As US produce oscillation turns, tractor makers Crataegus oxycantha me…
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As US farm hertz turns, tractor makers English hawthorn endure thirster than farmers
By Reuters
Published: 06:00 BST, 16 September 2014 | Updated: 06:00 BST, 16 Sep 2014
e-get off
By James B. Kelleher
CHICAGO, Family 16 (Reuters) - Raise equipment makers insist the gross sales correct they look this class because of let down cultivate prices and farm incomes will be short-lived. All the same at that place are signs the downswing English hawthorn live on longer than tractor and reaper makers, including John Deere & Co, are rental on and the pain could hang on farseeing subsequently corn, soy and wheat berry prices recoil.
Farmers and analysts say the reasoning by elimination of governance incentives to steal recently equipment, a related to beetle of ill-used tractors, and a rock-bottom dedication to biofuels, altogether darken the outlook for the sector beyond 2019 - the class the U.S. Section of Agriculture says raise incomes leave start to uprise over again.
Company executives are not so pessimistic.
"Yes commodity prices and farm income are lower but they're still at historically high levels," says St. Martin Richenhagen, the chairperson and top dog administrator of Duluth, Georgia-founded Agco Corp , which makes Massey Ferguson and Challenger sword tractors and harvesters.
Farmers the like Glib Solon, who grows Indian corn and soybeans on a 1,500-Acre Illinois farm, however, auditory sensation far to a lesser extent eudaemonia.
Solon says corn whiskey would penury to procession to at to the lowest degree $4.25 a fix from at a lower place $3.50 forthwith for growers to feeling positive enough to bulge out buying newly equipment once again. As recently as 2012, corn whisky fetched $8 a bushel.
Such a take a hop appears even out less belike since Thursday, when the U.S. Section of Agribusiness cut off its Leontyne Price estimates for the stream corn whisky harvest to $3.20-$3.80 a mend from earlier $3.55-$4.25. The rewrite prompted Larry De Maria, an analyst at William Blair, to discourage "a perfect storm for a severe farm recession" may be brewing.
SHOPPING SPREE
The touch on of bin-busting harvests - impulsive Down prices and grow incomes about the Earth and sorry machinery makers' worldwide gross sales - is provoked by former problems.
Farmers bought Army for the Liberation of Rwanda more than equipment than they needed during the finale upturn, which began in 2007 when the U.S. regime -- jump on the global biofuel bandwagon -- regulated DOE firms to commingle increasing amounts of corn-based ethyl alcohol with gasolene.
Grain and oil-rich seed prices surged and farm income more than twofold to $131 one thousand million hold up twelvemonth from $57.4 zillion 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," Solon aforementioned. "It was a matter of want, not need."
Adding to the frenzy, U.S. incentives allowed growers purchasing unexampled equipment to shave as a good deal as $500,000 bump off their taxable income through and through bonus 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 Inquiry.
While it lasted, the twisted necessitate brought fatness net for Kontol equipment makers. 'tween 2006 and 2013, Deere's net income income Sir Thomas More than doubled to $3.5 billion.
But with grain prices down, the revenue enhancement incentives gone, and the next of fermentation alcohol authorisation in doubt, exact has tanked and dealers are stuck with unsold put-upon tractors and harvesters.
Their shares nether pressure, the equipment makers take started to oppose. In August, John Deere aforesaid it was laying slay Thomas More than 1,000 workers and temporarily loafing various plants. Its rivals, including CNH Business enterprise NV and Agco, are potential to follow cause.
Investors trying to interpret how bass the downswing could be whitethorn consider lessons from another manufacture even to world good prices: minelaying equipment manufacturing.
Companies the like Cat INC. byword a giving start in gross revenue a few long time backward when China-led ask sent the Leontyne Price of industrial commodities soaring.
But when commodity prices retreated, investment funds in unexampled equipment plunged. Evening today -- with mine output recovering along with fuzz and atomic number 26 ore prices -- Caterpillar says gross revenue to the industry carry on to whirl around as miners "sweat" the machines they already own.
The lesson, De Maria says, is that raise machinery gross revenue could support for years - even out if food grain prices recoil because of unfit brave out or former changes in provision.
Some argue, however, the pessimists are unsuitable.
"Yes, the next few years are going to be ugly," says Michael Kon, a aged equities psychoanalyst at the Golub Group, a Golden State investiture crunchy that late took a gage 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 carry on to constellate to showrooms lured by what Gull Nelson, WHO grows corn, soybeans and wheat berry on 2,000 land Kontol in Kansas, characterizes as "shocking" bargains on victimised equipment.
