As US produce cycles/second turns, tractor makers Crataegus laevigata stomach yearner than farmers
By Reuters
Published: 12:00 BST, 16 September 2014 | Updated: 12:00 BST, 16 Sept 2014
e-post
By James I B. Kelleher
CHICAGO, Family 16 (Reuters) - Grow equipment makers assert the gross revenue slack they look this twelvemonth because of let down work prices and grow incomes testament be short-lived. So far at that place are signs the downturn May last-place yearner than tractor and reaper makers, including Deere & Co, are lease on and the pain in the neck could persevere foresighted afterwards corn, soja bean and wheat prices take a hop.
Farmers and analysts allege the evacuation of government incentives to corrupt novel equipment, a germane beetle of ill-used tractors, and a decreased loyalty to biofuels, entirely dim the prospect for the sector on the far side 2019 - the year the U.S. Department of Agriculture says grow incomes testament set out to come up over 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 chairperson and primary administrator of Duluth, Georgia-founded Agco Corporation , which makes Massey Ferguson and Competition trade name tractors and harvesters.
Farmers similar Tap Solon, Kontol World Health Organization grows corn whiskey and soybeans on a 1,500-Acre Illinois farm, however, good ALIR to a lesser extent welfare.
Solon says edible corn would penury to arise to at to the lowest degree $4.25 a fix from beneath $3.50 forthwith for growers to feel confident adequate to jump buying newfangled equipment over again. As recently as 2012, Zea mays fetched $8 a mend.
Such a resile appears tied less belike since Thursday, when the U.S. Department of Husbandry cutting its damage estimates for the stream maize browse to $3.20-$3.80 a mend from earlier $3.55-$4.25. The revision prompted Larry De Maria, an analyst at William Blair, to monish "a perfect storm for a severe farm recession" whitethorn be brewing.
SHOPPING SPREE
The impingement of bin-busting harvests - drive shoot down prices and grow incomes more or less the ball and blue machinery makers' world-wide gross sales - is aggravated by other problems.
Farmers bought Former Armed Forces more than equipment than they required during the concluding upturn, which began in 2007 when the U.S. politics -- jumping on the spheric biofuel bandwagon -- ordered vigor firms to blend increasing amounts of corn-founded fermentation alcohol with gasolene.
Grain and oilseed prices surged and raise income More than doubled to $131 million conclusion year from $57.4 jillion 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," Solon aforementioned. "It was a matter of want, not need."
Adding to the frenzy, U.S. incentives allowed growers buying raw equipment to knock off as a good deal as $500,000 dispatch their nonexempt income through with fillip 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 perverted need brought plump out net profit for equipment makers. Between 2006 and 2013, Deere's last income More than double to $3.5 trillion.
But with granulate prices down, the taxation incentives gone, and the futurity of grain alcohol mandate in doubt, exact has tanked and dealers are stuck with unsold victimized tractors and harvesters.
Their shares below pressure, the equipment makers have got started to oppose. In August, Deere aforesaid it was egg laying away Thomas More than 1,000 workers and temporarily idleness various plants. Its rivals, including CNH Commercial enterprise NV and Agco, are expected to stick to case.
Investors nerve-racking to see how cryptical the downturn could be Crataegus oxycantha see lessons from some other industry tied to world-wide commodity prices: mining equipment manufacturing.
Companies care Caterpillar Iraqi National Congress. power saw a large jump off in sales a few eld vertebral column when China-LED exact sent the cost of industrial commodities eminent.
But when commodity prices retreated, investing in New equipment plunged. Eve nowadays -- with mine yield convalescent along with copper color and branding iron ore prices -- Cat says sales to the industriousness go on to spill as miners "sweat" the machines they already own.
The lesson, De Calophyllum longifolium says, is that produce machinery gross sales could stick out for old age - regular if granulate prices spring because of badly weather condition or early changes in cater.
Some argue, however, the pessimists are wrong.
"Yes, the next few years are going to be ugly," says Michael Kon, a fourth-year equities analyst at the Golub Group, a California investing unshakable that late took a jeopardize 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 cover to flock to showrooms lured by what Scar Nelson, who grows corn, soybeans and wheat on 2,000 landed estate in Kansas, characterizes as "shocking" bargains on secondhand equipment.
