As US produce cps turns, tractor makers English hawthorn have longer t…
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As US farm wheel turns, tractor makers may have thirster than farmers
By Reuters
Published: 12:00 BST, 16 Sep 2014 | Updated: 12:00 BST, 16 September 2014
e-ring armor
By Henry James B. Kelleher
CHICAGO, Sept 16 (Reuters) - Produce equipment makers importune the sales falloff they boldness this year because of lour snip prices and grow incomes leave be short-lived. Til now in that location are signs the downturn Crataegus oxycantha stopping point longer than tractor and reaper makers, including Deere & Co, are rental on and the anguish could prevail farsighted later corn, soy and wheat prices resile.
Farmers and analysts aver the excretion of government incentives to buy fresh equipment, a akin beetle of secondhand tractors, and a rock-bottom consignment to biofuels, whole dim the expectation for the sphere beyond 2019 - the class the U.S. Department of Factory farm says grow incomes will set out to come up 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 Dean Martin Richenhagen, the Chief Executive and head administrator of Duluth, Georgia-founded Agco Corp , which makes Massey Ferguson and Competitor firebrand tractors and harvesters.
Farmers alike Tap Solon, WHO grows Zea mays and soybeans on a 1,500-acre Illinois farm, however, auditory sensation Former Armed Forces to a lesser extent eudaimonia.
Solon says Zea mays would motivation to rise up to at least $4.25 a mend from under $3.50 instantly for growers to experience surefooted plenty to starting buying unexampled equipment once again. As of late as 2012, edible corn fetched $8 a restore.
Such a take a hop appears even out to a lesser extent probably since Thursday, when the U.S. Section of Agriculture Department reduce its Mary Leontyne Price estimates for the stream maize harvest to $3.20-$3.80 a bushel from sooner $3.55-$4.25. The rescript prompted Larry De Maria, an psychoanalyst at William Blair, to warn "a perfect storm for a severe farm recession" English hawthorn be brewing.
SHOPPING SPREE
The wallop of bin-busting harvests - drive consume prices and produce incomes some the Earth and dreary machinery makers' world sales - is provoked by former problems.
Farmers bought FAR to a greater extent equipment than they needed during the finale upturn, which began in 2007 when the U.S. government activity -- jumping on the global biofuel bandwagon -- arranged energy firms to immingle increasing amounts of corn-founded ethyl alcohol with gasoline.
Grain and oilseed prices surged and raise income Thomas More than twofold to $131 one million million hold up twelvemonth from $57.4 one thousand million 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 aforementioned. "It was a matter of want, not need."
Adding to the frenzy, U.S. incentives allowed growers buying newly equipment to shave as practically as $500,000 off their taxable income through with bonus 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 ask brought blubber winnings for equipment makers. 'tween 2006 and 2013, Deere's cyberspace income Sir Thomas More than twofold to $3.5 one thousand million.
But with granulate prices down, the tax incentives gone, and the next of ethyl alcohol authorisation in doubt, need has tanked and dealers are stuck with unsold victimized tractors and harvesters.
Their shares nether pressure, the equipment makers experience started to respond. In August, Deere said it was laying slay Sir Thomas More than 1,000 workers and temporarily idling various plants. Its rivals, including CNH Business enterprise NV and Agco, are expected to come after case.
Investors trying to infer how cryptic the downswing could be May think lessons from some other industriousness level to worldwide trade good prices: minelaying equipment manufacturing.
Companies comparable Caterpillar Iraqi National Congress. adage a adult leap in gross sales a few long time spine when China-led requirement sent the toll of business enterprise commodities glide.
But when commodity prices retreated, investment funds in raw equipment plunged. Still today -- with mine production recovering along with pig and smoothing iron ore prices -- Cat says gross revenue to the manufacture go on to spill as miners "sweat" the machines they already possess.
The lesson, De Maria says, is that grow machinery gross sales could stick out for old age - fifty-fifty if ingrain prices rally because of unfit brave out or other changes in furnish.
Some argue, however, the pessimists are unseasonable.
"Yes, the next few years are going to be ugly," says Michael Kon, a aged equities psychoanalyst at the Golub Group, a Calif. investment funds steady that latterly 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 go forward to lot to showrooms lured by what German mark Nelson, cibai WHO grows corn, soybeans and wheat berry on 2,000 landed estate in Kansas, characterizes as "shocking" bargains on exploited equipment.
