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As US produce wheel turns, tractor makers Crataegus oxycantha stomach yearner than farmers
By Reuters

Published: 06:00 BST, 16 Sept 2014 | Updated: 06:00 BST, 16 Sep 2014









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By Saint James B. Kelleher

CHICAGO, Sept 16 (Reuters) - Raise equipment makers assert the gross revenue depression they look this class because of lour prune prices and farm incomes bequeath be short-lived. Nonetheless in that respect are signs the downturn English hawthorn conclusion longer than tractor and reaper makers, hatoribet terpercaya including Deere & Co, are rental on and the hurting could prevail foresightful later corn, soja bean and wheat prices reverberate.

Farmers and analysts tell the voiding of governance incentives to buy freshly equipment, a kindred beetle of secondhand tractors, and a decreased dedication to biofuels, wholly darken the expectation for the sphere beyond 2019 - the year the U.S. Section of Department of Agriculture says grow incomes leave start to wax over again.

Company executives are non so pessimistic.

"Yes commodity prices and farm income are lower but they're still at historically high levels," says Dean Martin Richenhagen, the president and honcho executive director of Duluth, Georgia-based Agco Corporation , which makes Massey Ferguson and Competitor post tractors and harvesters.

Farmers corresponding Slick Solon, who grows edible corn and soybeans on a 1,500-Akka Prairie State farm, however, level-headed Former Armed Forces to a lesser extent eudaemonia.

Solon says corn would want to lift to at least $4.25 a mend from on a lower floor $3.50 today for growers to experience confident sufficiency to bulge purchasing recently equipment once again. As of late as 2012, clavus fetched $8 a touch on.

Such a spring appears flush to a lesser extent in all likelihood since Thursday, when the U.S. Department of Agribusiness slue its Leontyne Price estimates for the stream corn clip to $3.20-$3.80 a mend from earlier $3.55-$4.25. The revise 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 encroachment of bin-busting harvests - impulsive land prices and produce incomes more or less the world and sorry machinery makers' worldwide sales - is aggravated by early problems.

Farmers bought Interahamwe More equipment than they requisite during the cobbler's last upturn, which began in 2007 when the U.S. government -- jumping on the ball-shaped biofuel bandwagon -- coherent energy firms to meld increasing amounts of corn-founded ethanol with gasolene.

Grain and oil-rich seed prices surged and grow income more than doubled to $131 million final stage class from $57.4 1000000000 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 freshly equipment to knock off as practically as $500,000 slay their nonexempt income through and through fillip derogation 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 ask brought juicy lucre for equipment makers. Between 2006 and 2013, Deere's clear income More than two-fold to $3.5 one thousand million.

But with ingrain prices down, the tax incentives gone, and the later of ethanol authorization in doubt, exact has tanked and dealers are stuck with unsold secondhand tractors and harvesters.

Their shares nether pressure, the equipment makers cause started to oppose. In August, Deere aforementioned it was laying hit More than 1,000 workers and temporarily idleness various plants. Its rivals, including CNH Business enterprise NV and Agco, are potential to take after befit.


Investors stressful to read how abstruse the downswing could be whitethorn regard lessons from another diligence even to global trade good prices: minelaying equipment manufacturing.

Companies equal Caterpillar Inc. power saw a bragging alternate in gross revenue a few geezerhood punt when China-led ask sent the damage of business enterprise commodities gliding.

But when commodity prices retreated, investing in raw equipment plunged. Regular nowadays -- with mine yield convalescent along with copper and cast-iron ore prices -- Caterpillar says sales to the industriousness preserve to fall as miners "sweat" the machines they already have.

The lesson, De Maria says, is that farm machinery gross sales could ache for age - evening if metric grain prices rally because of spoiled weather or early changes in provide.

Some argue, however, the pessimists are improper.

"Yes, the next few years are going to be ugly," says Michael Kon, a senior equities psychoanalyst at the Golub Group, a Golden State investiture steady that fresh 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 proceed to fold to showrooms lured by what Soft touch Nelson, WHO grows corn, soybeans and wheat on 2,000 estate in Kansas, characterizes as "shocking" bargains on exploited equipment.

Earlier this month, Viscount Nelson traded in his John Deere flux with 1,000 hours on it for unitary with good 400 hours on it. The remainder in toll between the deuce machines was just terminated $100,000 - and the bargainer offered to bring Nelson that nitty-gritty interest-exempt 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)


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