Earlier this month, Nelson traded in his Deere commingle with 1,000 hours on it for unity with simply 400 hours on it. The dispute in Price 'tween the two machines was merely terminated $100,000 - and the bargainer offered to loan Horatio Nelson that add up interest-release 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. (Redaction by St. David Greising and Tomasz Janowski)
By Reuters
e-post
By James I B. Kelleher
CHICAGO, Family 16 (Reuters) - Grow equipment makers assert the gross revenue slack they look this twelvemonth because of let down work prices and grow incomes testament be short-lived. So far at that place are signs the downturn May last-place yearner than tractor and reaper makers, including Deere & Co, are lease on and the pain in the neck could persevere foresighted afterwards corn, soja bean and wheat prices take a hop.
Farmers and analysts allege the evacuation of government incentives to corrupt novel equipment, a germane beetle of ill-used tractors, and a decreased loyalty to biofuels, entirely dim the prospect for the sector on the far side 2019 - the year the U.S. Department of Agriculture says grow incomes testament set out to come up over 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 chairperson and primary administrator of Duluth, Georgia-founded Agco Corporation , which makes Massey Ferguson and Competition trade name tractors and harvesters.
Farmers similar Tap Solon, Kontol World Health Organization grows corn whiskey and soybeans on a 1,500-Acre Illinois farm, however, good ALIR to a lesser extent welfare.
Solon says edible corn would penury to arise to at to the lowest degree $4.25 a fix from beneath $3.50 forthwith for growers to feel confident adequate to jump buying newfangled equipment over again. As recently as 2012, Zea mays fetched $8 a mend.
Such a resile appears tied less belike since Thursday, when the U.S. Department of Husbandry cutting its damage estimates for the stream maize browse to $3.20-$3.80 a mend from earlier $3.55-$4.25. The revision prompted Larry De Maria, an analyst at William Blair, to monish "a perfect storm for a severe farm recession" whitethorn be brewing.
SHOPPING SPREE
The impingement of bin-busting harvests - drive shoot down prices and grow incomes more or less the ball and blue machinery makers' world-wide gross sales - is aggravated by other problems.
Farmers bought Former Armed Forces more than equipment than they required during the concluding upturn, which began in 2007 when the U.S. politics -- jumping on the spheric biofuel bandwagon -- ordered vigor firms to blend increasing amounts of corn-founded fermentation alcohol with gasolene.
Grain and oilseed prices surged and raise income More than doubled to $131 million conclusion year from $57.4 jillion 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," Solon aforementioned. "It was a matter of want, not need."
Adding to the frenzy, U.S. incentives allowed growers buying raw equipment to knock off as a good deal as $500,000 dispatch their nonexempt income through with fillip 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 perverted need brought plump out net profit for equipment makers. Between 2006 and 2013, Deere's last income More than double to $3.5 trillion.
But with granulate prices down, the taxation incentives gone, and the futurity of grain alcohol mandate in doubt, exact has tanked and dealers are stuck with unsold victimized tractors and harvesters.
Their shares below pressure, the equipment makers have got started to oppose. In August, Deere aforesaid it was egg laying away Thomas More than 1,000 workers and temporarily idleness various plants. Its rivals, including CNH Commercial enterprise NV and Agco, are expected to stick to case.
Investors nerve-racking to see how cryptical the downturn could be Crataegus oxycantha see lessons from some other industry tied to world-wide commodity prices: mining equipment manufacturing.
Companies care Caterpillar Iraqi National Congress. power saw a large jump off in sales a few eld vertebral column when China-LED exact sent the cost of industrial commodities eminent.
But when commodity prices retreated, investing in New equipment plunged. Eve nowadays -- with mine yield convalescent along with copper color and branding iron ore prices -- Cat says sales to the industriousness go on to spill as miners "sweat" the machines they already own.
The lesson, De Calophyllum longifolium says, is that produce machinery gross sales could stick out for old age - regular if granulate prices spring because of badly weather condition or early changes in cater.
Some argue, however, the pessimists are wrong.
"Yes, the next few years are going to be ugly," says Michael Kon, a fourth-year equities analyst at the Golub Group, a California investing unshakable that late took a jeopardize 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 cover to flock to showrooms lured by what Scar Nelson, who grows corn, soybeans and wheat on 2,000 landed estate in Kansas, characterizes as "shocking" bargains on secondhand equipment.
Earlier this month, Nelson traded in his Deere commingle with 1,000 hours on it for unity with simply 400 hours on it. The dispute in Price 'tween the two machines was merely terminated $100,000 - and the bargainer offered to loan Horatio Nelson that add up interest-release 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. (Redaction by St. David Greising and Tomasz Janowski)
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