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The global Agricultural Machinery market reached a value of $61.7 billion in 2011
Despite continuing financial and economic uncertainty impacting the global economy, agricultural machinery achieved recovery in 2011, with both developed and developing nations posting a strong recovery. Volumes of sales continued to increase, and levels have already fully recovered from the 2009 decline.
The global market expanded by 11.9% in 2011, to reach a value of $61.7 billion, indicating a compound annual growth rate (CAGR) of 3.9% in the period 2007-2011.
Growth in this period was primarily driven by Asia-Pacific and Europe, who achieved the largest CAGRs in 2007-2011. Asia-Pacific contains the two largest domestic tractor markets in terms of volume, India and China. Governments of both countries have stepped up agricultural subsidies, increasing demand for the lower horsepower machinery. Other significant economies, such as South Korea, hope to adopt export oriented growth policies to sustain levels of historical growth, and have designated agricultural machinery one of the key sectors for this strategy.
Solid agricultural performances have encouraged reinvestment this year. A good harvest, combined with rising prices, particularly grain, livestock and dairy, have all encouraged farmers to reinvest in machinery. This rise in income could be potentially offset by rising input costs, most significantly fuel or energy. In South America, AGCO has been cutting prices in an attempt to gain a competitive advantage, so this has kept prices stable within that region.
Companies continue to see developing economies as a source of growth, with several large multinationals expanding their operations to capitalize on the burgeoning markets. Subsidies have been expanded in an effort to accelerate agricultural mechanization, hoping to reallocate labor to manufacturing. At present, countries with lower incomes prefer lower power tractors provided by companies such as Mahindra & Mahindra Ltd for their affordability, and the small average size of farms.
Conversely, in the developed world where mechanization has already been extensively implemented the tractor market is heading towards higher horsepower and technologically advanced tractors. Agricultural employment numbers remain marginal, and with farms large size, more powerful machinery will be necessary to compensate. “Precision farming” is becoming a more prominent idea, maximizing efficiency with lower inputs and raising output.
Agricultural machinery remains highly dependent on the agricultural industry. Population is estimated to arrive at 9 billion by 2050. Biofuels are also seriously being considered as alternatives to fossil fuel dependency. Commodity prices remain volatile, which will lead to fluctuating incomes for famers. Generally, the trend is for agricultural demand to be increasing, and so agricultural machinery will increase in line with this.
The Americas were the largest segment in 2011, accounting for 43.9% of revenues. Europe was the second largest, accounting for 38.4% of revenues in 2011. The United States proved the largest in terms of value, with revenues totaling $16.4 billion in 2011. India is the largest market in terms of volume, selling 401, 606 units in 2011.
Segmentation varies depending on the region. Globally, tractors under 50 brake horsepower remain dominant, accounting for 61.5% of the sales. Over 50 brake horsepower tractors accounted for 33.5%, and are prominent in Europe accounting for 68.3% of units sold. Combine sales were approximately 5%, and remain marginal throughout individual markets.
The global market is forecast to accelerate growth, reaching over $102 billion by 2016 with a CAGR of 10.7%. Key markets will grow robustly, with Europe growing at 12.1%, the Americas 8.7% and Asia-Pacific 12.1%. This will lead to Europe being the largest regional market, with a value of over $41.9 billion. The Americas will be a close second, valued at $41.1 billion.