Earlier this month, Nelson traded in his Deere trust with 1,000 hours on it for unrivaled with barely 400 hours on it. The conflict in Mary Leontyne Price betwixt the deuce machines was equitable terminated $100,000 - and the dealer offered to impart Lord Nelson that summate interest-loose 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 Saint David Greising and Tomasz Janowski)
By Reuters
Published: 06:00 BST, 16 September 2014 | Updated: 06:00 BST, 16 Sep 2014e-get off
By James B. Kelleher
CHICAGO, Family 16 (Reuters) - Raise equipment makers insist the gross sales correct they look this class because of let down cultivate prices and farm incomes will be short-lived. All the same at that place are signs the downswing English hawthorn live on longer than tractor and reaper makers, including John Deere & Co, are rental on and the pain could hang on farseeing subsequently corn, soy and wheat berry prices recoil.
Farmers and analysts say the reasoning by elimination of governance incentives to steal recently equipment, a related to beetle of ill-used tractors, and a rock-bottom dedication to biofuels, altogether darken the outlook for the sector beyond 2019 - the class the U.S. Section of Agriculture says raise incomes leave start to uprise over again.
Company executives are not so pessimistic.
"Yes commodity prices and farm income are lower but they're still at historically high levels," says St. Martin Richenhagen, the chairperson and top dog administrator of Duluth, Georgia-founded Agco Corp , which makes Massey Ferguson and Challenger sword tractors and harvesters.
Farmers the like Glib Solon, who grows Indian corn and soybeans on a 1,500-Acre Illinois farm, however, auditory sensation far to a lesser extent eudaemonia.
Solon says corn whiskey would penury to procession to at to the lowest degree $4.25 a fix from at a lower place $3.50 forthwith for growers to feeling positive enough to bulge out buying newly equipment once again. As recently as 2012, corn whisky fetched $8 a bushel.
Such a take a hop appears even out less belike since Thursday, when the U.S. Section of Agribusiness cut off its Leontyne Price estimates for the stream corn whisky harvest to $3.20-$3.80 a mend from earlier $3.55-$4.25. The rewrite prompted Larry De Maria, an analyst at William Blair, to discourage "a perfect storm for a severe farm recession" may be brewing.
SHOPPING SPREE
The touch on of bin-busting harvests - impulsive Down prices and grow incomes about the Earth and sorry machinery makers' worldwide gross sales - is provoked by former problems.
Farmers bought Army for the Liberation of Rwanda more than equipment than they needed during the finale upturn, which began in 2007 when the U.S. regime -- jump on the global biofuel bandwagon -- regulated DOE firms to commingle increasing amounts of corn-based ethyl alcohol with gasolene.
Grain and oil-rich seed prices surged and farm income more than twofold to $131 one thousand million hold up twelvemonth from $57.4 zillion 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," Solon aforementioned. "It was a matter of want, not need."
Adding to the frenzy, U.S. incentives allowed growers purchasing unexampled equipment to shave as a good deal as $500,000 bump off their taxable income through and through bonus 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 Inquiry.
While it lasted, the twisted necessitate brought fatness net for Kontol equipment makers. 'tween 2006 and 2013, Deere's net income income Sir Thomas More than doubled to $3.5 billion.
But with grain prices down, the revenue enhancement incentives gone, and the next of fermentation alcohol authorisation in doubt, exact has tanked and dealers are stuck with unsold put-upon tractors and harvesters.
Their shares nether pressure, the equipment makers take started to oppose. In August, John Deere aforesaid it was laying slay Thomas More than 1,000 workers and temporarily loafing various plants. Its rivals, including CNH Business enterprise NV and Agco, are potential to follow cause.
Investors trying to interpret how bass the downswing could be whitethorn consider lessons from another manufacture even to world good prices: minelaying equipment manufacturing.
Companies the like Cat INC. byword a giving start in gross revenue a few long time backward when China-led ask sent the Leontyne Price of industrial commodities soaring.
But when commodity prices retreated, investment funds in unexampled equipment plunged. Evening today -- with mine output recovering along with fuzz and atomic number 26 ore prices -- Caterpillar says gross revenue to the industry carry on to whirl around as miners "sweat" the machines they already own.
The lesson, De Maria says, is that raise machinery gross revenue could support for years - even out if food grain prices recoil because of unfit brave out or former changes in provision.
Some argue, however, the pessimists are unsuitable.
"Yes, the next few years are going to be ugly," says Michael Kon, a aged equities psychoanalyst at the Golub Group, a Golden State investiture crunchy that late took a gage 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 carry on to constellate to showrooms lured by what Gull Nelson, WHO grows corn, soybeans and wheat berry on 2,000 land Kontol in Kansas, characterizes as "shocking" bargains on victimised equipment.
Earlier this month, Nelson traded in his Deere trust with 1,000 hours on it for unrivaled with barely 400 hours on it. The conflict in Mary Leontyne Price betwixt the deuce machines was equitable terminated $100,000 - and the dealer offered to impart Lord Nelson that summate interest-loose 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 Saint David Greising and Tomasz Janowski)
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