Economics & Politics / Tractor Industry

Global Agricultural Machinery Market: Outlook 2012

Global Agricultural Machinery Market: Outlook 2012

  

Global Agriculture production 2010-11: Mixed Results

  • During 2010/11 harvest turned out well worldwide except Europe.
  • In 2011 the volume of grain harvested in the European Union was around 283 million tonnes, which is 2% above the average for the previous five harvests.
  • Wheat harvest was 130 million tonnes, which is 2% above the average for the previous five harvests.
  • Average farm machinery market growth in European Union during 2011 was 15% and market volume was 24 billion Euros, only 7% less than the record level of 2008.
  • However, for the year 2012 as a whole, stagnation of Western European market (Germany & France)seems likely.
  • A weak phase has already been initiated in the Southern European markets (particularly Spain & Italy).
  • However, further growth in Central and Eastern European markets is possible, in light of the good harvest and continued need for mechanization.

Business Climate

  • World
    • On global level, the majority of the industry representatives are satisfied with their current business situation, 63% of the manufactures of agri machinery rate their situation as good or very good but a totally different results exists for Japan, where the industry on one hand has to struggle with a very weak domestic market, and on the other hand to be competitive on the export markets considering the appreciation of the Yen currency.
    • Unbroken optimism exists in the US, as well as in India and Brazil.
    • All Indian Manufacturers and the great majority in the US expected increasing sales for the last three months of 2011 and during 1st three months of 2012.
  • Europe
    • The European agricultural machinery industry continues to be in boom phase and emerged relatively quickly from the short but deep recession of 2009/2010.
    • France and Germany are exhibiting double digit growth, also in terms of new orders.
    • In the Eastern European markets, particularly Russia and Ukraine, continuing high demand is anticipated. This more than offsets declining demand in the Southern European markets, Spain and Italy.

 

Industry Turnover

  • The Factors that will contribute to increase sale of the farm machinery are:
    • Agricultural income/purchasing power
    • Investment needs
    • Overall economic environment
    • Interest charges and liquidity
    • Taxes and agricultural policy
    • Used machinery market
    • Shift of investments mood.
    • No significant negative indications can be cited regarding the economic situation of the agricultural machinery industry in the year 2012.
    • Although the necessity of purchasing machinery is reduced in the core markets, at the same time sufficient purchasing power in agriculture to permit continued participation at the forefront of state–of-the-art technology.
    • The initial growth of the industry at the beginning of the year 2012 could be replaced by a stagnating trend in the following months–other circumstances being equal.
    • In the emerging Markets, the expansive trend towards higher production volumes of agricultural commodities will in medium term continues to play a positive role on demand for agricultural machinery.

1. Technology Trends

  • Automation: A trend of automation in agricultural machinery design e.g. remote-controlled or Driverless tractor/ combine.
  • Precision Farming with the help of GPS & ISOBUS. Use of two tractors in tandem with the help of ISOBUS/GPS system, where a second tractor is driverless and remotely controlled by the tractor with a driver.
  • Converting tractor mechanical power into electrical power by attaching a generator to the engine in the front for operating certain tractor auxiliaries like, steering, radiator fan, transmission, alternator, etc.
  • Engine Development: Engine development has special significance considering the framework of sustainability & environmental protection. Exhaust emission provisions, in particular, have strongly influenced further development of engines, as well as that of entire agricultural machines & tractors.
  • In Many cases, agricultural machinery & tractors would have to be completely redesign to meet the exhaust emission standards.

