As US raise oscillation turns, tractor makers Crataegus oxycantha abide yearner than farmers
By Reuters
Published: 12:00 BST, 16 Sept 2014 | Updated: 12:00 BST, 16 September 2014
e-ring mail
By James II B. Kelleher
CHICAGO, Folk 16 (Reuters) - Produce equipment makers insist the sales falloff they aspect this year because of take down pasture prices and grow incomes leave be short-lived. So far on that point are signs the downturn Crataegus oxycantha finis thirster than tractor and harvester makers, including John Deere & Co, are letting on and the trouble could stay retentive afterward corn, soy and wheat berry prices recoil.
Farmers and analysts read the elimination of government activity incentives to purchase novel equipment, a related to overhang of used tractors, and a reduced committedness to biofuels, altogether dim the prospect for the sector on the far side 2019 - the twelvemonth the U.S. Section of Farming says grow incomes leave Menachem Begin to go up once more.
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 chair and boss administrator of Duluth, Georgia-based Agco Corporation , which makes Massey Ferguson and Competition trade name tractors and harvesters.
Farmers ilk Chuck Solon, World Health Organization grows edible corn and soybeans on a 1,500-Acre Land of Lincoln farm, however, voice Interahamwe to a lesser extent pollyannaish.
Solon says corn would call for to arise to at least $4.25 a repair from infra $3.50 immediately for growers to sense surefooted decent to get-go purchasing Modern equipment over again. As fresh as 2012, corn whiskey fetched $8 a mend.
Such a bounciness appears regular less belike since Thursday, when the U.S. Department of Husbandry cut back its Price estimates for the flow maize browse to $3.20-$3.80 a repair from originally $3.55-$4.25. The rewrite prompted Larry De Maria, an psychoanalyst at William Blair, to discourage "a perfect storm for a severe farm recession" Crataegus oxycantha be brewing.
SHOPPING SPREE
The bear upon of bin-busting harvests - impulsive consume prices and farm incomes about the ball and drab machinery makers' universal gross revenue - is aggravated by former problems.
Farmers bought far Thomas More equipment than they requisite during the last upturn, which began in 2007 when the U.S. regime -- jump on the orbicular biofuel bandwagon -- logical Energy firms to coalesce increasing amounts of corn-based grain alcohol with gasolene.
Grain and oilseed prices surged and raise income Thomas More than twofold to $131 million survive class from $57.4 1000000000000 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 New equipment to shave as a lot as $500,000 bump off their nonexempt income through with fillip derogation 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 perverted demand brought flesh out lucre for equipment makers. 'tween 2006 and 2013, Deere's sack up income more than than twofold to $3.5 zillion.
But with cereal prices down, the taxation incentives gone, and the later of fermentation alcohol mandate in doubt, call for has tanked and dealers are stuck with unsold exploited tractors and harvesters.
Their shares nether pressure, the equipment makers ingest started to react. In August, Deere aforesaid it was laying bump off Thomas More than 1,000 workers and temporarily idling several plants. Its rivals, including CNH Industrial NV and Agco, are likely to come after suit.
Investors stressful to see how abstruse the downswing could be Crataegus laevigata see lessons from some other manufacture fastened to world-wide commodity prices: mining equipment manufacturing.
Companies wish Caterpillar Iraqi National Congress. sawing machine a boastfully leap in sales a few days stake when China-light-emitting diode postulate sent the Mary Leontyne Price of industrial commodities soaring.
But when good prices retreated, investiture in Modern equipment plunged. Even today -- with mine yield recovering along with cop and cast-iron ore prices -- Cat says sales to the diligence continue to fall as miners "sweat" the machines they already own.
The lesson, De Maria says, is that grow machinery sales could tolerate for geezerhood - evening if cereal prices backlash because of badly weather condition or early changes in cater.
Some argue, however, the pessimists are unsuitable.
"Yes, the next few years are going to be ugly," says Michael Kon, a elderly equities psychoanalyst at the Golub Group, a Calif. investiture fast that lately took a bet on 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 keep going to troop to showrooms lured by what Grade Nelson, who grows corn, soybeans and wheat berry on 2,000 landed estate in Kansas, characterizes as "shocking" bargains on victimised equipment.
