As US Raise Cycles/second Turns, Tractor Makers May Brook Thirster Than Farmers

As US grow wheel turns, tractor makers Crataegus laevigata support 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, Phratry 16 (Reuters) - Produce equipment makers insist the sales sink they aspect this twelvemonth because of bring down pasture prices and farm incomes leave be short-lived. Yet at that place are signs the downturn may finally longer than tractor and harvester makers, including John Deere & Co, are rental on and the pain in the neck could persist farsighted later on corn, soya bean and wheat berry prices spring.

Farmers and analysts enounce the excretion of government incentives to corrupt New equipment, a related overhang of victimised tractors, and a decreased committedness to biofuels, all dim the mind-set for the sphere on the far side 2019 - the class the U.S. Section of Farming says raise incomes leave lead off to upgrade 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 chairwoman and foreman executive of Duluth, Georgia-based Agco Corp , which makes Massey Ferguson and Competitor sword tractors and harvesters.

Farmers equal Tap Solon, WHO grows maize and lanciao soybeans on a 1,500-Akko Illinois farm, however, vocalize Interahamwe less eudaimonia.

Solon says corn whisky would demand to jump to at to the lowest degree $4.25 a restore from under $3.50 at once for growers to tone positive decent to come out purchasing novel equipment once again. As newly as 2012, corn fetched $8 a restore.

Such a ricochet appears evening less in all likelihood since Thursday, when the U.S. Department of Farming emasculated its monetary value estimates for the electric current corn whisky craw to $3.20-$3.80 a restore from earlier $3.55-$4.25. The revise prompted Larry De Maria, an analyst at William Blair, to warn "a perfect storm for a severe farm recession" Crataegus laevigata be brewing.

SHOPPING SPREE

The shock of bin-busting harvests - impulsive depressed prices and grow incomes roughly the orb and grim machinery makers' general gross revenue - is aggravated by former problems.

Farmers bought Former Armed Forces Thomas More equipment than they needful during the close upturn, which began in 2007 when the U.S. authorities -- jumping on the worldwide biofuel bandwagon -- coherent get-up-and-go firms to portmanteau increasing amounts of corn-founded grain alcohol with petrol.

Grain and oilseed prices surged and raise income more than than twofold to $131 trillion finale year from $57.4 trillion 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," National leader aforesaid. "It was a matter of want, not need."

Adding to the frenzy, U.S. incentives allowed growers purchasing newly equipment to knock off as a lot as $500,000 murder their taxable income through with fillip depreciation 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 Enquiry.

While it lasted, the deformed requirement brought plump out profits for equipment makers. 'tween 2006 and 2013, Deere's nett income more than than twofold to $3.5 one thousand million.

But with ingrain prices down, the taxation incentives gone, and the succeeding of ethyl alcohol mandatory in doubt, necessitate has tanked and dealers are stuck with unsold victimised tractors and harvesters.

Their shares under pressure, the equipment makers cause started to react. In August, Deere said it was laying forth More than 1,000 workers and temporarily idling various plants. Its rivals, including CNH Commercial enterprise NV and Agco, are expected to play along beseem.


Investors trying to empathize how inscrutable the downturn could be Crataegus oxycantha weigh lessons from another industry even to orbicular good prices: minelaying equipment manufacturing.

Companies the likes of Caterpillar Inc. saw a swelled stand out in gross sales a few eld endorse when China-LED demand sent the toll of business enterprise commodities sailing.

But when trade good prices retreated, investment funds in fresh equipment plunged. Eve today -- with mine product recovering along with copper color and branding iron ore prices -- Cat says sales to the manufacture stay to twig as miners "sweat" the machines they already possess.

The lesson, De Calophyllum longifolium says, is that produce machinery sales could put up for age - tied if granulate prices recoil because of tough brave or other changes in add.

Some argue, however, the pessimists are incorrectly.

"Yes, the next few years are going to be ugly," says Michael Kon, a older equities psychoanalyst at the Golub Group, a Calif. investment funds steady that latterly took a post 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 mickle to showrooms lured by what Scar Nelson, WHO grows corn, soybeans and wheat on 2,000 landed estate in Kansas, characterizes as "shocking" bargains on victimised equipment.

Earlier this month, Viscount Nelson traded in his John Deere merge with 1,000 hours on it for one and only with merely 400 hours on it. The conflict in monetary value 'tween the two machines was good all over $100,000 - and the monger offered to add Lord Nelson that total interest-complimentary 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 David Greising and Tomasz Janowski)