 

2.     Product Related Market Trends across the globe

  • During January to September 2011, tractor market was very dynamic. Approximately 121,000 new tractors registered in Western Europe, an increase of 14%.
  • In the two largest markets Germany and France tractor sales surpassed those of last year by remarkably 29 and 23%, respectively.
  • As per estimate of VDMA by end of 2011 about 158,000 tractors would (an increase of 12 percent) have been sold in Western European Market.
  • Positive prospects for 2012.
  • A decline in 5-10% in registration of tractor in Brazil and Japan was noticed during 1st nine months of 2011.
  • The US market seemed to be stagnating and leveling off at 160,000 to 170,000 tractors during 2011.
  • Extremely positive growth trends in Russia and Turkey; sales figures have doubled as compared to last year.
  • Chinese sales went up by 10%, with a considerable growth of one third for the bigger tractors.
  • During the previous year (2010)
    • Western Europe combine harvester market shrunk for  the 2nd consecutive year to only ~5600 machines.
    • In Germany 1500 new combines were sold.
    • In France only 1740 combines were sold.
    • In Eastern Europe, sale of combines declined around 3% to just over 30,000 machines.
    • The economic low was upset by excellent sale of more than 4500 combines in Brazil and 10,700 units in US.
    • Sale of combine harvesters increased to an estimated 36,000 units in Western Europe. The number increased to 6900, a fairly average value, with 2000 each for Germany and France. For the coming year, manufacturers worldwide anticipate a significant decline.
    • During 2011, about 2700 forage harvesters are expected to have been sold in the worldwide market with 1500 in Western Europe. Demand is due to use of biomass for power generation and in light of this, the forecast for 2012 remains positive.
    • In the past few years, market trends have been more volatile for big square balers. About 3200 square balers have been sold during 2011 globally as compared to 2900 sold last year. About 1700 square balers were sold in Western Europe during 2011 against 1500 last year.
    • During 2011 about 27,200 round balers were sold worldwide and 10,000 in Western Europe. A stable trend is expected during 2012. In India one manufacturer has started manufacturing round baler.
    • The market for grassland equipment (Mowers, Tedders, Rakes, Forage Loading Wagons, etc.) is expected to be high during 2012.
    • In case of sprayers, the market is divided into towed/ mounted and self-propelled equipment. There was a considerable increase in sales of sprayers for Europe in 2011. With approximately 2000 towed/ mounted sprayers. The two largest European Markets, Germany and France are providing a solid basis for the upswing.
    • There was strong recovery in sale of fertilizer spreaders during 2011 with above-average sales increases in the large markets of France and Germany. Across Europe, the number of fertiliser spreaders sold in the first half of 2011 was only 25 more than last year.
    • In case of tillage equipment, the boom of 2008 is a thing of the past. Last year’s sales number were well below that figure with a decline of 12%. Sales during 2011 were expected to be more than compensate for this drop. Some manufacturers are anticipating additional demand due to the new strip-till system.  Strip till drills were in demand during 2011.
    • Demand for precision seed drills have been dynamic. In the first half of 2011, the European market recorded an increase of 56%.