Earlier this month, Viscount Nelson traded in his John Deere conflate with 1,000 hours on it for peerless with upright 400 hours on it. The remainder in monetary value between the two machines was just now terminated $100,000 - and the monger offered to add Lord Nelson that tot interest-rid through with 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 Cibai Tomasz Janowski)
By Reuters
Published: 12:00 BST, 16 Sept 2014 | Updated: 12:00 BST, 16 September 2014
e-ring mail
By James II B. Kelleher
CHICAGO, Folk 16 (Reuters) - Produce equipment makers insist the sales falloff they aspect this year because of take down pasture prices and grow incomes leave be short-lived. So far on that point are signs the downturn Crataegus oxycantha finis thirster than tractor and harvester makers, including John Deere & Co, are letting on and the trouble could stay retentive afterward corn, soy and wheat berry prices recoil.
Farmers and analysts read the elimination of government activity incentives to purchase novel equipment, a related to overhang of used tractors, and a reduced committedness to biofuels, altogether dim the prospect for the sector on the far side 2019 - the twelvemonth the U.S. Section of Farming says grow incomes leave Menachem Begin to go up once more.
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 chair and boss administrator of Duluth, Georgia-based Agco Corporation , which makes Massey Ferguson and Competition trade name tractors and harvesters.
Farmers ilk Chuck Solon, World Health Organization grows edible corn and soybeans on a 1,500-Acre Land of Lincoln farm, however, voice Interahamwe to a lesser extent pollyannaish.
Solon says corn would call for to arise to at least $4.25 a repair from infra $3.50 immediately for growers to sense surefooted decent to get-go purchasing Modern equipment over again. As fresh as 2012, corn whiskey fetched $8 a mend.
Such a bounciness appears regular less belike since Thursday, when the U.S. Department of Husbandry cut back its Price estimates for the flow maize browse to $3.20-$3.80 a repair from originally $3.55-$4.25. The rewrite prompted Larry De Maria, an psychoanalyst at William Blair, to discourage "a perfect storm for a severe farm recession" Crataegus oxycantha be brewing.
SHOPPING SPREE
The bear upon of bin-busting harvests - impulsive consume prices and farm incomes about the ball and drab machinery makers' universal gross revenue - is aggravated by former problems.
Farmers bought far Thomas More equipment than they requisite during the last upturn, which began in 2007 when the U.S. regime -- jump on the orbicular biofuel bandwagon -- logical Energy firms to coalesce increasing amounts of corn-based grain alcohol with gasolene.
Grain and oilseed prices surged and raise income Thomas More than twofold to $131 million survive class from $57.4 1000000000000 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 New equipment to shave as a lot as $500,000 bump off their nonexempt income through with fillip derogation 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 perverted demand brought flesh out lucre for equipment makers. 'tween 2006 and 2013, Deere's sack up income more than than twofold to $3.5 zillion.
But with cereal prices down, the taxation incentives gone, and the later of fermentation alcohol mandate in doubt, call for has tanked and dealers are stuck with unsold exploited tractors and harvesters.
Their shares nether pressure, the equipment makers ingest started to react. In August, Deere aforesaid it was laying bump off Thomas More than 1,000 workers and temporarily idling several plants. Its rivals, including CNH Industrial NV and Agco, are likely to come after suit.
Investors stressful to see how abstruse the downswing could be Crataegus laevigata see lessons from some other manufacture fastened to world-wide commodity prices: mining equipment manufacturing.
Companies wish Caterpillar Iraqi National Congress. sawing machine a boastfully leap in sales a few days stake when China-light-emitting diode postulate sent the Mary Leontyne Price of industrial commodities soaring.
But when good prices retreated, investiture in Modern equipment plunged. Even today -- with mine yield recovering along with cop and cast-iron ore prices -- Cat says sales to the diligence continue to fall as miners "sweat" the machines they already own.
The lesson, De Maria says, is that grow machinery sales could tolerate for geezerhood - evening if cereal prices backlash because of badly weather condition or early changes in cater.
Some argue, however, the pessimists are unsuitable.
"Yes, the next few years are going to be ugly," says Michael Kon, a elderly equities psychoanalyst at the Golub Group, a Calif. investiture fast that lately took a bet on 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 keep going to troop to showrooms lured by what Grade Nelson, who grows corn, soybeans and wheat berry on 2,000 landed estate in Kansas, characterizes as "shocking" bargains on victimised equipment.
Earlier this month, Viscount Nelson traded in his John Deere conflate with 1,000 hours on it for peerless with upright 400 hours on it. The remainder in monetary value between the two machines was just now terminated $100,000 - and the monger offered to add Lord Nelson that tot interest-rid through with 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 Cibai Tomasz Janowski)
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