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Worldwide agricultural mechanization: Agrievolution check-up at EIMA Agrimach

EIMA Agrimach is providing the forum for Agrievolution for mapping out future scenarios covering agricultural mechanization around the world. The Chinese and American markets are racing whereas Europe is slowing as expected in the wake of the gains of past years. Promising prospects for Turkey experiencing an agriculture boom and a pricing risk brewing in Japan

by Giovanni M. Losavio
december 2013 | Back

The global markets will come under the spotlight at Eima Agrimach in New Delhi in the Agrievolution forum, organized by Ficci, planned for 5 and 6 December where speakers will update world agricultural forecasts and the outlook for agricultural mechanization. Proceedings will open with a business climate survey conducted among agricultural machinery manufacturers and importers by the Agrievolution, the international association which brings together the agricultural machinery manufacturers in the leading countries around the world. The findings of the Agrievolution Economic Working Group, made public at the recent edition of Agritechnica in Hanover, pointed to growth prospects for the sector in 2013. Overall agricultural machinery sales should reach 96billion euro for a seven point increase over the previous year. The third quarter trend was especially positive with sales gains chalked up for most of the world’s markets to offset the less satisfactory results of the first quarter. Thanks to favorable economic conditions for farming around the globe, the outlook for the months to come is optimistic. On a global average, 45% percent of the manufacturers interviewed, almost one out of two, expect further growth of their turnover for the coming six months and only 18% are looking to decreasing sales over the same period.


Market scenarios. India in evidence

The data gathered of course does not disclose what are often significant differences in the various frames of reference. A consolidated element in the scenario of agricultural mechanization is represented by the Indian market, which has recently gained the first position worldwide for tractor registrations. In fact, if we take into consideration the machinery with more than 30 HP, India reached last year an amount of almost 600,000 units, that is four times in comparison with mature markets such as Europe and United States. This value is destined to a further increase in the following years. For the United States, China and Turkey, and Japan to some degree, further grown is forecast within the coming six months, but expectations are not bright for the European markets where about one in three manufacturers, the highest percentage in the Agrievolution survey, said they expected a decline in sales in the coming six months under levels reached in the same period in 2012. The findings of the Economic Working Group in the sector of tractors indicate that the European Union should close 2013 with volume down 5% and value off 1% under 2012.Also sales in 2014 will remain on the negative side to settle at about 170,000 units, for a 3% drop, and slip 2% under the 2013value to a total of 10.4 billion euro. This trend differs little for combine harvesters which should hold out in 2013 at the level reported for 2012, 10,500 units, to then drop by 8% in 2014. Thes lowdown in Europe, however, could be considered merely a pause for reflection coming after the expansionary cycle of recent years. This is seen as the case for France, where the 2014 market is expected to shrink from 5.6 to 5.4 billion euro after uninterrupted gains reported since 2011, and for Germany leaving behind three strongly positive years in which the sector moved from 4.8to 5.6 billion euro in 2013 with record growth of the sales of Germany manufacturers at plus 7% for 2012. The Old Continent’s situation can also be traced to structural factors as can the case of Italy where new tractor sales plunged 28% from 2007 to 2012to bring to light serious problems on the domestic market which were partially offset by the increase in exports. These difficulties were caused not only the unfavorable economic climate but also structural factors such as the tightening of access to credit by banks and the European Union funds and the weight of bureaucratic costs and the fiscal burden. FederUnacoma has pointed out that because of these factors, the majority of farms, 55%, has financed the acquisition of agricultural machinery with their own funds. Moreover, according to the manufacturers’ federation, the outlook does not appear likely to change in the near future in that only 13% of farming enterprises are planning the purchase of new machinery or equipment over the three years to come.

China setting the pace, also Turkey in the race

Compared to Europe in stagnation, favorable prospects for China revolve around increasing income in the primary sector and government subsidies for the purchase of agricultural machinery which completed its fifth straight year of grown in value of domestic production as well as profitability for national manufacturers. On incentive policies for the sector, the China Association of Agricultural Machinery Manufacturers, Caam, has reported that the Beijing government made available 74.4 billion yuan, equal to more than 9 billion euro, from 2004 to 2012 and is expected to allocate further funds of 21.7 billion yuan, 2.5 billion euro, for2013 to raise the total value of production to 400 billion yuan,48 billion euro, and that of exports to 12 billion dollars. Thus China is the nation with the big numbers market as shown by the Agrievolution data on five straight years of expansion featuring double digit growth. The estimate for 2013 is for gains of16% over 2012. Another point of interest is that Chinese manufacturers are specializing in high horsepower tractors of over 100hp, a category which rose from 2,700 units in 2006 to more than56,000 in 2012 while the production of tractors rated as over 25hp reached an estimated 380,000 in 2013. According to Caam, the market expansionary phase should continue in the coming years thanks in part to the progressive modernization and industrialization of Chinese agriculture which will increasingly require the support of mechanical means. Against this backdrop, it comes as no surprise that Chinese manufacturers are looking to the future with considerable optimism. Also the data for Turkey are glowing, especially those on agriculture. GDP for the sector has tripled to reach 62.5 billion dollars while agriculture is becoming a genuine engine for the development of the nation’s economy now ranked in seventh place for the sector among world producers. The agriculture boom has obviously laid the groundwork for the development of agricultural mechanization sector made possible by public sector support whichled to a surge of 68% in tractor sales in 2011 up to the total of more than 60,000 units. The market decline in 2012 was seen as normal and should continue through 2013 as well to then return to growth beginning in 2014, a year for which the Agrievolution study foresees a 6% gain over 2013. The market trend of the future is linked especially to making Turkey’s agriculture more professional and will witness the natural selection among less efficient and less competitive enterprises and increasingly involve the use of high capacity machinery and mecatronic systems capable of rationalizing the country’s primary sector to make it more efficient.

High power valued in the U.S.; prices on the increase in Japan

A favorable outlook has also been charted for the United States market where 54% of the manufacturers said they expected the growth of orders over the coming six months and 46% expected increasing sales. In 2012 the U.S. market reached 29 billion dollars for a steep 40% increase over 2011. Benefiting especially were tractors with power of more than 30 hp, up 47% in value, and combine harvesters to a lesser degree, ahead 12%. For the sector of tractors, the manufacturer’s association AEM is look into slightly fewer than 150,000 units sold in 2013. Though the high power ratings are still in the minority with 25,000 units moved in 2013 they are making significant inroads against the low power models. The trend over the past ten years, in fact, shows that the former have more than doubled their share from 10,000tractors in 2003 to 25,000 in 2013 to undercut the latter which shed some 20% in sales and lost out by more than 20,000units, with sales in 2003 which came to 100,000 units sold. Also tractors in the 40 to 100 hp categories are on the decline. After the peak reached between 2004 and 2007, these tractors dropped back to their 2003 value. The case of Japan is something else. In this country, manufacturer’s expectations for the coming months are positive following the launch of new models of their products in 2013 and the sound performance of Japanese agriculture but the outlook could turn pessimistic. The alarm is sounded by the association of Japanese manufacturers, JAMMA, in reporting two increases in sales taxes planned for next April, from 5% to 8%, and the other, up to 10% in October2015, certain to result in higher prices for agricultural machinery and equipment. Added to this new pressure on prices is the arrival, expected for November 2014, of new emissions regulations to apply to agricultural machinery. According to JAMMA, the9% estimated increase in tractor sales and 10% gain for combines in 2013 could be the result of a race to buy to sterilize the price hikes foreseen in the years to come.


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