Development in Selected Markets

  • China – Government encourages mechanization
    • The migration of the rural population to the cities is continuing. Farmers are leaving their small parcels of lands and migrating to cities.
    • As a result, there is more and more unused land and thus tremendous opportunity for the establishment of modern agriculture. Same is also happening in India. Land is being leased to the remaining farmers.
    • So contractors are taking over not only all field work, from soil tillage to sowing and harvesting but also the complete marketing of the agricultural products. Contractors are buying latest machinery under subsidy. Foreign manufactures who have set up their manufacturing base in China can also avail up to 30 % subsidy.
    • Chinese agri machinery market is already second to that of the US. VDMA had estimated a volume of 11 billion Euros for 2010.
    • The large state-owned and private farms in the northeast( Heilongjiang and Jilin), northwest(Xinjiang) and inner Mongolia are certainly the main purchasers of modern tractors and agri machinery.
    • Subsidy profile based on the next five year plan may be focused on large tractors (with more than 100 HP)and on implements, since these segments still have a lot of catching up to do. So many foreign companies are toying up with the idea of setting up their base in China like John deere, Case New Holland and AGCO, which have already set up production in China.
  • United States: Slower Growth
    • The market picked up significantly again during 2010.
    • Machinery imports grew by 19 percent to US$ 4 billion.
    • The tractor market grew by 6 percent to 1,65,253 units.
    • In the Combine harvester segment sales figures were extraordinarily high at 10,700 units.
    • During 2011, sale of tractors during 1st nine months, sales of tractors were flat on the previous year’s level, while the combine harvester declined by 6 percent but compared to a very high level 2010.
    • The North American manufacturers in the past months still had high increase rates for new orders in the US market- in average by around 20 percent over the 1st half of the 2011.
  • Brazil: Trendsetter for the Latin America
  • Imports are minimal as a lot of agri machinery is produced at home.
  • Home market remained stable during 2009 due to subsidies programme of the Govt.
  • Due to subsidy programme, the tractor segment even saw growth, albeit more in the lower HP segment.
  • The rate of mechanisation of sugarcane harvest will be higher in future.
  • Starting in 2014, slash–and-burn operations for sugarcane harvests will no longer be permitted on the areas in the Sao Paulo Region that are larger than 150 ha.
  • Sales of agri machinery continued at high levels in 2011. During 2011, tractors sales declined by 7 percent in the 1st nine months, combine harvesters sales were nine percent above the previous year( i.e 2010), after a short decline in the first half of the year. Thus both markets exceed the average of recent years.
  • There are considerable political efforts to prevent imports- starting with import duty of 14 %, which are increased by numerous additional charges that apply in the various states, reaching around 50 % of the actual value.
  • The Brazilian manufacturers received more orders during 2011 and the agri machinery market has good potential of growth during 2012.
  • Dynamic Market Development in Europe
    • During 2011, turnover of the agricultural machinery in the European Union was around 20% higher than last year. The industry approached the record level of the year 2008.
    • The outlook for the year 2012 is fraught with uncertainty.
    • Contract farming is expected to be the order of the day.
    • In Germany, companies received 35% more incoming orders than last year.
    • German agricultural machinery industry expects further nominal growth of 5% during 2012. With a volume of 7.5 billion Euros this would again reach the record level of 2008.
    • During 2011, the European Union agricultural machinery markets experienced a slight decline. Thus, while other regions reported considerable growth during the course of last year agricultural investment in Europe remained cautious..
    • In Poland, Romania and Switzerland the agricultural machinery market remained relatively robust throughout the economic crisis, due to Govt. funding that created a ‘special’ boom in the agricultural sector. The situation was similar in Austria, where agricultural investment did not change much in recent years.
    • For most of the remaining countries of the European Union, the years 2009 and 2010 were marked by the recession which, at different rates, reverted to new upswing during the course of 2010.
    • The earliest signs of an economic recovery were felt in Europe’s largest market, Germany, and in some Central and Northern European countries.
    • An average market growth of 15 % was foreseen in the European Union during 2011 with considerable difference from country to country. The market volume thus amounts to just under 24 billion Euros, only 7 % less than the record level of 2008.
    • However, for the year 2012 as a whole, stagnation of the Western European markets seems more likely.
    • A weak phase has already been initiated in the Southern European countries (particularly Italy and Spain). However, further Growth in Central and Eastern European markets is possible, in the light of good harvests and continuing strong need of mechanization.
    • Industry turnover in Germany in the first three quarters of 2011 rose to 31% to 5.4 billion Euros.
    • During the same period, in the tractor factories more than 44,000 tractors rolled off the assembly line, an increase of 23%. Tractor turnover rose 29%, to 2.5 billion euros.
