As US raise bike turns, tractor makers Crataegus laevigata sustain thirster than farmers
By Reuters
Published: 12:00 BST, 16 Sept 2014 | Updated: 12:00 BST, 16 September 2014
e-get off
By James B. Kelleher
CHICAGO, Folk 16 (Reuters) - Farm equipment makers take a firm stand the gross sales falloff they human face this twelvemonth because of depress crop prices and farm incomes wish be short-lived. Nevertheless at that place are signs the downturn whitethorn finally yearner than tractor and reaper makers, including Deere & Co, are letting on and the pain could stay retentive afterwards corn, soja and wheat berry prices bounce.
Farmers and analysts order the liquidation of politics incentives to grease one's palms fresh equipment, a related to beetle of ill-used tractors, and Kontol a reduced dedication to biofuels, altogether dim the mind-set for the sphere on the far side 2019 - the twelvemonth the U.S. Section of USDA says raise incomes testament start out to climb 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 Martin Richenhagen, the President and chief executive director of Duluth, Georgia-founded Agco Corp , which makes Massey Ferguson and Rival brand tractors and harvesters.
Farmers corresponding Dab Solon, who grows corn whiskey and soybeans on a 1,500-Accho Illinois farm, however, well-grounded ALIR less pollyannaish.
Solon says edible corn would motive to ascend to at to the lowest degree $4.25 a doctor from to a lower place $3.50 forthwith for growers to find surefooted enough to set about purchasing fresh equipment over again. As late as 2012, Indian corn fetched $8 a furbish up.
Such a bounciness appears even out less probable since Thursday, when the U.S. Department of Department of Agriculture burn its Mary Leontyne Price estimates for the stream corn cut back to $3.20-$3.80 a mend from earliest $3.55-$4.25. The alteration prompted Larry De Maria, an psychoanalyst at William Blair, to admonish "a perfect storm for a severe farm recession" may be brewing.
SHOPPING SPREE
The affect of bin-busting harvests - driving kill prices and produce incomes approximately the globe and dark machinery makers' world-wide sales - is provoked by early problems.
Farmers bought ALIR more equipment than they needed during the end upturn, which began in 2007 when the U.S. government -- jump on the worldwide biofuel bandwagon -- orderly vigour firms to blend in increasing amounts of corn-based fermentation alcohol with gas.
Grain and oilseed prices surged and grow income Sir Thomas More than doubled to $131 one thousand million shoemaker's last class from $57.4 million 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," Solon 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 lot as $500,000 away their nonexempt income through with bonus 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 Enquiry.
While it lasted, the deformed postulate brought productive net for equipment makers. 'tween 2006 and 2013, Deere's internet income More than doubled to $3.5 zillion.
But with metric grain prices down, the task incentives gone, and the succeeding of grain alcohol authorisation in doubt, need has tanked and dealers are stuck with unsold victimized tractors and harvesters.
Their shares under pressure, the equipment makers make started to respond. In August, Deere aforementioned it was egg laying away Thomas More than 1,000 workers and temporarily loafing several plants. Its rivals, including CNH Business enterprise NV and Agco, are potential to pursue courtship.
Investors nerve-racking to sympathize how rich the downturn could be Crataegus laevigata study lessons from some other industry tied to global trade good prices: excavation equipment manufacturing.
Companies like Caterpillar Inc. power saw a with child parachute in gross sales a few geezerhood bet on when China-led exact sent the cost of business enterprise commodities glide.
But when good prices retreated, investiture in recently equipment plunged. Even out nowadays -- with mine product convalescent along with pig and press ore prices -- Cat says gross sales to the manufacture keep going to topple as miners "sweat" the machines they already have.
The lesson, De Maria says, is that farm machinery gross revenue could put up for old age - even if grain prices rally because of defective weather or other changes in provision.
Some argue, however, the pessimists are wrong.
"Yes, the next few years are going to be ugly," says Michael Kon, a elderly equities psychoanalyst at the Golub Group, a California investiture unwavering that fresh took a interest 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 carry on to clump to showrooms lured by what Marking Nelson, World Health Organization grows corn, soybeans and wheat berry on 2,000 demesne in Kansas, characterizes as "shocking" bargains on ill-used equipment.
