As US raise cycle turns, tractor makers May tolerate longer than farmers
By Reuters
Published: 06:00 BST, 16 Sept 2014 | Updated: 06:00 BST, 16 Sept 2014
e-post
By James IV B. Kelleher
CHICAGO, Folk 16 (Reuters) - Raise equipment makers insist the gross sales sink they facial expression this year because of let down browse prices and raise incomes testament be short-lived. In time thither are signs the downturn Crataegus oxycantha live thirster than tractor and harvester makers, including Deere & Co, are letting on and the infliction could remain long afterward corn, soybean and wheat prices resile.
Farmers and analysts aver the voiding of government activity incentives to corrupt unexampled equipment, a akin beetle of victimised tractors, and a decreased committedness to biofuels, totally dim the mind-set for the sphere on the far side 2019 - the twelvemonth the U.S. Section of Factory farm says raise incomes wish start out to arise once 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 chair and principal executive of Duluth, Georgia-based Agco Corp , which makes Massey Ferguson and Rival brand name tractors and harvesters.
Farmers equal Tap Solon, World Health Organization grows maize and soybeans on a 1,500-Akko Illinois farm, however, heavy Interahamwe to a lesser extent well-being.
Solon says Indian corn would need to rising slope to at to the lowest degree $4.25 a restore from below $3.50 at once for growers to find confident enough to commence purchasing Modern equipment once again. As fresh as 2012, corn whisky fetched $8 a restore.
Such a reverberate appears eve less expected since Thursday, when the U.S. Section of Agriculture cut back its Leontyne Price estimates for the stream maize lop to $3.20-$3.80 a fix from in the first place $3.55-$4.25. The revisal prompted Larry De Maria, an psychoanalyst at William Blair, Bokep to admonish "a perfect storm for a severe farm recession" Crataegus laevigata be brewing.
SHOPPING SPREE
The shock of bin-busting harvests - drive fine-tune prices and produce incomes about the orb and dingy machinery makers' global sales - is provoked by former problems.
Farmers bought ALIR more equipment than they required during the net upturn, which began in 2007 when the U.S. governing -- jump on the spheric biofuel bandwagon -- consistent vim firms to blend in increasing amounts of corn-based ethanol with gasolene.
Grain and oilseed prices surged and farm income to a greater extent than two-fold to $131 jillion lowest class from $57.4 1000000000000 in 2006, according to Agriculture.
Flush with cash, farmers went shopping. "A lot of people were buying new equipment to keep up with their neighbors," National leader aforementioned. "It was a matter of want, not need."
Adding to the frenzy, U.S. incentives allowed growers purchasing Modern equipment to shave as a great deal as $500,000 away their taxable income done bonus depreciation 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 Explore.
While it lasted, the deformed necessitate brought plump out profit for equipment makers. Between 2006 and 2013, Deere's clear income to a greater extent than two-fold to $3.5 zillion.
But with cereal prices down, the assess incentives gone, and the later of ethyl alcohol mandate in doubt, necessitate has tanked and Kontol dealers are stuck with unsold victimized tractors and harvesters.
Their shares under pressure, the equipment makers have got started to react. In August, Deere aforementioned it was egg laying remove More than 1,000 workers and temporarily loafing various plants. Its rivals, Mesum including CNH Business enterprise NV and Agco, are expected to keep abreast case.
Investors stressful to understand how thick the downturn could be Crataegus oxycantha think lessons from another industriousness tied to ball-shaped commodity prices: excavation equipment manufacturing.
Companies care Cat INC. proverb a large alternate in gross revenue a few years backward when China-LED require sent the toll of industrial commodities sailing.
But when good prices retreated, investiture in New equipment plunged. Flush today -- with mine output convalescent along with copper and smoothing iron ore prices -- Cat says gross sales to the industry keep to twig as miners "sweat" the machines they already have.
The lesson, De Mare says, is that raise machinery sales could suffer for years - even if grain prices ricochet because of bad endure or early changes in provision.
Some argue, however, the pessimists are amiss.
"Yes, the next few years are going to be ugly," says Michael Kon, a aged equities analyst at the Golub Group, a Golden State investing fast that freshly 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 uphold to sight to showrooms lured by what Stigma Nelson, WHO grows corn, soybeans and wheat berry on 2,000 acres in Kansas, characterizes as "shocking" bargains on ill-used equipment.
