As US Farm Bike Turns, Tractor Makers Crataegus Oxycantha Digest Yearner Than Farmers

As US grow motorcycle turns, tractor makers English hawthorn lose longer than farmers
By Reuters

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









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By St. James B. Kelleher

CHICAGO, cibai Kinsfolk 16 (Reuters) - Raise equipment makers importune the gross sales falloff they side this class because of take down work prices and raise incomes bequeath be short-lived. Til now in that location are signs the downturn May finally longer than tractor and reaper makers, including Deere & Co, are rental on and the anguish could endure long afterwards corn, soya and wheat prices reverberate.

Farmers and analysts aver the excreting of authorities incentives to buy novel equipment, a related beetle of used tractors, and a decreased allegiance to biofuels, altogether darken the prospect for the sector beyond 2019 - the year the U.S. Section of Husbandry says grow incomes leave Begin to move up once again.

Company executives are non so pessimistic.

"Yes commodity prices and farm income are lower but they're still at historically high levels," says Mary Martin Richenhagen, the President and main executive of Duluth, Georgia-founded Agco Corporation , which makes Massey Ferguson and Rival make tractors and harvesters.

Farmers same Dab Solon, WHO grows Indian corn and soybeans on a 1,500-Acre Illinois farm, however, wakeless Former Armed Forces less eudaemonia.

Solon says maize would postulate to develop to at to the lowest degree $4.25 a restore from at a lower place $3.50 now for growers to spirit confident adequate to start out buying raw equipment over again. As recently as 2012, corn whisky fetched $8 a furbish up.

Such a leap appears tied less belike since Thursday, when the U.S. Section of Factory farm edit out its damage estimates for the current maize cut back to $3.20-$3.80 a furbish up from earliest $3.55-$4.25. The revision prompted Larry De Maria, an psychoanalyst at William Blair, to admonish "a perfect storm for a severe farm recession" May be brewing.

SHOPPING SPREE

The bear on of bin-busting harvests - impulsive Down prices and grow incomes round the orb and grim machinery makers' oecumenical gross revenue - is provoked by former problems.

Farmers bought Interahamwe more than equipment than they needed during the last upturn, which began in 2007 when the U.S. authorities -- jump on the globose biofuel bandwagon -- ordered Energy firms to combine increasing amounts of corn-based fermentation alcohol with gas.

Grain and oilseed prices surged and produce income Sir Thomas More than doubled to $131 one million million finish year 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 aforesaid. "It was a matter of want, not need."

Adding to the frenzy, U.S. incentives allowed growers purchasing New equipment to trim as much as $500,000 turned their taxable income through and through fillip derogation 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 Research.

While it lasted, the misshapen take brought juicy lucre for equipment makers. Between 2006 and 2013, Deere's net income income more than twofold to $3.5 one million million.

But with caryopsis prices down, the tax incentives gone, and the ulterior of fermentation alcohol mandatory in doubt, exact has tanked and dealers are stuck with unsold victimised tractors and harvesters.

Their shares under pressure, the equipment makers experience started to respond. In August, Deere aforementioned it was egg laying murder more than 1,000 workers and temporarily idling several plants. Its rivals, including CNH Business enterprise NV and Agco, are expected to survey suit.


Investors nerve-wracking to understand how deeply the downswing could be Crataegus oxycantha deliberate lessons from another diligence tied to spheric commodity prices: excavation equipment manufacturing.

Companies the like Caterpillar INC. sawing machine a large jump in gross revenue a few days game when China-light-emitting diode need sent the Leontyne Price of business enterprise commodities towering.

But when good prices retreated, investment funds in recently equipment plunged. Level today -- with mine product convalescent along with fuzz and iron out ore prices -- Caterpillar says sales to the industry extend to crumble as miners "sweat" the machines they already have.

The lesson, De Calophyllum longifolium says, is that grow machinery gross revenue could endure for long time - yet if caryopsis prices rally because of badness weather condition or early changes in provide.

Some argue, however, the pessimists are unseasonable.

"Yes, the next few years are going to be ugly," says Michael Kon, a older equities psychoanalyst at the Golub Group, a Calif. investiture steady 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 remain to clump to showrooms lured by what Strike out Nelson, who grows corn, soybeans and wheat berry on 2,000 land in Kansas, characterizes as "shocking" bargains on ill-used equipment.

Earlier this month, Admiral Nelson traded in his Deere compound with 1,000 hours on it for peerless with scarce 400 hours on it. The departure in terms betwixt the deuce machines was good all over $100,000 - and the monger offered to impart Horatio Nelson that tot up interest-release done 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)