Worldwide Farm Machinery Sales to Decline 3-5% in 2014

After averaging an annual growth rate of 11% since 2009, worldwide ag equipment sales are expected to take a breather this year, according to Frankfurt, Germany-based VDMA Agricultural Machinery Assn.

In its 2014 Economic Report, the association noted, “In the past 4 years, turnover in the agricultural machinery industry has risen sharply and continuously.” VDMA estimates worldwide volume for 2013 was $130 billion, calling it “a remarkable 50% higher than the level of the last ‘crisis year,’ 2009.”

This rapid increase in farm equipment sales is forecast to slow somewhat in the year ahead. “Following the 7% global growth in the industry last year we expect a decrease of 3-5% this year, although we continue to be at a distinctly high level,” said Dr. Bernd Scherer, managing director of VDMA Landtechnik. The association’s forecast for global sales in 2014 is $126.7 million, a decrease of about 4%.

When it comes to global production of ag equipment, the most significant trend has been the steady growth of Asian products and the long-term decline of farm machinery produced in Europe. In its report, VDMA said, “As a production location, China has gained considerable market share, while the importance of Europe is slowly declining. China will continue to be one of the driving forces in the industry.”

VDMA points out that much of Asian production is actually “world-renowned ‘Western’ brands, which organize assembly and production lines in Asia.” VDMA estimates that Asian manufacturers produced 24% of worldwide farm machinery in 2007, with China accounting for about 20% of the total. VDMA’s 2014 estimates calls for Asian manufacturers to produce one-third of ag equipment used globally.

During this same period, European production of farm machinery declined from 42% in 2007 to 34% estimated for 2014. The manufacture of ag machinery in the Americas has held steady during the period at 31% in 2007 and an estimated 30% this year. The association estimates that sales of U.S.-made farm machinery climbed from $21 billion in 2009 to $34 billion last year.

Production wise, another significant up-and-comer is India. VDMA estimates that India produces about 6% of global agricultural machinery. In 2013, more than 680,000 tractors were produced there, which continues the country’s reign as the world’s largest producer of tractors.

Ag Equipment Sales Decline Accelerates in May

North American large ag equipment sales were down again in May, with 4WD tractor sales down 14.4% year-over-year, combine sales down 24% and row-crop tractor sales down 15.9%, according to the latest figures released by the Assn. of Equipment Manufacturers.

Inventory levels rose year-over-year across all large equipment categories, and Mircea (Mig) Dobre, analyst with RW Baird, said given projected sales declines there is continued risk for inventory destocking in 2014.

U.S. and Canada large tractor and combine retail sales decreased 17% year-over-year in May, following a 13% decrease in April.

U.S. sales were down 18% year-over-year, while Canadian sales were down 11%.

Combine retail sales fell, posting a 24% year-over-year decrease in May following a 12.7% decrease the previous month. U.S. combine inventories were 1.4% higher year-over-year in April vs. up 6.9% last month. May is typically a lower-than-average month for combine sales, accounting for just 6.6% of annual sales over the last 5 years.

—Ag Flash Reports, Assn. of Equipment Manufacturers