  • Country wise outlook
    • Germany
      • According to the German Ministry of Agriculture, the yield per hectare as a whole was 6 % below the comparison level for the past six years. However, wheat harvest was good during 2011.
      • Biomass is being utilized for electricity generation this has led to increased demand for forage harvesters by 100 to 200 units per year. During 2011 forage harvester market was expected to reach a new record level of about 700 machines.
      • About 35000 tractors, 2015 combine harvesters, 2144 balers, 700 forage harvesters, 9681 mowers and 8702 tedders and rakes were sold during 2011.
      • Overall during 1st half of 2011, the German machinery market grew by 26 % to 2.76 Billion Euros and is estimated to be 4.9 billion Euros. This is 7 % higher than record level of the comparable periods for 2008 and 2009. Current investment plans are –except for combine harvesters-still on high level of the previous year. VDMS Agricultural Machinery Association does not currently foresee a further increase in the German agricultural machinery market for the year 2012 as a whole.
    • France
      • In comparison to German market, in France, the recovery of agricultural machinery market in 2010 was delayed by just under half a year. However, during 2011 French farmers and cooperatives have again invested considerably in new machinery.
      • The French Industry Association, Axima expected record market growth of 39 % for the first half year of 2011 with French manufacturers benefiting more strongly from this increase than other manufacturers. However, Germany was also able to increase its deliveries to France by 46 percent in the first eight months of 2011.
      • For the year 2011 as whole, the market forecast is plus 30 % – with a volume of 4.4 billion Euros, the market has thus again reached a considerable size.
      • The sale of combine harvesters rose again in 2010/2011 to just over 2000 machines; balers increased by 26 % to 4000 machines.
      • Manufacturers of tillage equipment reported a dynamic business. For 2012 increase of ten to fifteen percent is forcasted.
      • During 2011 the French market was expected to grow by 20 percent.
      • The French Association anticipates a stable to slightly increasing volume of turnover for the coming year.
    • United Kingdom:
      • Investment made by UK farmers was good and the tractor market rose four percent by September, 2011.
      • Due to good harvest, more combine harvesters and balers were purchased. However, with 150 machines sold, the forage harvester market also has turned out comparatively well.
      • The British AEA Association estimates the increase in market volume for the first seven months of the year at 15 percent.
    • Central Europe
      • All of the markets in Central Europe are on the upswing, and differ only in rate of growth.
      • The markets of Czech Republic, Slovakia, Hungary and the three Baltic states, which experienced a severe decline due to economic and financial crisis, are again exhibiting significant double- digit growth rates.
      • Bulgaria and Romania are profiting from the excellent harvests of 2010 and 2011, as well as from considerably increased exports.
      • Only in Romania do subsidies still play an appreciable role.
      • The Polish market is at a high level, which means that noticeable growth can still occur only in specific segments.
    • Czech Republic and Slovakia
      • The markets exhibited double digit growth rates.
      • The average size of farm in Czech is 800 hectares and in Slovakia it is 1100 ha.
      • However, the equity market is still low, which makes the farms susceptible to crisis.
      • The agricultural machinery market is booming this year-Germany, the most important supplier, recorded an increase of 50 % in the first eight months of 2011.
      • Further growth in agricultural machinery market is anticipated.
    • Poland
      • Most farms in Poland are very small as compared to Czech and Slovakia with average size of 7 ha. An increasing structural change to large farms can be observed. The equity ratio in the smaller operations is relatively high.  Since, last year, financing opportunities have also improved.
      • The positive mood in Polish agriculture remains above average.
      • Since 2010 farmers have profited from higher prices of grains, beef and milk.
      • Only 1/3 rd of the Polish farmers currently view their economic situation as unfavourable- a smaller percentage than in the past three years. Expectation in coming years also remains very optimistic.
      • However, most farmers complain of the high cost of operating supplies( e.g. energy, fuel and mineral fertilizer) which remains an negative factor.
      • The agricultural machinery market grew slightly in the first half of 2011. The level thus continues to be very high.
      • For the coming months, stagnation of the market is to be expected. Despite the good mood in Polish agriculture, a certain degree of saturation is apparent. If prices for grain, milk and meat fall, a short term decline in agricultural machinery market is also conceivable. However medium –term prospects are good.
      • Poland benefits from a flexible currency and from its geographical location, which provides good opportunities for exporting milk and meat products to both Western Europe and CIS markets.
      • A short term decline in demand would therefore do little to change the key position of Poland as the fifth largest agricultural machinery market in the EU.
    • Hungary
      • During 2011 Hungary achieved a good harvest.