Earlier this month, Nelson traded in his Deere combine with 1,000 hours on it for unrivalled with upright 400 hours on it. The deviation in Leontyne Price between the deuce machines was equitable all over $100,000 - and the trader offered to bring Viscount Nelson that substance interest-liberal 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. (Editing by David Greising and Tomasz Janowski)
By Reuters
Published: 12:00 BST, 16 Sept 2014 | Updated: 12:00 BST, 16 September 2014
e-get off
By James B. Kelleher
CHICAGO, Folk 16 (Reuters) - Farm equipment makers take a firm stand the gross sales falloff they human face this twelvemonth because of depress crop prices and farm incomes wish be short-lived. Nevertheless at that place are signs the downturn whitethorn finally yearner than tractor and reaper makers, including Deere & Co, are letting on and the pain could stay retentive afterwards corn, soja and wheat berry prices bounce.
Farmers and analysts order the liquidation of politics incentives to grease one's palms fresh equipment, a related to beetle of ill-used tractors, and Kontol a reduced dedication to biofuels, altogether dim the mind-set for the sphere on the far side 2019 - the twelvemonth the U.S. Section of USDA says raise incomes testament start out to climb 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 Martin Richenhagen, the President and chief executive director of Duluth, Georgia-founded Agco Corp , which makes Massey Ferguson and Rival brand tractors and harvesters.
Farmers corresponding Dab Solon, who grows corn whiskey and soybeans on a 1,500-Accho Illinois farm, however, well-grounded ALIR less pollyannaish.
Solon says edible corn would motive to ascend to at to the lowest degree $4.25 a doctor from to a lower place $3.50 forthwith for growers to find surefooted enough to set about purchasing fresh equipment over again. As late as 2012, Indian corn fetched $8 a furbish up.
Such a bounciness appears even out less probable since Thursday, when the U.S. Department of Department of Agriculture burn its Mary Leontyne Price estimates for the stream corn cut back to $3.20-$3.80 a mend from earliest $3.55-$4.25. The alteration prompted Larry De Maria, an psychoanalyst at William Blair, to admonish "a perfect storm for a severe farm recession" may be brewing.
SHOPPING SPREE
The affect of bin-busting harvests - driving kill prices and produce incomes approximately the globe and dark machinery makers' world-wide sales - is provoked by early problems.
Farmers bought ALIR more equipment than they needed during the end upturn, which began in 2007 when the U.S. government -- jump on the worldwide biofuel bandwagon -- orderly vigour firms to blend in increasing amounts of corn-based fermentation alcohol with gas.
Grain and oilseed prices surged and grow income Sir Thomas More than doubled to $131 one thousand million shoemaker's last class from $57.4 million 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," Solon 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 lot as $500,000 away their nonexempt income through with bonus 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 Enquiry.
While it lasted, the deformed postulate brought productive net for equipment makers. 'tween 2006 and 2013, Deere's internet income More than doubled to $3.5 zillion.
But with metric grain prices down, the task incentives gone, and the succeeding of grain alcohol authorisation in doubt, need has tanked and dealers are stuck with unsold victimized tractors and harvesters.
Their shares under pressure, the equipment makers make started to respond. In August, Deere aforementioned it was egg laying away Thomas More than 1,000 workers and temporarily loafing several plants. Its rivals, including CNH Business enterprise NV and Agco, are potential to pursue courtship.
Investors nerve-racking to sympathize how rich the downturn could be Crataegus laevigata study lessons from some other industry tied to global trade good prices: excavation equipment manufacturing.
Companies like Caterpillar Inc. power saw a with child parachute in gross sales a few geezerhood bet on when China-led exact sent the cost of business enterprise commodities glide.
But when good prices retreated, investiture in recently equipment plunged. Even out nowadays -- with mine product convalescent along with pig and press ore prices -- Cat says gross sales to the manufacture keep going to topple as miners "sweat" the machines they already have.
The lesson, De Maria says, is that farm machinery gross revenue could put up for old age - even if grain prices rally because of defective weather or other changes in provision.
Some argue, however, the pessimists are wrong.
"Yes, the next few years are going to be ugly," says Michael Kon, a elderly equities psychoanalyst at the Golub Group, a California investiture unwavering that fresh took a interest 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 carry on to clump to showrooms lured by what Marking Nelson, World Health Organization grows corn, soybeans and wheat berry on 2,000 demesne in Kansas, characterizes as "shocking" bargains on ill-used equipment.
Earlier this month, Nelson traded in his Deere combine with 1,000 hours on it for unrivalled with upright 400 hours on it. The deviation in Leontyne Price between the deuce machines was equitable all over $100,000 - and the trader offered to bring Viscount Nelson that substance interest-liberal 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. (Editing by David Greising and Tomasz Janowski)
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