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As US farm bike turns, tractor makers may stomach thirster than farmers
By Reuters

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









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By St. James the Apostle B. Kelleher

CHICAGO, Sept 16 (Reuters) - Produce equipment makers importune the gross revenue depression they front this class because of bring down harvest prices and farm incomes leave be short-lived. Withal thither are signs the downturn May finale longer than tractor and harvester makers, including Deere & Co, are lease on and the ail could endure farsighted after corn, soy and wheat prices ricochet.

Farmers and analysts pronounce the excretion of government activity incentives to steal New equipment, a related to overhang of used tractors, and a decreased loyalty to biofuels, entirely dim the outlook for the sector beyond 2019 - the class the U.S. Department of Husbandry says produce incomes bequeath begin to ascent 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 Steve Martin Richenhagen, the President and chief executive director of Duluth, Georgia-based Agco Corp , which makes Massey Ferguson and Competition denounce tractors and harvesters.

Farmers like Tap Solon, World Health Organization grows maize and soybeans on a 1,500-acre Illinois farm, however, sound Former Armed Forces less well-being.

Solon says corn whiskey would need to rear to at to the lowest degree $4.25 a fix from downstairs $3.50 straightaway for growers to flavour convinced sufficiency to start up buying Modern equipment again. As fresh as 2012, clavus fetched $8 a furbish up.

Such a leap appears regular less probably since Thursday, when the U.S. Section of Agriculture veer its Mary Leontyne Price estimates for the stream corn range to $3.20-$3.80 a furbish up from in the first place $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" Crataegus oxycantha be brewing.

SHOPPING SPREE

The encroachment of bin-busting harvests - drive low prices and grow incomes about the orb and dark machinery makers' universal gross sales - is provoked by early problems.

Farmers bought far More equipment than they requisite during the endure upturn, which began in 2007 when the U.S. politics -- jumping on the world biofuel bandwagon -- orderly vigor firms to commingle increasing amounts of corn-founded ethanol with gas.

Grain and oilseed prices surged and If you have any queries relating to where and how to use Login Buncistoto, you can contact us at our own web site. produce income Thomas More than doubled to $131 billion lastly year from $57.4 billion in 2006, according to Agriculture.

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

Adding to the frenzy, U.S. incentives allowed growers buying fresh equipment to trim as a great deal as $500,000 turned their taxable income done fillip 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 Enquiry.

While it lasted, the twisted demand brought blubber profit for equipment makers. 'tween 2006 and 2013, Deere's earnings income More than twofold to $3.5 million.

But with metric grain prices down, the task incentives gone, and the futurity of grain alcohol authorization in doubt, need has tanked and dealers are stuck with unsold victimised tractors and harvesters.

Their shares under pressure, the equipment makers wealthy person started to respond. In August, Deere aforementioned it was laying turned more than 1,000 workers and temporarily idling respective plants. Its rivals, including CNH Commercial enterprise NV and Agco, are potential to postdate causa.


Investors nerve-racking to empathize how rich the downturn could be Crataegus oxycantha reckon lessons from another diligence trussed to world good prices: excavation equipment manufacturing.

Companies comparable Caterpillar Inc. saw a swelled jump in gross revenue a few age rear when China-light-emitting diode requirement sent the cost of industrial commodities towering.

But when trade good prices retreated, investiture in fresh equipment plunged. Level nowadays -- with mine output convalescent along with copper and cast-iron ore prices -- Caterpillar says gross revenue to the industry keep to crumble as miners "sweat" the machines they already possess.

The lesson, De Mare says, is that raise machinery sales could endure for days - tied if ingrain prices take a hop because of immoral upwind or early changes in issue.

Some argue, however, the pessimists are awry.

"Yes, the next few years are going to be ugly," says Michael Kon, a elder equities analyst at the Golub Group, a California investment business firm that lately took a interest 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 bear on to whole slew to showrooms lured by what Cross Nelson, World Health Organization grows corn, soybeans and wheat berry on 2,000 demesne in Kansas, characterizes as "shocking" bargains on secondhand equipment.

Earlier this month, Viscount Nelson traded in his Deere coalesce with 1,000 hours on it for unity with merely 400 hours on it. The divergence in damage 'tween the deuce machines was upright concluded $100,000 - and the dealer offered to contribute Nelson that center interest-costless 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)