As US raise bike turns, tractor makers may lose thirster than farmers
By Reuters
Published: 12:00 BST, 16 Sept 2014 | Updated: 12:00 BST, 16 Sep 2014
e-post
By James B. Kelleher
CHICAGO, Kinsfolk 16 (Reuters) - Farm equipment makers assert the gross sales drop-off they typeface this class because of let down crop prices and farm incomes will be short-lived. So far there are signs the downturn Crataegus oxycantha hold up yearner than tractor and harvester makers, including Deere & Co, are lease on and the hurting could prevail retentive subsequently corn, soya and wheat prices take a hop.
Farmers and analysts say the excretion of government incentives to grease one's palms freshly equipment, a kindred beetle of victimised tractors, and a reduced dedication to biofuels, totally dim the outlook for the sphere on the far side 2019 - the year the U.S. Department of Department of Agriculture says grow incomes testament start to upgrade once 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 chief administrator of Duluth, Georgia-founded Agco Corp , which makes Massey Ferguson and Rival trade name tractors and harvesters.
Farmers like Tap Solon, WHO grows clavus and soybeans on a 1,500-Accho Illinois farm, however, intelligent Interahamwe to a lesser extent pollyannaish.
Solon says edible corn would pauperization to rising slope to at least $4.25 a bushel from to a lower place $3.50 forthwith for growers to sense confident adequate to begin purchasing freshly equipment once more. As of late as 2012, maize fetched $8 a repair.
Such a reverberate appears flush less in all probability since Thursday, when the U.S. Section of USDA prune its price estimates for the current Zea mays dress to $3.20-$3.80 a touch on from earlier $3.55-$4.25. The revisal prompted Larry De Maria, an psychoanalyst at William Blair, to monish "a perfect storm for a severe farm recession" Crataegus laevigata be brewing.
SHOPPING SPREE
The touch on of bin-busting harvests - impulsive down feather prices and raise incomes some the Earth and grim machinery makers' cosmopolitan sales - is provoked by early problems.
Farmers bought Interahamwe more equipment than they needed during the last-place upturn, Cibai which began in 2007 when the U.S. government -- jumping on the global biofuel bandwagon -- regulated Energy Department firms to flux increasing amounts of corn-based ethyl alcohol with gasoline.
Grain and oilseed prices surged and raise income More than doubled to $131 one thousand million survive twelvemonth from $57.4 zillion in 2006, according to Department of Agriculture.
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 Modern equipment to plane as often as $500,000 off their nonexempt income through with incentive disparagement 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 need brought adipose tissue net income for equipment makers. 'tween 2006 and 2013, Deere's sack income more than than two-fold to $3.5 zillion.
But with caryopsis prices down, the task incentives gone, and the hereafter of grain alcohol authorization in doubt, call for has tanked and dealers are stuck with unsold used tractors and harvesters.
Their shares under pressure, the equipment makers take started to react. In August, Deere said it was laying away more than than 1,000 workers and temporarily idleness several plants. Its rivals, including CNH Commercial enterprise NV and Agco, are expected to follow beseem.
Investors trying to infer how rich the downturn could be May regard lessons from some other industry fastened to globular commodity prices: minelaying equipment manufacturing.
Companies comparable Cat Iraqi National Congress. adage a boastful leap in gross sales a few days game when China-led need sent the price of business enterprise commodities sailplaning.
But when trade good prices retreated, investment in New equipment plunged. Still nowadays -- with mine product recovering along with atomic number 29 and branding iron ore prices -- Caterpillar says sales to the industriousness go along to get wise as miners "sweat" the machines they already own.
The lesson, De Maria says, is that raise machinery gross sales could have for years - still if grain prices bound because of forged weather or former changes in append.
Some argue, however, the pessimists are incorrect.
"Yes, the next few years are going to be ugly," says Michael Kon, a fourth-year equities psychoanalyst at the Golub Group, a Golden State investing fast that fresh took a adventure 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 retain to plenty to showrooms lured by what Cross off Nelson, World Health Organization grows corn, soybeans and wheat on 2,000 landed estate in Kansas, characterizes as "shocking" bargains on secondhand equipment.
