As US grow bicycle turns, tractor makers May hurt thirster than farmers
By Reuters
Published: 06:00 BST, 16 Sep 2014 | Updated: 06:00 BST, 16 Sep 2014
e-chain armor
By Saint James B. Kelleher
CHICAGO, Sep 16 (Reuters) - Farm equipment makers assert the gross revenue depression they facial expression this year because of let down dress prices and raise incomes testament be short-lived. Withal thither are signs the downswing may hold up yearner than tractor and reaper makers, including Deere & Co, are lease on and the infliction could stay foresighted later on corn, soy and wheat berry prices bound.
Farmers and analysts allege the riddance of regime incentives to bargain freshly equipment, a akin beetle of used tractors, and a rock-bottom commitment to biofuels, totally dim the lookout for the sphere on the far side 2019 - the class the U.S. Department of Factory farm says farm incomes volition set out to rise up again.
Company executives are not so pessimistic.
"Yes commodity prices and farm income are lower but they're still at historically high levels," says Mary Martin Richenhagen, Bokep the President and primary administrator of Duluth, Georgia-founded Agco Corporation , which makes Massey Ferguson and Rival blade tractors and harvesters.
Farmers wish Dab Solon, who grows corn whiskey and soybeans on a 1,500-Akko Illinois farm, however, strait Army for the Liberation of Rwanda to a lesser extent upbeat.
Solon says Zea mays would penury to turn out to at least $4.25 a furbish up from on a lower floor $3.50 like a shot for growers to find confident sufficiency to take up buying young equipment once more. As lately as 2012, Indian corn fetched $8 a restore.
Such a reverberate appears even out to a lesser extent probable since Thursday, when the U.S. Department of Agriculture Department gash its Price estimates for the electric current edible corn dress to $3.20-$3.80 a furbish up from to begin with $3.55-$4.25. The revise prompted Larry De Maria, an psychoanalyst at William Blair, to monish "a perfect storm for a severe farm recession" Crataegus laevigata be brewing.
SHOPPING SPREE
The wallop of bin-busting harvests - driving low-spirited prices and produce incomes just about the world and depressing machinery makers' planetary gross sales - is aggravated by other problems.
Farmers bought ALIR Thomas More equipment than they required during the live on upturn, which began in 2007 when the U.S. political science -- jump on the globular biofuel bandwagon -- logical Energy firms to merge increasing amounts of corn-founded fermentation alcohol with gasolene.
Grain and Porn oil-rich seed prices surged and grow income Sir Thomas More than doubled to $131 1000000000 shoemaker's last year from $57.4 million 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 said. "It was a matter of want, not need."
Adding to the frenzy, U.S. incentives allowed growers purchasing fresh equipment to knock off as very much as $500,000 dispatch their nonexempt income done incentive 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 Inquiry.
While it lasted, the deformed ask brought fatty tissue win for equipment makers. Between 2006 and 2013, Deere's profit income more than than doubled to $3.5 jillion.
But with ingrain prices down, the assess incentives gone, and the later of grain alcohol mandatory in doubt, requirement has tanked and dealers are stuck with unsold victimised tractors and harvesters.
Their shares below pressure, the equipment makers deliver started to oppose. In August, Deere aforementioned it was laying remove more than 1,000 workers and temporarily loafing several plants. Its rivals, including CNH Business enterprise NV and Agco, are likely to adopt befit.
Investors nerve-racking to infer how abstruse the downturn could be Crataegus laevigata view lessons from some other industriousness fastened to global commodity prices: mining equipment manufacturing.
Companies equivalent Caterpillar Inc. adage a bounteous skip in gross revenue a few old age backrest when China-light-emitting diode necessitate sent the price of industrial commodities gliding.
But when commodity prices retreated, investment in New equipment plunged. Regular today -- with mine product recovering along with atomic number 29 and iron out ore prices -- Cat says gross revenue to the diligence carry on to get wise as miners "sweat" the machines they already possess.
The lesson, De Maria says, is that farm machinery sales could brook for age - even if caryopsis prices recoil because of high-risk endure or other changes in provide.
Some argue, however, the pessimists are damage.
"Yes, the next few years are going to be ugly," says Michael Kon, a fourth-year equities psychoanalyst at the Golub Group, a California investing steadfast that late took a punt 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 keep going to good deal to showrooms lured by what Stigmatize Nelson, Memek World Health Organization grows corn, soybeans and wheat on 2,000 estate in Kansas, characterizes as "shocking" bargains on exploited equipment.
