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The dynamics of the agricultural machinery market in 2024 may be worse than expected. Farmers whose incomes will be affected by the loss of part of the crop due to the weather are suspending the renewal of the park, and some are abandoning already concluded deals. Pessimistic forecasts suggest a decrease in sales of agricultural machinery up to 40%. At the same time, manufacturers and sellers are concerned about various issues: the first is concerned about the expansion of Chinese companies in the market, and the second is the prospects for an increase in the cost of equipment.

The May frosts in the center of Russia and the dry weather in the south of the country significantly worsened the prospects for this year's grain harvest. According to the Ministry of Agriculture, crops on an area of about 1 million hectares, or 1.2% of the 2024 harvest area, were lost, and another 700 thousand hectares were damaged. Sovecon estimated the Russian grain harvest in the new season at 127.4 million tons, which may be the lowest figure since the 2021/22 season.

According to analysts, wheat production may decrease by 13% year—on—year, to 80.7 million tons, barley - by 12%, to 18.6 million tons, corn - by 12%, to 14.6 million tons. 

Since the beginning of May, analysts have already adjusted the forecast for wheat harvest twice, reducing initial expectations by 7.85%, to 85.7 million tons. If this happens, the harvest in the current season will be lower than last year's by 7.65%. The Institute of Agricultural Market Studies (ICAR) reduced the forecast for wheat by 5.5% to 86 million tons, and for gross grain harvest by 5% to 135 million tons due to frosts.

A decrease in the purchasing power of farmers and less positive crop forecasts than last year "cannot but affect the sales of agricultural machinery," said Gennady Nepomnyashchy, commercial director of the Ekoniva technical holding.

According to Rosspetsmash, in January—May, shipments of forage harvesters have already fallen by 19% year-on-year, and grain harvesters by 9%. At the same time, the supply of self-propelled sprayers and four-wheel drive tractors increased by 17% and 23%, respectively.

The head of the southern sales division of Alfa-Leasing, Vladimir Vorotilin, claims that sales of Russian agricultural machinery in money are growing by 9-10%, but in pieces they are decreasing by 5-40% for different types of products. Europlan sees "a slight decrease in the number of combine harvester leasing transactions," but notes an increase in demand for equipment for tillage and spreaders of  fertilizers.

Buyers are on standby

"The market situation is not easy," confirms Rushan Aynetdinov, Chief Operating Officer of Zoomlion AG in Russia. According to him, in some segments, the decrease in demand reaches 30-40%, which is due to the weak purchasing power of farmers, as well as low availability of borrowed funds. "The price correction associated with increased recycling and increased logistics costs is not the best effect," adds Mr. Aynetdinov.

"If suppliers still continue to import equipment, then the farmers themselves have taken a wait—and-see attitude," says Tatiana Fadeeva, CEO of Optitech Agro. According to her, prices for equipment have increased due to exchange rate fluctuations. "The cost of a tractor, whether Russian or imported, in tons of grain doubled in 2023," explains Ms. Fadeeva.

According to Alexander Isakov, sales are going "better than last year, but worse than planned." "We expected a twofold growth, but we are seeing an increase of 30-35%," he clarifies.— At the end of the year, we will probably reach an increase of 30-40%." Svetlana Linnik, CEO of Pegas-Agro, says that the company went well during the peak season for fertilization equipment in spring, the next surge in demand should be in autumn, "the situation will depend on many factors, including weather conditions and grain prices."

Demand support

Alexey Lyubetsky notes that in partnership with manufacturers and distributors of agricultural machinery, the lessor offers programs with a reduced rate and individual payment schedules. Europlan, Zoomlion and Alfa-Leasing are also talking about measures to stimulate demand, including mentioning reduced advances.

The Ministry of Agriculture informed Kommersant that Rosagroleasing has allocated additional funds in the amount of 1 billion rubles for the supply of agricultural machinery and equipment to farmers on preferential leasing terms.

Among the measures of state support, the Ministry of Industry and Trade calls subsidizing R&D and reengineering costs at the stage of technology development, as well as stimulating demand through the "1432 Program", which provides discounts on equipment.

Ekoniva holding believes that demand for equipment will revive by the end of the year, but it will not be possible to fully compensate for the losses of the first half of the year. Tatyana Fadeeva believes that significant sales and import growth should not be expected by the end of 2024. Alexey Lyubetsky expects a decrease in sales of agricultural machinery by 30-40% year-on-year. Rushan Aynetdinov admits a 25-35% drop in sales of imported brands. Dmitry Babansky from SBS Consulting predicts a 5-10% reduction in market volume this year.

Europlan is betting on maintaining sales of agricultural machinery at the level of 2023, but warns that demand may still be affected by a potential increase in scrap collection.

The fact that the Ministry of Industry and Trade is discussing increasing the levy on self-propelled agricultural machinery (powerful tractors, combines and sprayers) by five to ten times became known in February (see Kommersant of February 19,2024).

Asian suppliers "enter the Russian market with very low prices." Rosspetsmash explains that due to the large scale of production and support in their countries, importers "can sell their products in the Russian Federation at prices on the verge or beyond profitability." Russian factories are facing cost increases due to the rise in the cost of loans, materials, energy, logistics, etc.

The import of agricultural machinery to Russia is characterized by the following: delivery times have increased, as with all suppliers of goods in the current conditions. First of all, this happens for commodity items from Europe and the USA, where the terms reach three to four months. Prompt deliveries from China are also more stable, but, unfortunately, these products cannot cover the needs of the entire nomenclature group of both goods and spare parts.

The share of Russian agricultural machinery in the domestic market in %

Year	2015	2017	2018	2019	2020	2021	2022	2023
Share in %	40	56	60	54	58	47	59	53

Source: RosSpetsMash statistics 

The segments that have not yet been closed by their Russian counterparts are primarily 85-260 horsepower tractors equipped in accordance with the requirements of farmers in terms of transmission, hydraulics and other parameters. In addition, the range includes self-propelled sprayers, trailed guns and telescopic loaders. In general, the directions in which we observe a large number of requests from the market, despite the limited purchasing power of agricultural producers.

Rosagroleasing warns that an increase in the recycling fee (utilsbor) for machinery by five times will lead to an increase in the cost of agricultural products by 25%. Russian equipment is already rising in price faster than imported ones: in the last three years alone, the price has increased 1.5 times, the company says. Some enterprises and farmers, Vladimir Vorotilin believes, will prefer to repair the old one instead of buying new equipment.

Source: https://www.kommersant.ru/doc/6775921?from=glavnoe_6 ; https://www.kommersant.ru/doc/6773584?from=doc_vrez