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Press Release- AGRIEVOLUTION Economic Committe Meeting in Moscow

PRESS RELEASE- AGRIEVOLUTION ECENOMIC COMMITTE MEETING IN MOSCOW

Agricultural machinery associations evaluate the development of the industry positively 

The annual meeting of the Agrievolution Economic Committee, which took place on 10th October 2012 during the trade fair Agrosalon in Moscow (Russia), showed a rather positive picture of current investments in the agricultural sector and the economic expectations for the coming year. The participating associations, which represent the large locations of agricultural machinery production worldwide, exchanged information about the sales and market development in 2012.

According to current estimates, the global production volume of agricultural machinery will increase to € 86 billion (US$ 110 billion) in the year 2012 and could grow by another five percent in 2013. “Especially the good producer prices for agricultural commodities, which have increased the purchasing power of farmers worldwide, are decisive", says Gerd Wiesendorfer, market analyst of the VDMA Agricultural Machinery Association and organiser of the economic committee in the “Agrievolution” network. He also states that under these conditions it is a general objective of farmers to increase yields in farming by using modern machinery and to improve the process chain in food production. In addition, many governments, especially in the emerging markets, aim to increase domestic production and the degree of self-sufficiency in food and feedstuff production in the medium run by providing new incentives for the purchase of agricultural machines and tractors.

The host of this year´s Agrievolution meeting, the Russian association of manufacturers ROSAGROMASH, discussed the currently rather low national machinery production. During the first eight months of this year, deliveries to dealers decreased by an average of approximately 10%. The entire market, however, remained stable or even grew in some segments as compared with the previous year, which was compensated for by higher imports. For 2013, ROSAGROMASH expects a market growth for agricultural machinery by 8% to US$ 3.3 billion for the Russian Federation.

After extraordinarily good results in 2011, the Turkish agricultural machinery industry has lost some of its dynamic strength. However, the decrease seems to remain within limits. By August, almost 39,000 units of tractors were manufactured, which was only 2% less than in the year before. Higher export figures almost compensate for the current decline on the domestic market. The national association TARMAKBIR emphasised that agricultural machinery is currently the sixth largest position in the entire Turkish export. In the coming year, the poorer 2012 harvest and reduced government subsidies for the sector could slow down the development on the domestic market.

For the European Union, a market volume for agricultural machinery comparable with the last record year 2008 is expected for 2012 (ca. € 25 billion). According to current estimates, the level will remain high in the coming year. However, this includes the possibility of a small sales reduction. The representative of the Italian association UNACOMA, for example, reported a continuously very low willingness of farmers to invest. By the end of September, tractor registrations fell by another 17% as compared with the previous year. Two significant problems of the sector are inadequate access to loans and the insufficient economic efficiency of Italian agriculture. Higher export figures, however, provide some compensation for the Italian manufacturers. The two largest agricultural machinery markets in Europe, Germany and France, are currently in a remarkable boom phase. Driven by the high producer prices for agricultural products, investments in new machinery are at a record level. The volume of the German agricultural machinery market will increase to more than € 5 billion in 2012 and reach a new peak. According to the VDMA, planned investments for the coming six months remain at the level of the year before. In individual market segments, however, the demand might decrease. In France, customers´ incomes are also decisive for this year´s market growth, which has been in the two-digit range so far. For the French tractor market, the association AXEMA expects a sales volume of 41,500 units in 2012, which means a growth of almost 10%. In contrast to Germany, 2008 sales were still slightly above the current level.

The Japanese manufacturer association JAMMA reports a slightly better sentiment in the industry even if the majority of the manufacturers are still dissatisfied with the situation on the domestic market. In 2012, however, the market is expected to grow by 9% for machines and 2% for tractors, followed by an additional growth of 2% in the coming year.

India is drawing a comparison with a very good previous year in 2012. The harvest was over average in 2011, while drought and the late beginning of precipitation reduced the harvest results this year. At the same time, however, Indian farmers also profit from higher prices for their products. After a 25% growth in market volume for agricultural machines in 2011, the association FICCI expects a 10% increase in 2012. The government subsidy programmes for agriculture are a stimulating factor for the demand for machinery, whose effect should not be underestimated.

In China, the agricultural machinery sector has grown very significantly in recent years. The representatives of the national manufacturers´ association CAAMM emphasised the progress in the productivity of arable farming over the past years. According to the representatives, this progress was partially caused by the higher degree of mechanisation in agriculture induced by the government. The total budget for subsidies for the purchase of agricultural machinery amounted to a converted sum of approximately € 1.5 billion in 2011. According to CAAMM, sales growth in the industry reached 17% in the first seven months of 2012. For tractors, however, growth was limited to the segment above 100 hp. For 2013, more growth is predicted, which, however, will remain slightly below 10%.

The Brazilian market will also continue to grow significantly in the medium run. The five million farms represent a large part of global agricultural production, especially since the export share is very high for some goods. The Brazilians also have a strong position in agricultural machinery exports. Over the past years, their exports have always been twice as high as their imports. In 2012, the manufacturers want to reach over-average sales figures by selling 65,000 tractors. By September, the domestic market was stable for tractors and grew considerably for combines. The association of machinery manufacturers, ABIMAQ, expects a growth in market volume of 10% in 2013.

In the United States, the drought in the Midwest was the greatest challenge for the farmers this year. The association AEM emphasised the high insurance payments for harvest losses and therefore expects only a slightly negative influence on the demand for machinery in the coming year. Growth in 2012 has not been significantly slowed down so far: By September, tractor sales were 8% above the figures of the year before. The combine segment currently records a minus of 8% after three years characterised by very high sales figures (2009 - 2011).

The “Agrievolution Economic Committee” is a working group of the global network of the large agricultural machinery associations, the so-called “Agrievolution Alliance”. The group was founded in 2009, and has assumed the responsibility of promoting the exchange of market information for agricultural machinery at an international level, through its own projects. The goal is greater market transparency at a global level, in order to permit the representation of agricultural modernisation requirements on an economic basis. The following countries are currently members of the committee: Brazil, China, France, Germany, United Kingdom, India, Italy, Japan, Russia, Turkey, and the USA. The VDMA Agricultural Machinery Association is responsible for the secretariat of the economic committee, while the American association AEM is in charge of the parent organisation Agrievolution Alliance.

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