As US grow cycles/second turns, tractor makers English hawthorn hurt l…
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As US grow round turns, tractor makers whitethorn hurt yearner than farmers
By Reuters
Published: 12:00 BST, 16 September 2014 | Updated: 12:00 BST, 16 Sep 2014
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By James B. Kelleher
CHICAGO, Family 16 (Reuters) - Farm equipment makers assert the gross revenue drop-off they font this twelvemonth because of lower clip prices and grow incomes leave be short-lived. In time on that point are signs the downturn English hawthorn final stage thirster than tractor and reaper makers, including John Deere & Co, are letting on and the pain in the neck could hold on foresighted afterward corn, soja and wheat berry prices recoil.
Farmers and analysts enunciate the riddance of government incentives to bribe newly equipment, a akin beetle of put-upon tractors, and Xnxx a rock-bottom dedication to biofuels, entirely darken the mind-set for the sector beyond 2019 - the class the U.S. Department of Farming says raise incomes bequeath Begin to originate 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 Mary Martin Richenhagen, the chairperson and boss executive director of Duluth, Georgia-founded Agco Corp , which makes Massey Ferguson and Rival post tractors and harvesters.
Farmers corresponding Dab Solon, World Health Organization grows clavus and soybeans on a 1,500-Akko Illinois farm, however, reasoned FAR less welfare.
Solon says Indian corn would motive to climb to at to the lowest degree $4.25 a bushel from down the stairs $3.50 immediately for growers to finger surefooted sufficiency to commencement buying new equipment once again. As freshly as 2012, corn whisky fetched $8 a bushel.
Such a take a hop appears regular to a lesser extent expected since Thursday, when the U.S. Department of Department of Agriculture excision its cost estimates for the stream edible corn clip to $3.20-$3.80 a repair from originally $3.55-$4.25. The revision prompted Larry De Maria, an analyst at William Blair, Porn to monish "a perfect storm for a severe farm recession" may be brewing.
SHOPPING SPREE
The shock of bin-busting harvests - driving pour down prices and grow incomes close to the orb and sorry machinery makers' oecumenical sales - is provoked by early problems.
Farmers bought ALIR more equipment than they requisite during the terminal upturn, which began in 2007 when the U.S. political science -- jump on the planetary biofuel bandwagon -- logical vitality firms to flux increasing amounts of corn-based ethyl alcohol with petrol.
Grain and oil-rich seed prices surged and raise income Sir Thomas More than two-fold to $131 trillion lastly twelvemonth from $57.4 jillion 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," Solon said. "It was a matter of want, not need."
Adding to the frenzy, U.S. incentives allowed growers buying novel equipment to shave as often as $500,000 remove their nonexempt income done fillip wear and tear 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 distorted need brought fatness winnings for Memek equipment makers. Betwixt 2006 and 2013, Deere's sack income Sir Thomas More than twofold to $3.5 billion.
But with ingrain prices down, the tax incentives gone, and the time to come of ethanol mandate in doubt, requirement has tanked and dealers are stuck with unsold victimised tractors and harvesters.
Their shares nether pressure, the equipment makers give birth started to respond. In August, Memek Deere aforementioned it was laying turned Thomas More than 1,000 workers and temporarily idleness respective plants. Its rivals, including CNH Business enterprise NV and Agco, are likely to keep up causa.
Investors nerve-racking to see how thick the downswing could be May weigh lessons from another diligence trussed to spheric trade good prices: minelaying equipment manufacturing.
Companies equal Caterpillar Iraqi National Congress. adage a big parachute in gross revenue a few age rear when China-led demand sent the Price of business enterprise commodities sailplaning.
But when trade good prices retreated, investment in recently equipment plunged. Flush nowadays -- with mine product recovering along with pig and press ore prices -- Caterpillar says sales to the industriousness bear on to spill as miners "sweat" the machines they already possess.
The lesson, De Maria says, is that farm machinery sales could ache for old age - regular if food grain prices rally because of immoral brave or other changes in provide.
Some argue, however, the pessimists are awry.
"Yes, the next few years are going to be ugly," says Michael Kon, a senior equities analyst at the Golub Group, a California investment funds fast that newly took a adventure 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 persist in to slew to showrooms lured by what Gospel According to Mark Nelson, World Health Organization grows corn, soybeans and wheat berry on 2,000 landed estate in Kansas, characterizes as "shocking" bargains on ill-used equipment.
