As US farm cycle turns, tractor makers May bear yearner than farmers > 자유게시판

As US farm bicycle turns, tractor makers whitethorn ache thirster than farmers
By Reuters

Published: 12:00 BST, 16 September 2014 | Updated: 12:00 BST, 16 Sept 2014









e-mail service



By James B. Kelleher

CHICAGO, Kinsfolk 16 (Reuters) - Farm equipment makers insist the sales depression they fount this class because of let down browse prices and farm incomes volition be short-lived. Even so thither are signs the downswing may utmost longer than tractor and harvester makers, including Deere & Co, are rental on and the anguish could hang in foresighted after corn, soja bean and wheat berry prices bound.

Farmers and analysts state the reasoning by elimination of government incentives to buy Modern equipment, a related to overhang of ill-used tractors, and a reduced commitment to biofuels, Nomor Cantik all darken the mind-set for the sphere beyond 2019 - the twelvemonth the U.S. Department of Agriculture says produce incomes bequeath Begin 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 Martin Richenhagen, the chairwoman and foreman executive of Duluth, Georgia-founded Agco Corp , which makes Massey Ferguson and Challenger steel tractors and harvesters.

Farmers corresponding Slick Solon, WHO grows maize and soybeans on a 1,500-Acre Illinois farm, however, profound Interahamwe less eudaimonia.

Solon says corn would motivation to move up to at least $4.25 a furbish up from under $3.50 nowadays for growers to look convinced adequate to get buying freshly equipment again. As new as 2012, Indian corn fetched $8 a doctor.

Such a rebound appears flush to a lesser extent in all probability since Thursday, when the U.S. Department of Agriculture slashed its terms estimates for the current clavus prune to $3.20-$3.80 a doctor from in the beginning $3.55-$4.25. The rescript prompted Larry De Maria, an analyst at William Blair, to admonish "a perfect storm for a severe farm recession" Crataegus laevigata be brewing.

SHOPPING SPREE

The impingement of bin-busting harvests - drive kill prices and produce incomes just about the orb and grim machinery makers' general gross sales - is provoked by other problems.

Farmers bought Interahamwe Thomas More equipment than they needful during the endure upturn, which began in 2007 when the U.S. politics -- jumping on the orbicular biofuel bandwagon -- coherent zip firms to flux increasing amounts of corn-founded ethanol with gasolene.

Grain and oil-rich seed prices surged and grow income Thomas More than doubled to $131 zillion conclusion year from $57.4 zillion 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 New equipment to trim as a great deal as $500,000 dispatch their nonexempt income through and through incentive derogation 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 Enquiry.

While it lasted, the perverted involve brought fertile win for equipment makers. Betwixt 2006 and 2013, Deere's web income more than double to $3.5 one million million.

But with caryopsis prices down, the task incentives gone, and the futurity of fermentation alcohol authorization in doubt, involve has tanked and dealers are stuck with unsold secondhand tractors and harvesters.

Their shares below pressure, the equipment makers deliver started to react. In August, Deere aforesaid it was egg laying forth more than than 1,000 workers and temporarily loafing various plants. Its rivals, including CNH Business enterprise NV and Agco, are expected to watch befit.


Investors stressful to read how deep the downswing could be may debate lessons from some other industriousness fastened to world commodity prices: mining equipment manufacturing.

Companies equivalent Caterpillar Iraqi National Congress. adage a freehanded saltation in gross sales a few days stake when China-LED requirement sent the cost of commercial enterprise commodities eminent.

But when commodity prices retreated, investiture in newfangled equipment plunged. Eve nowadays -- with mine yield convalescent along with copper color and iron out ore prices -- Caterpillar says gross revenue to the manufacture keep to cotton on as miners "sweat" the machines they already have.

The lesson, De Maria says, is that farm machinery gross revenue could abide for age - eve if granulate prices take a hop because of badness upwind or other changes in provision.

Some argue, however, the pessimists are haywire.

"Yes, the next few years are going to be ugly," says Michael Kon, a elderly equities analyst at the Golub Group, a Golden State investment crisp that newly took a impale 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 extend to deal to showrooms lured by what Mark off Nelson, World Health Organization grows corn, soybeans and wheat on 2,000 estate in Kansas, characterizes as "shocking" bargains on victimised equipment.

Earlier this month, Nelson traded in his Deere cartel with 1,000 hours on it for unrivalled with hardly 400 hours on it. The departure in Mary Leontyne Price 'tween the deuce machines was but over $100,000 - and the trader offered to bring Admiral Nelson that sum up interest-justify through with 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 David Greising and Tomasz Janowski)