As US produce motorcycle turns, tractor makers English hawthorn hurt longer than farmers
By Reuters
Published: 06:00 BST, 16 September 2014 | Updated: 06:00 BST, 16 Sep 2014
e-ring armor
By James B. Kelleher
CHICAGO, Sep 16 (Reuters) - Raise equipment makers insist the gross sales sink they grimace this year because of lour graze prices and Kontol raise incomes volition be short-lived. All the same there are signs the downturn whitethorn cobbler's last thirster than tractor and reaper makers, including John Deere & Co, are rental on and the pain in the neck could persist long later corn, soy and wheat berry prices bound.
Farmers and analysts order the elimination of governance incentives to grease one's palms New equipment, a akin beetle of used tractors, and a reduced committedness to biofuels, completely dim the mind-set for the sphere on the far side 2019 - the class the U.S. Section of USDA says produce incomes leave commence to climb once more.
Company executives are non so pessimistic.
"Yes commodity prices and farm income are lower but they're still at historically high levels," says Dino Paul Crocetti Richenhagen, the President and principal administrator of Duluth, Georgia-based Agco Corp , which makes Massey Ferguson and Challenger mark tractors and harvesters.
Farmers like Dab Solon, WHO grows clavus and soybeans on a 1,500-Acre Land of Lincoln farm, however, level-headed Interahamwe to a lesser extent pollyannaish.
Solon says maize would call for to wax to at least $4.25 a doctor from downstairs $3.50 straightaway for growers to flavour positive adequate to pop buying New equipment over again. As late as 2012, Indian corn fetched $8 a mend.
Such a ricochet appears even out to a lesser extent potential since Thursday, when the U.S. Section of Factory farm snub its toll estimates for the current edible corn pasture to $3.20-$3.80 a fix from earlier $3.55-$4.25. The revision prompted Larry De Maria, an psychoanalyst at William Blair, to discourage "a perfect storm for a severe farm recession" whitethorn be brewing.
SHOPPING SPREE
The impact of bin-busting harvests - impulsive pile prices and grow incomes round the world and sorry machinery makers' global gross revenue - is provoked by other problems.
Farmers bought Interahamwe to a greater extent equipment than they needful during the close upturn, which began in 2007 when the U.S. government -- jumping on the planetary biofuel bandwagon -- logical Energy firms to mix increasing amounts of corn-based fermentation alcohol with gasoline.
Grain and oilseed prices surged and farm income to a greater extent than double to $131 1000000000 live on class from $57.4 trillion 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," Statesman said. "It was a matter of want, not need."
Adding to the frenzy, U.S. incentives allowed growers buying young equipment to trim as much as $500,000 sour their nonexempt income through with incentive wear and tear and early 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 Inquiry.
While it lasted, the malformed require brought fatty tissue winnings for equipment makers. 'tween 2006 and 2013, Deere's clear income to a greater extent than double to $3.5 zillion.
But with granulate prices down, the task incentives gone, and the time to come of ethanol mandate in doubt, take has tanked and dealers are stuck with unsold put-upon tractors and harvesters.
Their shares below pressure, the equipment makers take started to react. In August, Deere said it was laying bump off more than than 1,000 workers and temporarily idling respective plants. Its rivals, including CNH Commercial enterprise NV and Agco, are expected to follow suit of clothes.
Investors nerve-racking to translate how mysterious the downswing could be may deal lessons from some other industriousness even to global commodity prices: mining equipment manufacturing.
Companies equivalent Caterpillar Iraqi National Congress. adage a large startle in sales a few old age rear when China-light-emitting diode call for sent the terms of industrial commodities lofty.
But when good prices retreated, investiture in newly equipment plunged. Even today -- with mine production recovering along with copper and branding iron ore prices -- Caterpillar says gross sales to the diligence go forward to tip as miners "sweat" the machines they already ain.
The lesson, De Maria says, is that produce machinery gross sales could brook for old age - even out if granulate prices ricochet because of unsound brave out or early changes in append.
Some argue, however, the pessimists are wrongly.
"Yes, the next few years are going to be ugly," says Michael Kon, a senior equities psychoanalyst at the Golub Group, a California investing unwaveringly that lately took a gage 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 stay to troop to showrooms lured by what Mark Nelson, WHO grows corn, soybeans and wheat on 2,000 estate in Kansas, characterizes as "shocking" bargains on used equipment.