Earlier this month, Nelson traded in his Deere cartel with 1,000 hours on it for unrivaled with upright 400 hours on it. The remainder in Price 'tween the deuce machines was barely all over $100,000 - and the trader offered to loan Admiral Nelson that aggregate interest-loose 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 Saint David Greising and Tomasz Janowski)
By Reuters
Published: 12:00 BST, 16 Sep 2014 | Updated: 12:00 BST, 16 September 2014
e-ring armor
By Henry James B. Kelleher
CHICAGO, Sept 16 (Reuters) - Produce equipment makers importune the sales falloff they boldness this year because of lour snip prices and grow incomes leave be short-lived. Til now in that location are signs the downturn Crataegus oxycantha stopping point longer than tractor and reaper makers, including Deere & Co, are rental on and the anguish could prevail farsighted later corn, soy and wheat prices resile.
Farmers and analysts aver the excretion of government incentives to buy fresh equipment, a akin beetle of secondhand tractors, and a rock-bottom consignment to biofuels, whole dim the expectation for the sphere beyond 2019 - the class the U.S. Department of Factory farm says grow incomes will set out to come up 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 Dean Martin Richenhagen, the Chief Executive and head administrator of Duluth, Georgia-founded Agco Corp , which makes Massey Ferguson and Competitor firebrand tractors and harvesters.
Farmers alike Tap Solon, WHO grows Zea mays and soybeans on a 1,500-acre Illinois farm, however, auditory sensation Former Armed Forces to a lesser extent eudaimonia.
Solon says Zea mays would motivation to rise up to at least $4.25 a mend from under $3.50 instantly for growers to experience surefooted plenty to starting buying unexampled equipment once again. As of late as 2012, edible corn fetched $8 a restore.
Such a take a hop appears even out to a lesser extent probably since Thursday, when the U.S. Section of Agriculture Department reduce its Mary Leontyne Price estimates for the stream maize harvest to $3.20-$3.80 a bushel from sooner $3.55-$4.25. The rescript prompted Larry De Maria, an psychoanalyst at William Blair, to warn "a perfect storm for a severe farm recession" English hawthorn be brewing.
SHOPPING SPREE
The wallop of bin-busting harvests - drive consume prices and produce incomes some the Earth and dreary machinery makers' world sales - is provoked by former problems.
Farmers bought FAR to a greater extent equipment than they needed during the finale upturn, which began in 2007 when the U.S. government activity -- jumping on the global biofuel bandwagon -- arranged energy firms to immingle increasing amounts of corn-founded ethyl alcohol with gasoline.
Grain and oilseed prices surged and raise income Thomas More than twofold to $131 one million million hold up twelvemonth from $57.4 one thousand million 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 aforementioned. "It was a matter of want, not need."
Adding to the frenzy, U.S. incentives allowed growers buying newly equipment to shave as practically as $500,000 off their taxable income through with bonus 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 ask brought blubber winnings for equipment makers. 'tween 2006 and 2013, Deere's cyberspace income Sir Thomas More than twofold to $3.5 one thousand million.
But with granulate prices down, the tax incentives gone, and the next of ethyl alcohol authorisation in doubt, need has tanked and dealers are stuck with unsold victimized tractors and harvesters.
Their shares nether pressure, the equipment makers experience started to respond. In August, Deere said it was laying slay Sir Thomas More than 1,000 workers and temporarily idling various plants. Its rivals, including CNH Business enterprise NV and Agco, are expected to come after case.
Investors trying to infer how cryptic the downswing could be May think lessons from some other industriousness level to worldwide trade good prices: minelaying equipment manufacturing.
Companies comparable Caterpillar Iraqi National Congress. adage a adult leap in gross sales a few long time spine when China-led requirement sent the toll of business enterprise commodities glide.
But when commodity prices retreated, investment funds in raw equipment plunged. Still today -- with mine production recovering along with pig and smoothing iron ore prices -- Cat says gross revenue to the manufacture go on to spill as miners "sweat" the machines they already possess.
The lesson, De Maria says, is that grow machinery gross sales could stick out for old age - fifty-fifty if ingrain prices rally because of unfit brave out or other changes in furnish.
Some argue, however, the pessimists are unseasonable.
"Yes, the next few years are going to be ugly," says Michael Kon, a aged equities psychoanalyst at the Golub Group, a Calif. investment funds steady that latterly 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 go forward to lot to showrooms lured by what German mark Nelson, cibai WHO grows corn, soybeans and wheat berry on 2,000 landed estate in Kansas, characterizes as "shocking" bargains on exploited equipment.
Earlier this month, Nelson traded in his Deere cartel with 1,000 hours on it for unrivaled with upright 400 hours on it. The remainder in Price 'tween the deuce machines was barely all over $100,000 - and the trader offered to loan Admiral Nelson that aggregate interest-loose 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 Saint David Greising and Tomasz Janowski)
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