German Association of Agricultural Machinery Manufacturers (Engineers Union of Germany) VDMA Agricultural Machinery is a leading sectoral association of agricultural machinery manufacturers that includes more than 160 German companies, and also companies of world famous brands – the sectoral leaders which produce innovative and high-technological products in Germany. Just in Germany the Association unites companies with total annual goods turnover of more than € 8 billion with more than 30 000 employees.
The “Firm “Runo” LTD is a marketing events partner of the VDMA Agricultural Machinery in the CIS countries. Especially for APK-Inform readers in June-July 2014 there will be published extracts from the Association annual report with data on volumes of manufacture, export, import of Asia, Europe, North and South America countries by results of the year 2013.
In the European Union, according to results of the year 2013, sales volume of agricultural machinery and tractors from manufacturers to their trading partners was about € 27 billion that is a new record. Increase of sales volume in comparison with previous year was 3%.
At the same time production volume of agricultural machinery in EU was about € 30 billion. As nearest competitors of agricultural engineers from European Union are representatives of this economy segment from North America, who are same high-technological, but yield to production volume for 15-20% Even if to sum value of agricultural machinery produced in North and South America, it will correspond to production volume in EU. From other representatives of world agricultural engineering companies from European Union have still more impressive lead as at production volume, so at a level of high technologies usage.
Production of agricultural machinery in the world
Data in billion euro
Source: VDMA Agricultural Machinery Association.
Market of EU
Increase of sales volumes in 3% is average at common market of agricultural machinery. Considering market of EU, from the point of states-participants view, it is should be noted that this rate in a considerable degree is formed at the expanse of two largest markets, France and German, which are the largest producers of agricultural production in EU. About one-third of value added of agricultural production produced in EU goes to these two states. As a result, markets of these states are leading at common European agricultural machinery market and they forms more than 40% of its volume.
More detailed analysis of EU agricultural machinery market points at sales growth in 11 countries, while in 17 states-participants of agricultural machinery market sales volumes decreased. Nevertheless, little markets stay the most important resource for EU common market.
Source: VDMA
Trends at the market of agricultural machinery depend on purchaser business environment, i.e. on farms or their service suppliers, contractors. According to Eurostat data, income per agricultural sector decreased for one percent last year, even this figure is higher than average level of last 10 years. Totally, income of milk, wine and fruit farms was at a high level, while result for arable farms mostly depended on yield, because prices for their production were reduced. Prices and sales volumes for vegetable growers remained at the last year level. Prices for fertilizers were reduced, but in total balance of agricultural production price cost this price reduction did not influenced at the expanse of insignificant increase of fertilizers usage.
Part of farmers’ income is made up by subsidized payments from EU. In average, grants, connected with leased areas, make up a quarter of farmer (broker) income. There are also grants of Common Agricultural Policy, those are programs for development of agricultural areas, and also national grants, for example, recovery of diesel fuel cost. During the period from 2014 till 2020 year the Common Agricultural Policy must influence on farmers purchasing power, because rules for grants receiving were changed. It is possible firstly by virtue of new program requirements for stable agriculture in a form of “landscape gardening measures”, and also principles changing on common budget distribution between states-members of EU.
Evidently, as “Winners” from these measures basically are eastern regions of EU, mainly Baltic countries, and also Romania. Farmers from Netherlands, Belgium, Italy and Denmark will have to accept big reductions of subsidized sums. Germany also will lose about 3% of subsidized payments in comparison with previous period, at that continuing to remain a big investor in agricultural budget of EU.
However, standards and principles of the Common Agricultural Policy did not change, that is why farmers’ uncertainty is minimized. For some farms, transition from scheme of single farmers’ payment, that has place in some countries till now, to a model of single payment for area, probably, will have lager influence, than new “landscape gardening” rules. This type of redistribution inside farmer sector has place, for example, in France and Spain. In Germany, where single payment for area had been bringing in step-by-step from the year 2007, further financing redistribution inside country will be according to standardization of basic premium payments of € 259 per ha.
Between European farmers agricultural policy in the whole is not a hindrance. Possibly, it will be changed next year, when new landscape gardening principles start to effect. Although, many farmers had already had to make business with less grants thanks to Common Agricultural Policy reform, they consider, that reductions are tolerable, if to take into account tendency of prices growth for their production (milk products, meat, and also partly grain and oil crops).