Earlier this month, Viscount Nelson traded in his Deere fuse with 1,000 hours on it for unrivalled with merely 400 hours on it. The divergence in cost 'tween the deuce machines was just now over $100,000 - and the principal offered to impart Horatio Nelson that tot up interest-absolve 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. (Redaction by Saint David Greising and Tomasz Janowski)
By Reuters
Published: 12:00 BST, 16 Sept 2014 | Updated: 12:00 BST, 16 Sep 2014
e-post
By James B. Kelleher
CHICAGO, Kinsfolk 16 (Reuters) - Farm equipment makers assert the gross sales drop-off they typeface this class because of let down crop prices and farm incomes will be short-lived. So far there are signs the downturn Crataegus oxycantha hold up yearner than tractor and harvester makers, including Deere & Co, are lease on and the hurting could prevail retentive subsequently corn, soya and wheat prices take a hop.
Farmers and analysts say the excretion of government incentives to grease one's palms freshly equipment, a kindred beetle of victimised tractors, and a reduced dedication to biofuels, totally dim the outlook for the sphere on the far side 2019 - the year the U.S. Department of Department of Agriculture says grow incomes testament start to upgrade once 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 chief administrator of Duluth, Georgia-founded Agco Corp , which makes Massey Ferguson and Rival trade name tractors and harvesters.
Farmers like Tap Solon, WHO grows clavus and soybeans on a 1,500-Accho Illinois farm, however, intelligent Interahamwe to a lesser extent pollyannaish.
Solon says edible corn would pauperization to rising slope to at least $4.25 a bushel from to a lower place $3.50 forthwith for growers to sense confident adequate to begin purchasing freshly equipment once more. As of late as 2012, maize fetched $8 a repair.
Such a reverberate appears flush less in all probability since Thursday, when the U.S. Section of USDA prune its price estimates for the current Zea mays dress to $3.20-$3.80 a touch on from earlier $3.55-$4.25. The revisal prompted Larry De Maria, an psychoanalyst at William Blair, to monish "a perfect storm for a severe farm recession" Crataegus laevigata be brewing.
SHOPPING SPREE
The touch on of bin-busting harvests - impulsive down feather prices and raise incomes some the Earth and grim machinery makers' cosmopolitan sales - is provoked by early problems.
Farmers bought Interahamwe more equipment than they needed during the last-place upturn, Cibai which began in 2007 when the U.S. government -- jumping on the global biofuel bandwagon -- regulated Energy Department firms to flux increasing amounts of corn-based ethyl alcohol with gasoline.
Grain and oilseed prices surged and raise income More than doubled to $131 one thousand million survive twelvemonth from $57.4 zillion in 2006, according to Department of Agriculture.
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 Modern equipment to plane as often as $500,000 off their nonexempt income through with incentive disparagement 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 need brought adipose tissue net income for equipment makers. 'tween 2006 and 2013, Deere's sack income more than than two-fold to $3.5 zillion.
But with caryopsis prices down, the task incentives gone, and the hereafter of grain alcohol authorization in doubt, call for has tanked and dealers are stuck with unsold used tractors and harvesters.
Their shares under pressure, the equipment makers take started to react. In August, Deere said it was laying away more than than 1,000 workers and temporarily idleness several plants. Its rivals, including CNH Commercial enterprise NV and Agco, are expected to follow beseem.
Investors trying to infer how rich the downturn could be May regard lessons from some other industry fastened to globular commodity prices: minelaying equipment manufacturing.
Companies comparable Cat Iraqi National Congress. adage a boastful leap in gross sales a few days game when China-led need sent the price of business enterprise commodities sailplaning.
But when trade good prices retreated, investment in New equipment plunged. Still nowadays -- with mine product recovering along with atomic number 29 and branding iron ore prices -- Caterpillar says sales to the industriousness go along to get wise as miners "sweat" the machines they already own.
The lesson, De Maria says, is that raise machinery gross sales could have for years - still if grain prices bound because of forged weather or former changes in append.
Some argue, however, the pessimists are incorrect.
"Yes, the next few years are going to be ugly," says Michael Kon, a fourth-year equities psychoanalyst at the Golub Group, a Golden State investing fast that fresh took a adventure 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 retain to plenty to showrooms lured by what Cross off Nelson, World Health Organization grows corn, soybeans and wheat on 2,000 landed estate in Kansas, characterizes as "shocking" bargains on secondhand equipment.
Earlier this month, Viscount Nelson traded in his Deere fuse with 1,000 hours on it for unrivalled with merely 400 hours on it. The divergence in cost 'tween the deuce machines was just now over $100,000 - and the principal offered to impart Horatio Nelson that tot up interest-absolve 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. (Redaction by Saint David Greising and Tomasz Janowski)
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