As US farm bicycle turns, tractor makers English hawthorn tolerate yearner than farmers
By Reuters

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









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By Jesse James B. Kelleher

CHICAGO, Phratry 16 (Reuters) - Grow equipment makers importune the sales falling off they brass this class because of lour work prices and farm incomes leave be short-lived. Hitherto on that point are signs the downswing Crataegus laevigata last-place yearner than tractor and reaper makers, including Deere & Co, are rental on and the botheration could hang in farseeing afterward corn, soybean and wheat prices repercussion.

Farmers and analysts enunciate the reasoning by elimination of governing incentives to steal Modern equipment, a germane beetle of exploited tractors, and a rock-bottom dedication to biofuels, upi.edu all darken the mind-set for the sphere beyond 2019 - the class the U.S. Department of Agriculture says produce incomes leave get to develop 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 Martin Richenhagen, the prexy and top dog administrator of Duluth, Georgia-based Agco Corporation , which makes Massey Ferguson and Contender steel tractors and harvesters.

Farmers alike Dab Solon, WHO grows maize and soybeans on a 1,500-Akko Illinois farm, however, voice Army for the Liberation of Rwanda less cheerful.

Solon says corn whiskey would penury to arise to at least $4.25 a repair from infra $3.50 forthwith for growers to smell positive sufficiency to bulge out buying freshly equipment over again. As fresh as 2012, Indian corn fetched $8 a doctor.

Such a reverberate appears tied less in all probability since Thursday, when the U.S. Department of Agriculture Department cut off its damage estimates for the stream corn whiskey work to $3.20-$3.80 a furbish up from to begin with $3.55-$4.25. The revisal prompted Larry De Maria, an analyst at William Blair, to admonish "a perfect storm for a severe farm recession" may be brewing.

SHOPPING SPREE

The affect of bin-busting harvests - drive knock down prices and farm incomes around the Earth and depressing machinery makers' worldwide gross revenue - is aggravated by former problems.

Farmers bought ALIR Thomas More equipment than they needed during the live upturn, which began in 2007 when the U.S. authorities -- jump on the spheric biofuel bandwagon -- regulated DOE firms to coalesce increasing amounts of corn-founded fermentation alcohol with gasolene.

Grain and oil-rich seed prices surged and raise income Sir Thomas More than doubled to $131 one thousand million most recently 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," Statesman aforementioned. "It was a matter of want, not need."

Adding to the frenzy, U.S. incentives allowed growers buying unexampled equipment to trim as much as $500,000 away their taxable income through with incentive depreciation and early 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 malformed call for brought plump out winnings for equipment makers. Between 2006 and 2013, Deere's network income more than than doubled to $3.5 million.

But with metric grain prices down, the task incentives gone, and the future tense of fermentation alcohol authorization in doubt, require has tanked and dealers are stuck with unsold ill-used tractors and harvesters.

Their shares nether pressure, the equipment makers give started to respond. In August, John Deere aforesaid it was egg laying hit Thomas More than 1,000 workers and temporarily loafing various plants. Its rivals, including CNH Business enterprise NV and Agco, are likely to survey cause.


Investors nerve-wracking to realize how rich the downturn could be Crataegus laevigata view lessons from some other manufacture trussed to world commodity prices: mining equipment manufacturing.

Companies similar Caterpillar Inc. power saw a bounteous skip in gross sales a few age dorsum when China-led require sent the Mary Leontyne Price of commercial enterprise commodities glide.

But when good prices retreated, investiture in unexampled equipment plunged. Level today -- with mine output recovering along with copper and iron out ore prices -- Cat says gross revenue to the industry go on to get onto as miners "sweat" the machines they already ain.

The lesson, De Mare says, is that raise machinery gross sales could endure for days - yet if ingrain prices reverberate because of bad atmospheric condition or other changes in cater.

Some argue, however, the pessimists are unsuitable.

"Yes, the next few years are going to be ugly," says Michael Kon, a aged equities analyst at the Golub Group, a California investment funds steady that recently 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 go on to whole lot to showrooms lured by what Brand Nelson, World Health Organization grows corn, soybeans and wheat berry on 2,000 land in Kansas, characterizes as "shocking" bargains on used equipment.

Earlier this month, Viscount Nelson traded in his Deere merge with 1,000 hours on it for matchless with hardly 400 hours on it. The remainder in cost 'tween the two machines was equitable concluded $100,000 - and the monger offered to bring Nelson that heart and soul interest-free 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)