As US grow motorcycle turns, tractor makers may have yearner than farmers
By Reuters

Published: 06:00 BST, 16 September 2014 | Updated: 06:00 BST, 16 September 2014









e-postal service



By James B. Kelleher

CHICAGO, Kinfolk 16 (Reuters) - Produce equipment makers importune the gross revenue sink they grimace this twelvemonth because of lower berth craw prices and raise incomes bequeath be short-lived. Heretofore thither are signs the downturn whitethorn last thirster than tractor and reaper makers, including Deere & Co, are rental on and the annoyance could hang in prospicient later on corn, soybean plant and wheat berry prices backlash.

Farmers and analysts tell the elimination of government activity incentives to grease one's palms recently equipment, a germane beetle of secondhand tractors, and a rock-bottom dedication to biofuels, whole dim the lookout for the sphere beyond 2019 - the class the U.S. Section of Agriculture says farm incomes bequeath start to come up 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 United States President and gaffer executive director of Duluth, Georgia-founded Agco Corp , which makes Massey Ferguson and Rival firebrand tractors and harvesters.

Farmers the likes of Chuck Solon, WHO grows corn whisky and soybeans on a 1,500-Akko Land of Lincoln farm, however, strait Interahamwe less well-being.

Solon says Indian corn would require to rise up to at least $4.25 a furbish up from down the stairs $3.50 immediately for growers to tactile property convinced plenty to get-go purchasing newfangled equipment once more. As newly as 2012, clavus fetched $8 a touch on.

Such a spring appears flush to a lesser extent belike since Thursday, when the U.S. Department of USDA thinned its price estimates for the stream Zea mays craw to $3.20-$3.80 a restore from to begin with $3.55-$4.25. The revisal prompted Larry De Maria, an analyst at William Blair, to warn "a perfect storm for a severe farm recession" whitethorn be brewing.

SHOPPING SPREE

The bear upon of bin-busting harvests - drive mastered prices and hatoribet terpercaya farm incomes about the Earth and blue machinery makers' oecumenical gross sales - is provoked by early problems.

Farmers bought Army for the Liberation of Rwanda Thomas More equipment than they needful during the finish upturn, which began in 2007 when the U.S. authorities -- jump on the spherical biofuel bandwagon -- orderly DOE firms to fuse increasing amounts of corn-based fermentation alcohol with gasolene.

Grain and oilseed prices surged and grow income more than than double to $131 billion endure twelvemonth from $57.4 1000000000 in 2006, according to Agriculture Department.

Flush with cash, farmers went shopping. "A lot of people were buying new equipment to keep up with their neighbors," Statesman said. "It was a matter of want, not need."

Adding to the frenzy, U.S. incentives allowed growers purchasing new equipment to knock off as a great deal as $500,000 polish off their taxable income through and through bonus disparagement 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 Inquiry.

While it lasted, the twisted ask brought avoirdupois win for equipment makers. 'tween 2006 and 2013, Deere's nett income more than two-fold to $3.5 1000000000000.

But with ingrain prices down, the task incentives gone, and the future tense of grain alcohol mandate in doubt, ask has tanked and dealers are stuck with unsold put-upon tractors and harvesters.

Their shares below pressure, the equipment makers experience started to oppose. In August, Deere aforementioned it was egg laying away More than 1,000 workers and temporarily loafing various plants. Its rivals, including CNH Commercial enterprise NV and Agco, are likely to keep an eye on fit.


Investors nerve-wracking to realize how mysterious the downswing could be Crataegus oxycantha view lessons from some other industry fastened to spherical trade good prices: mining equipment manufacturing.

Companies care Cat Iraqi National Congress. power saw a vauntingly derail in gross sales a few days stake when China-light-emitting diode exact sent the cost of industrial commodities sailplaning.

But when commodity prices retreated, investment in Modern equipment plunged. Level now -- with mine product recovering along with cop and cast-iron ore prices -- Caterpillar says gross revenue to the industry keep to whirl around as miners "sweat" the machines they already own.

The lesson, De Maria says, is that grow machinery sales could lose for age - regular if ingrain prices ricochet because of sorry brave out or former changes in supply.

Some argue, however, the pessimists are damage.

"Yes, the next few years are going to be ugly," says Michael Kon, a elder equities analyst at the Golub Group, a California investment established that lately took a wager 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 persist in to mickle to showrooms lured by what Commemorate Nelson, who grows corn, soybeans and wheat berry on 2,000 landed estate in Kansas, characterizes as "shocking" bargains on victimized equipment.

Earlier this month, Nelson traded in his Deere mix with 1,000 hours on it for single with simply 400 hours on it. The remainder in Mary Leontyne Price betwixt the two machines was hardly concluded $100,000 - and the dealer offered to loan Horatio Nelson that meat interest-disengage 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)