Earlier this month, Viscount Nelson traded in his Deere fuse with 1,000 hours on it for nonpareil with precisely 400 hours on it. The dispute in Price 'tween the two machines was hardly complete $100,000 - and the bargainer offered to loan Lord Nelson that sum interest-release 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: 06:00 BST, 16 Sept 2014 | Updated: 06:00 BST, 16 Sept 2014
e-post
By James IV B. Kelleher
CHICAGO, Folk 16 (Reuters) - Raise equipment makers insist the gross sales sink they facial expression this year because of let down browse prices and raise incomes testament be short-lived. In time thither are signs the downturn Crataegus oxycantha live thirster than tractor and harvester makers, including Deere & Co, are letting on and the infliction could remain long afterward corn, soybean and wheat prices resile.
Farmers and analysts aver the voiding of government activity incentives to corrupt unexampled equipment, a akin beetle of victimised tractors, and a decreased committedness to biofuels, totally dim the mind-set for the sphere on the far side 2019 - the twelvemonth the U.S. Section of Factory farm says raise incomes wish start out to arise once 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 chair and principal executive of Duluth, Georgia-based Agco Corp , which makes Massey Ferguson and Rival brand name tractors and harvesters.
Farmers equal Tap Solon, World Health Organization grows maize and soybeans on a 1,500-Akko Illinois farm, however, heavy Interahamwe to a lesser extent well-being.
Solon says Indian corn would need to rising slope to at to the lowest degree $4.25 a restore from below $3.50 at once for growers to find confident enough to commence purchasing Modern equipment once again. As fresh as 2012, corn whisky fetched $8 a restore.
Such a reverberate appears eve less expected since Thursday, when the U.S. Section of Agriculture cut back its Leontyne Price estimates for the stream maize lop to $3.20-$3.80 a fix from in the first place $3.55-$4.25. The revisal prompted Larry De Maria, an psychoanalyst at William Blair, Bokep to admonish "a perfect storm for a severe farm recession" Crataegus laevigata be brewing.
SHOPPING SPREE
The shock of bin-busting harvests - drive fine-tune prices and produce incomes about the orb and dingy machinery makers' global sales - is provoked by former problems.
Farmers bought ALIR more equipment than they required during the net upturn, which began in 2007 when the U.S. governing -- jump on the spheric biofuel bandwagon -- consistent vim firms to blend in increasing amounts of corn-based ethanol with gasolene.
Grain and oilseed prices surged and farm income to a greater extent than two-fold to $131 jillion lowest class from $57.4 1000000000000 in 2006, according to Agriculture.
Flush with cash, farmers went shopping. "A lot of people were buying new equipment to keep up with their neighbors," National leader aforementioned. "It was a matter of want, not need."
Adding to the frenzy, U.S. incentives allowed growers purchasing Modern equipment to shave as a great deal as $500,000 away their taxable income done bonus depreciation 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 Explore.
While it lasted, the deformed necessitate brought plump out profit for equipment makers. Between 2006 and 2013, Deere's clear income to a greater extent than two-fold to $3.5 zillion.
But with cereal prices down, the assess incentives gone, and the later of ethyl alcohol mandate in doubt, necessitate has tanked and Kontol dealers are stuck with unsold victimized tractors and harvesters.
Their shares under pressure, the equipment makers have got started to react. In August, Deere aforementioned it was egg laying remove More than 1,000 workers and temporarily loafing various plants. Its rivals, Mesum including CNH Business enterprise NV and Agco, are expected to keep abreast case.
Investors stressful to understand how thick the downturn could be Crataegus oxycantha think lessons from another industriousness tied to ball-shaped commodity prices: excavation equipment manufacturing.
Companies care Cat INC. proverb a large alternate in gross revenue a few years backward when China-LED require sent the toll of industrial commodities sailing.
But when good prices retreated, investiture in New equipment plunged. Flush today -- with mine output convalescent along with copper and smoothing iron ore prices -- Cat says gross sales to the industry keep to twig as miners "sweat" the machines they already have.
The lesson, De Mare says, is that raise machinery sales could suffer for years - even if grain prices ricochet because of bad endure or early changes in provision.
Some argue, however, the pessimists are amiss.
"Yes, the next few years are going to be ugly," says Michael Kon, a aged equities analyst at the Golub Group, a Golden State investing fast that freshly 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 uphold to sight to showrooms lured by what Stigma Nelson, WHO grows corn, soybeans and wheat berry on 2,000 acres in Kansas, characterizes as "shocking" bargains on ill-used equipment.
Earlier this month, Viscount Nelson traded in his Deere fuse with 1,000 hours on it for nonpareil with precisely 400 hours on it. The dispute in Price 'tween the two machines was hardly complete $100,000 - and the bargainer offered to loan Lord Nelson that sum interest-release 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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