      • Farmers are benefiting not only from good producer prices but also from favourable exchange rate.
      • A structural change to larger farms is gradually being implemented.
      • In future contractors will play an important role and contract farming will be in vogue.
      • The agricultural machinery market is firmly in the hands of a few dealers that dominate the market.
    • Romania
      • Romania experienced very dynamic developments during 2011, benefitting from subsidies as well as from high crop yields and good export opportunities. The mood in the agriculture continues to be excellent.
      • The impact of the sugar beet, oilseed rape and sunflower is regarded very positive while milk and beef prices worsened.
      • There is considerable investment in modern machinery in both the arable farming area and animal husbandry.
      • The investment plan for tractor for the 2nd half of 2011 were above the previous year.
      • Germany’s share of export to Romania is 20 %.
      • The distribution of subsidies continues to play a central role in the development of the agri machinery market but meantime to a far lower extent than until the past year.
      • Even though there may be another one or two rounds of Measures 121 applications( subsidies in the area of equipping farms with machines), in future investment opportunities will depend more heavily upon agricultural markets.
    • Bulgaria
      • In the past year and half, the Bulgarian agri machinery market experienced an unprecedented boom.
      • Following excellent harvest in 2010, investment in arable farming machinery doubled.
      • German tractors and agricultural machinery play an important role in Bulgaria, and make up 40 % of total imports.
      • The Bulgarian Govt. has approved an allocation of funding for measure 121(subsidies in the area of equipping farms with machinery) but funds disbursement time not known.
      • A slightly decreasing farm investment activity is anticipated during 2012 but if further rounds of Measure 121 application follow, this could even contribute to a further short term market boom.
      • The high milk and beef prices are expected to probably stimulate investment in the area of animal husbandry machinery in coming years.
    • Serbia and Croatia
      • Although the agri machinery markets have grown somewhat, they remain far below the actual potential.
      • Serbia formerly strong agricultural machinery industry has now virtually disappeared.
      • Serbia is making serious efforts towards systematic development of domestic agriculture, which has vast potential especially in the province of Vojvodina. In coming years the older machinery must be replaced and so there is good opportunity.
      • If Serbia obtains EU pre-accession status and hence access to funds, this would allow the agri machinery market to advance rapidly.
      • In Croatia a growing market is also anticipated and future investments in equipment and machinery for fruit and vegetable will be intensified.
    • CIS Market
      • The agri machinery markets in the Commonwealth States (CIS) was among the top performers during 2011.
      • The largest markets, Russia and Ukraine, in particular have grown considerable this year. Here, the need for modernization continues to be very great.
      • The quite substantial agri machinery market in Belarus is continuing at a high level.
      • Growth is being recorded by German manufacturers in the niche markets in South Caucasus and in Central Asia. Kazakhstan being exception in this region, with the market remaining at low level, far below its potential.
    • Russian
      • During 2011 Russian market has gained strength and situation in agriculture and hence, the investment climate has improved considerably relative to 2010. The credit squeeze has eased, with the aid of national and regional assistance programmes. Loans are again available even for imported machinery.
      • During 2011, the sales of agri machinery in the Russian market increased by around 50 % relative to last year. In some individual segments of tillage, sowing and forage machinery, the market grew by as much as 60 % to 70 %.
      • Import of tractors and combine harvesters, as well as cultivating machinery are playing an ever smaller role, since international groups & some medium –sized companies have established their own local production locations.
      • The potential of Russian agriculture continue to be immense.
      • Because of the severely restricted investment in the past two years, the need for agri machinery has in fact increased further.
      • In 2012, growth is expected in harvesting machinery( combine harvesters, forage harvesters, balers and mowers)since the important market drivers are grain, milk and meat prices.
    • Ukraine
      • During 2011, sale of agri machinery exceeded even the most optimistic forecasts. Sale of tractors and agri machinery doubled in first half of 2011.While domestic production rose approximately 60 %, import virtually exploded.
      • German exports to Ukraine increased by 135 % in the first six months and 97 % in first 8 months.
      • There is strong demand for combine harvesters, sowing machinery, tillage equipment and equipment for milking and livestock production.
      • Two important factors contributing to these developments are political stability and improved liquidity of the farming operations.
      • There are scarcely any high –quality local farm machinery suppliers.
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6 thoughts on “Global Agricultural Machinery Market: Outlook 2012

  1. Pingback: Global Machinery Industry Outlook « For Whatever It's Worth…

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