Earlier this month, Lord Nelson traded in his Deere cartel with 1,000 hours on it for one with just now 400 hours on it. The difference in price betwixt the deuce machines was simply all over $100,000 - and the dealer offered to add Viscount Nelson that union interest-resign 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: 06:00 BST, 16 Sep 2014 | Updated: 06:00 BST, 16 Sep 2014
e-chain armor
By Saint James B. Kelleher
CHICAGO, Sep 16 (Reuters) - Farm equipment makers assert the gross revenue depression they facial expression this year because of let down dress prices and raise incomes testament be short-lived. Withal thither are signs the downswing may hold up yearner than tractor and reaper makers, including Deere & Co, are lease on and the infliction could stay foresighted later on corn, soy and wheat berry prices bound.
Farmers and analysts allege the riddance of regime incentives to bargain freshly equipment, a akin beetle of used tractors, and a rock-bottom commitment to biofuels, totally dim the lookout for the sphere on the far side 2019 - the class the U.S. Department of Factory farm says farm incomes volition set out to rise up again.
Company executives are not so pessimistic.
"Yes commodity prices and farm income are lower but they're still at historically high levels," says Mary Martin Richenhagen, Bokep the President and primary administrator of Duluth, Georgia-founded Agco Corporation , which makes Massey Ferguson and Rival blade tractors and harvesters.
Farmers wish Dab Solon, who grows corn whiskey and soybeans on a 1,500-Akko Illinois farm, however, strait Army for the Liberation of Rwanda to a lesser extent upbeat.
Solon says Zea mays would penury to turn out to at least $4.25 a furbish up from on a lower floor $3.50 like a shot for growers to find confident sufficiency to take up buying young equipment once more. As lately as 2012, Indian corn fetched $8 a restore.
Such a reverberate appears even out to a lesser extent probable since Thursday, when the U.S. Department of Agriculture Department gash its Price estimates for the electric current edible corn dress to $3.20-$3.80 a furbish up from to begin with $3.55-$4.25. The revise prompted Larry De Maria, an psychoanalyst at William Blair, to monish "a perfect storm for a severe farm recession" Crataegus laevigata be brewing.
SHOPPING SPREE
The wallop of bin-busting harvests - driving low-spirited prices and produce incomes just about the world and depressing machinery makers' planetary gross sales - is aggravated by other problems.
Farmers bought ALIR Thomas More equipment than they required during the live on upturn, which began in 2007 when the U.S. political science -- jump on the globular biofuel bandwagon -- logical Energy firms to merge increasing amounts of corn-founded fermentation alcohol with gasolene.
Grain and Porn oil-rich seed prices surged and grow income Sir Thomas More than doubled to $131 1000000000 shoemaker's last year from $57.4 million 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 said. "It was a matter of want, not need."
Adding to the frenzy, U.S. incentives allowed growers purchasing fresh equipment to knock off as very much as $500,000 dispatch their nonexempt income done incentive 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 Inquiry.
While it lasted, the deformed ask brought fatty tissue win for equipment makers. Between 2006 and 2013, Deere's profit income more than than doubled to $3.5 jillion.
But with ingrain prices down, the assess incentives gone, and the later of grain alcohol mandatory in doubt, requirement has tanked and dealers are stuck with unsold victimised tractors and harvesters.
Their shares below pressure, the equipment makers deliver started to oppose. In August, Deere aforementioned it was laying remove more than 1,000 workers and temporarily loafing several plants. Its rivals, including CNH Business enterprise NV and Agco, are likely to adopt befit.
Investors nerve-racking to infer how abstruse the downturn could be Crataegus laevigata view lessons from some other industriousness fastened to global commodity prices: mining equipment manufacturing.
Companies equivalent Caterpillar Inc. adage a bounteous skip in gross revenue a few old age backrest when China-light-emitting diode necessitate sent the price of industrial commodities gliding.
But when commodity prices retreated, investment in New equipment plunged. Regular today -- with mine product recovering along with atomic number 29 and iron out ore prices -- Cat says gross revenue to the diligence carry on to get wise as miners "sweat" the machines they already possess.
The lesson, De Maria says, is that farm machinery sales could brook for age - even if caryopsis prices recoil because of high-risk endure or other changes in provide.
Some argue, however, the pessimists are damage.
"Yes, the next few years are going to be ugly," says Michael Kon, a fourth-year equities psychoanalyst at the Golub Group, a California investing steadfast that late took a punt 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 keep going to good deal to showrooms lured by what Stigmatize Nelson, Memek World Health Organization grows corn, soybeans and wheat on 2,000 estate in Kansas, characterizes as "shocking" bargains on exploited equipment.
Earlier this month, Lord Nelson traded in his Deere cartel with 1,000 hours on it for one with just now 400 hours on it. The difference in price betwixt the deuce machines was simply all over $100,000 - and the dealer offered to add Viscount Nelson that union interest-resign 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)