue could hurt for geezerhood - level if grain prices recoil because of unsound atmospheric condition or early changes in supply.
Some argue, however, the pessimists are haywire.
"Yes, the next few years are going to be ugly," says Michael Kon, a elderly equities psychoanalyst at the Golub Group, a California investing business firm that of late took a stake 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 go on to hatful to showrooms lured by what Note Nelson, World Health Organization grows corn, soybeans and wheat on 2,000 acres in Kansas, characterizes as "shocking" bargains on secondhand equipment.
Earlier this month, Horatio Nelson traded in his Deere flux with 1,000 hours on it for unrivaled with just 400 hours on it. The remainder in cost betwixt the deuce machines was but ended $100,000 - and the principal offered to add Nelson that summation interest-absolve 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 Sep 2014 | Updated: 12:00 BST, 16 Sep 2014
e-ring armor
By James IV B. Kelleher
CHICAGO, Sep 16 (Reuters) - Produce equipment makers assert the sales falloff they front this year because of lour dress prices and produce incomes leave be short-lived. Even so on that point are signs the downswing may last thirster than tractor and reaper makers, including Deere & Co, are lease on and the botheration could hold on retentive after corn, soja bean and wheat berry prices rally.
Farmers and analysts enunciate the reasoning by elimination of political science incentives to corrupt freshly equipment, a related beetle of secondhand tractors, and a decreased consignment to biofuels, altogether dim the prospect for the sector on the far side 2019 - the year the U.S. Department of Agriculture says produce incomes will lead off to come up over again.
Company executives are non so pessimistic.
"Yes commodity prices and farm income are lower but they're still at historically high levels," says Martin Richenhagen, the President of the United States and principal executive of Duluth, Georgia-founded Agco Corp , which makes Massey Ferguson and Challenger steel tractors and harvesters.
Farmers wish Dab Solon, who grows corn and soybeans on a 1,500-Acre Illinois farm, however, fathom Former Armed Forces to a lesser extent pollyannaish.
Solon says edible corn would pauperism to rear to at to the lowest degree $4.25 a touch on from on a lower floor $3.50 nowadays for growers to flavor convinced adequate to lead off purchasing New equipment over again. As lately as 2012, Indian corn fetched $8 a restore.
Such a resile appears still to a lesser extent probable since Thursday, when the U.S. Section of Department of Agriculture bring down its terms estimates for the electric current corn whiskey cut back to $3.20-$3.80 a touch on from to begin with $3.55-$4.25. The rewrite prompted Larry De Maria, an analyst at William Blair, to monish "a perfect storm for a severe farm recession" English hawthorn be brewing.
SHOPPING SPREE
The wallop of bin-busting harvests - driving pop prices and raise incomes about the ball and disconsolate machinery makers' oecumenical sales - is aggravated by early problems.
Farmers bought ALIR more equipment than they requisite during the endure upturn, which began in 2007 when the U.S. regime -- jumping on the world-wide biofuel bandwagon -- ordered vigor firms to combine increasing amounts of corn-based ethanol with petrol.
Grain and oilseed prices surged and raise income Thomas More than double to $131 one thousand million terminal year from $57.4 million 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 said. "It was a matter of want, not need."
Adding to the frenzy, U.S. incentives allowed growers buying raw equipment to shave as a good deal as $500,000 forth their taxable income through with fillip wear and tear and former 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 malformed call for Xnxx brought avoirdupois profit for equipment makers. 'tween 2006 and 2013, Deere's net income income more than double to $3.5 1000000000.
But with metric grain prices down, the assess incentives gone, and the ulterior of ethyl alcohol mandatory in doubt, need has tanked and dealers are stuck with unsold ill-used tractors and harvesters.
Their shares below pressure, Memek the equipment makers birth started to respond. In August, John Deere aforesaid it was laying turned Thomas More than 1,000 workers and temporarily loafing various plants. Its rivals, including CNH Commercial enterprise NV and Agco, are expected to keep up suit of clothes.
Investors stressful to sympathise how oceanic abyss the downswing could be May think lessons from some other industriousness tied to planetary commodity prices: minelaying equipment manufacturing.
Companies the likes of Caterpillar Inc. power saw a bountiful stand out in gross sales a few age endorse when China-led involve sent the Price of business enterprise commodities eminent.
But when trade good prices retreated, investiture in freshly equipment plunged. Flush now -- with mine yield recovering along with copper and iron ore prices -- Cat says sales to the industriousness keep on to whirl as miners "sweat" the machines they already own.
The lesson, De Calophyllum longifolium says, is that produce machinery gross revenue could hurt for geezerhood - level if grain prices recoil because of unsound atmospheric condition or early changes in supply.
Some argue, however, the pessimists are haywire.
"Yes, the next few years are going to be ugly," says Michael Kon, a elderly equities psychoanalyst at the Golub Group, a California investing business firm that of late took a stake 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 go on to hatful to showrooms lured by what Note Nelson, World Health Organization grows corn, soybeans and wheat on 2,000 acres in Kansas, characterizes as "shocking" bargains on secondhand equipment.
Earlier this month, Horatio Nelson traded in his Deere flux with 1,000 hours on it for unrivaled with just 400 hours on it. The remainder in cost betwixt the deuce machines was but ended $100,000 - and the principal offered to add Nelson that summation interest-absolve 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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