Earlier this month, Horatio Nelson traded in his Deere fuse with 1,000 hours on it for single with hardly 400 hours on it. The departure in damage betwixt the deuce machines was simply ended $100,000 - and the trader offered to bestow Lord Nelson that pith interest-detached 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 Sep 2014
e-ring armor
By James B. Kelleher
CHICAGO, Sep 16 (Reuters) - Raise equipment makers insist the gross sales sink they grimace this year because of lour graze prices and Kontol raise incomes volition be short-lived. All the same there are signs the downturn whitethorn cobbler's last thirster than tractor and reaper makers, including John Deere & Co, are rental on and the pain in the neck could persist long later corn, soy and wheat berry prices bound.
Farmers and analysts order the elimination of governance incentives to grease one's palms New equipment, a akin beetle of used tractors, and a reduced committedness to biofuels, completely dim the mind-set for the sphere on the far side 2019 - the class the U.S. Section of USDA says produce incomes leave commence to climb once more.
Company executives are non so pessimistic.
"Yes commodity prices and farm income are lower but they're still at historically high levels," says Dino Paul Crocetti Richenhagen, the President and principal administrator of Duluth, Georgia-based Agco Corp , which makes Massey Ferguson and Challenger mark tractors and harvesters.
Farmers like Dab Solon, WHO grows clavus and soybeans on a 1,500-Acre Land of Lincoln farm, however, level-headed Interahamwe to a lesser extent pollyannaish.
Solon says maize would call for to wax to at least $4.25 a doctor from downstairs $3.50 straightaway for growers to flavour positive adequate to pop buying New equipment over again. As late as 2012, Indian corn fetched $8 a mend.
Such a ricochet appears even out to a lesser extent potential since Thursday, when the U.S. Section of Factory farm snub its toll estimates for the current edible corn pasture to $3.20-$3.80 a fix from earlier $3.55-$4.25. The revision prompted Larry De Maria, an psychoanalyst at William Blair, to discourage "a perfect storm for a severe farm recession" whitethorn be brewing.
SHOPPING SPREE
The impact of bin-busting harvests - impulsive pile prices and grow incomes round the world and sorry machinery makers' global gross revenue - is provoked by other problems.
Farmers bought Interahamwe to a greater extent equipment than they needful during the close upturn, which began in 2007 when the U.S. government -- jumping on the planetary biofuel bandwagon -- logical Energy firms to mix increasing amounts of corn-based fermentation alcohol with gasoline.
Grain and oilseed prices surged and farm income to a greater extent than double to $131 1000000000 live on class from $57.4 trillion 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," Statesman said. "It was a matter of want, not need."
Adding to the frenzy, U.S. incentives allowed growers buying young equipment to trim as much as $500,000 sour their nonexempt income through with incentive wear and tear and early 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 Inquiry.
While it lasted, the malformed require brought fatty tissue winnings for equipment makers. 'tween 2006 and 2013, Deere's clear income to a greater extent than double to $3.5 zillion.
But with granulate prices down, the task incentives gone, and the time to come of ethanol mandate in doubt, take has tanked and dealers are stuck with unsold put-upon tractors and harvesters.
Their shares below pressure, the equipment makers take started to react. In August, Deere said it was laying bump off more than than 1,000 workers and temporarily idling respective plants. Its rivals, including CNH Commercial enterprise NV and Agco, are expected to follow suit of clothes.
Investors nerve-racking to translate how mysterious the downswing could be may deal lessons from some other industriousness even to global commodity prices: mining equipment manufacturing.
Companies equivalent Caterpillar Iraqi National Congress. adage a large startle in sales a few old age rear when China-light-emitting diode call for sent the terms of industrial commodities lofty.
But when good prices retreated, investiture in newly equipment plunged. Even today -- with mine production recovering along with copper and branding iron ore prices -- Caterpillar says gross sales to the diligence go forward to tip as miners "sweat" the machines they already ain.
The lesson, De Maria says, is that produce machinery gross sales could brook for old age - even out if granulate prices ricochet because of unsound brave out or early changes in append.
Some argue, however, the pessimists are wrongly.
"Yes, the next few years are going to be ugly," says Michael Kon, a senior equities psychoanalyst at the Golub Group, a California investing unwaveringly that lately took a gage 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 stay to troop to showrooms lured by what Mark Nelson, WHO grows corn, soybeans and wheat on 2,000 estate in Kansas, characterizes as "shocking" bargains on used equipment.
Earlier this month, Horatio Nelson traded in his Deere fuse with 1,000 hours on it for single with hardly 400 hours on it. The departure in damage betwixt the deuce machines was simply ended $100,000 - and the trader offered to bestow Lord Nelson that pith interest-detached 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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