Despite this, European market of agricultural machinery will experience tendency to demand reduction. One of main reasons, except new terms of Common Agricultural Policy and financing principles changes, is a high level of investments into new agricultural machinery from the side of European farmers during last three years. Today this necessity has reduced, that is why we can to expect that investments will be directed to other spheres, such as agricultural building or renewable energy. Reduction of demand is possible in Poland, Italy and France, while growth we can expect in Spain, Great Britain and Scandinavia. Forecasts for Germany at the moment are restrained, considering small amount of new orders at present.
Manufacturing of agricultural machinery in EU
Increasing of agricultural machinery and tractors production volume for 4% up to level a little less than € 30 billion is depended in many ways on high demand at large internal markets of Germany and France. Nevertheless growth rates in the 2013 were lower than average world figure. It reflects dependence from large trade areas, on which demand on agricultural machinery produced in EU was rather low last year because of different reasons. First of all, they are such countries as Italy, Poland, Russia and Ukraine. Results higher than average ones were received by manufacturers from Austria. Poland manufacturers of agricultural machinery in turn increased production volume on about 10% because of high demand from the side of Turkey, Iraq and Belarus Republic.
Source: VDMA
To the share of Germany goes 28% of agricultural machinery manufacture in EU. System work of 200 German companies had good result of their production sales all over the world during last year. Export volume was for 11% higher than in the previous year. This year was dynamical especially for manufacturers of tractors and farming equipment. New record in export volume of machines depended firstly on orders from France and USA. Number of staffers thanks to that increased for 4% up to 31 800 persons, while part of temporary employees was reduced from 14% to 11%.
In 2014 production volumes of German agricultural engineering will reduce a little. After steady tendency in the first quarter of this year, in presence there is a marked reduction of orders amount. Nevertheless forecasted production volume will stay at very high level and will be more than € 8 billion. It confirms that German agricultural engineering is in better condition that is also indicated by opinions of branch leaders. They say that they as usual are satisfied with results and perspectives of their business.
Italy takes second place among European manufacturers of agricultural machinery. Special stress lays on tractors manufacture (mainly up to 100 h.p.), and also on equipment for soil treatment, sowing and plants protection.
On the VDMA estimation in the year 2013 production volume of agricultural machinery in Italy was € 5.1 billion. Seven best manufacturers of tractors produced about 67,000 units for total amount of € 1,880,000,000. Share of tractors export in total volume is about 85%, which in the 2013 increased for 3%. Last year was marked by significant increase of deliveries to the USA that was compensated by export reduction to Poland, Spain, Turkey and United Kingdom.
Internal market of Italy continues to remain on the decline, but first signs of renewal are evident. Starting from March, 2014 volumes of orders to Italian enterprises give preconditions for renewal and growth of agricultural machinery production volumes after some years of decline. It adds confidence to Italian agricultural engineers. According to polls, just one tenth part of agricultural machinery manufacturers is dissatisfied with their position, on condition that every third among questioned persons expect growth of production volumes by half-year results.
Third result on agricultural production volume in EU has France. According to the VDMA estimations in the year 2013 French production turnover in this segment was € 4.3 billion and increased for 3% in comparison with previous year. In view of growth at the internal market in 10% it was very weak result.
After two years of significant growth, in the 2013 export value reduced for 1%, also export ratio reduced for two points, down to 64%. Among other equipment significant reduction of deliveries abroad went to machines for hay picking.
In the same time, volume of tractors production increased a little. On last year results to tractors segment went 37% of total agricultural machinery production volume in France and 44% of export. In that way, Massey Ferguson (factory in Bowa) and Claas (factory in Le Mans) support firm basis for French agricultural machinery manufacture. It is necessary to note that Japanese tractors manufacturer Kubota also takes part in this process, having organized tractors manufacture in the north of the country.
In whole, state of things in Frensh agricultural engineering cannot be called optimistic. More than half among questioned manufacturers in the context of monthly poll by the CEMA Business Barometer expressed their dissatisfaction with the situation, because in some cases incoming orders reduced for more than 25%. Accordingly, one third of agricultural machinery manufacturers plan reduce number of temporary employees at their plants.
Agricultural Machinery in the European Union.
As consistent with segments from the point of the most important manufacturers view.
Figures in billion euro
Sources: Eurostat, VDMA (including own calculations and manufacture in 2013), *import and export not including trade inside EU.
In following articles we will be able to report more detailed tendency of agricultural machinery markets of leading EU countries and to discuss this topic in groups of runo-agro.com and apk-inform.com located in social networks.
Vitalii Mietolkin
Web-portal about agricultural machinery market : runo-agro.com
Translated by Natalia Dragnieva
https://www.facebook.com/natalia.dragnyeva