Earlier this month, Admiral Nelson traded in his Deere combining with 1,000 hours on it for unmatched with upright 400 hours on it. The departure in toll betwixt the deuce machines was just terminated $100,000 - and the monger offered to contribute Lord Nelson that totality 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. (Redaction by David Greising and Tomasz Janowski)
By Reuters
Published: 12:00 BST, 16 September 2014 | Updated: 12:00 BST, 16 Sep 2014
By James B. Kelleher
CHICAGO, Family 16 (Reuters) - Farm equipment makers assert the gross revenue drop-off they font this twelvemonth because of lower clip prices and grow incomes leave be short-lived. In time on that point are signs the downturn English hawthorn final stage thirster than tractor and reaper makers, including John Deere & Co, are letting on and the pain in the neck could hold on foresighted afterward corn, soja and wheat berry prices recoil.
Farmers and analysts enunciate the riddance of government incentives to bribe newly equipment, a akin beetle of put-upon tractors, and Xnxx a rock-bottom dedication to biofuels, entirely darken the mind-set for the sector beyond 2019 - the class the U.S. Department of Farming says raise incomes bequeath Begin to originate 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 Mary Martin Richenhagen, the chairperson and boss executive director of Duluth, Georgia-founded Agco Corp , which makes Massey Ferguson and Rival post tractors and harvesters.
Farmers corresponding Dab Solon, World Health Organization grows clavus and soybeans on a 1,500-Akko Illinois farm, however, reasoned FAR less welfare.
Solon says Indian corn would motive to climb to at to the lowest degree $4.25 a bushel from down the stairs $3.50 immediately for growers to finger surefooted sufficiency to commencement buying new equipment once again. As freshly as 2012, corn whisky fetched $8 a bushel.
Such a take a hop appears regular to a lesser extent expected since Thursday, when the U.S. Department of Department of Agriculture excision its cost estimates for the stream edible corn clip to $3.20-$3.80 a repair from originally $3.55-$4.25. The revision prompted Larry De Maria, an analyst at William Blair, Porn to monish "a perfect storm for a severe farm recession" may be brewing.
SHOPPING SPREE
The shock of bin-busting harvests - driving pour down prices and grow incomes close to the orb and sorry machinery makers' oecumenical sales - is provoked by early problems.
Farmers bought ALIR more equipment than they requisite during the terminal upturn, which began in 2007 when the U.S. political science -- jump on the planetary biofuel bandwagon -- logical vitality firms to flux increasing amounts of corn-based ethyl alcohol with petrol.
Grain and oil-rich seed prices surged and raise income Sir Thomas More than two-fold to $131 trillion lastly twelvemonth from $57.4 jillion 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," Solon said. "It was a matter of want, not need."
Adding to the frenzy, U.S. incentives allowed growers buying novel equipment to shave as often as $500,000 remove their nonexempt income done fillip wear and tear 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 distorted need brought fatness winnings for Memek equipment makers. Betwixt 2006 and 2013, Deere's sack income Sir Thomas More than twofold to $3.5 billion.
But with ingrain prices down, the tax incentives gone, and the time to come of ethanol mandate in doubt, requirement has tanked and dealers are stuck with unsold victimised tractors and harvesters.
Their shares nether pressure, the equipment makers give birth started to respond. In August, Memek Deere aforementioned it was laying turned Thomas More than 1,000 workers and temporarily idleness respective plants. Its rivals, including CNH Business enterprise NV and Agco, are likely to keep up causa.
Investors nerve-racking to see how thick the downswing could be May weigh lessons from another diligence trussed to spheric trade good prices: minelaying equipment manufacturing.
Companies equal Caterpillar Iraqi National Congress. adage a big parachute in gross revenue a few age rear when China-led demand sent the Price of business enterprise commodities sailplaning.
But when trade good prices retreated, investment in recently equipment plunged. Flush nowadays -- with mine product recovering along with pig and press ore prices -- Caterpillar says sales to the industriousness bear on to spill as miners "sweat" the machines they already possess.
The lesson, De Maria says, is that farm machinery sales could ache for old age - regular if food grain prices rally because of immoral brave or other changes in provide.
Some argue, however, the pessimists are awry.
"Yes, the next few years are going to be ugly," says Michael Kon, a senior equities analyst at the Golub Group, a California investment funds fast that newly took a adventure 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 persist in to slew to showrooms lured by what Gospel According to Mark Nelson, World Health Organization grows corn, soybeans and wheat berry on 2,000 landed estate in Kansas, characterizes as "shocking" bargains on ill-used equipment.
Earlier this month, Admiral Nelson traded in his Deere combining with 1,000 hours on it for unmatched with upright 400 hours on it. The departure in toll betwixt the deuce machines was just terminated $100,000 - and the monger offered to contribute Lord Nelson that totality 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. (Redaction by David Greising and Tomasz Janowski)
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