Tractors: the global market is slowing down, yet the trend remains positive

In 2023, growth in the agri-mechanical market slowed, with double-digit declines in some countries. Geopolitical tensions, inflation and rising interest rates are the factors that have affected the sector

January to November last year marks a slowdown for the global tractor market compared to the high sales volumes seen in 2022 and particularly in 2021. As a matter of fact, the currently available data, released by the trade associations of the main countries and revised by FederUnacoma, show a significant slowdown for Canada and the United States, which are experiencing - respectively - a 10.4 percent and 8.4 percent decline, and a two-speed trend for Europe. Germany and France, the two locomotives of the European market, remain at essentially the same values as in 2022, the two countries of reference for the Mediterranean area, while Spain and Italy, on the other hand, record a marked decline: the former "closes" the period with a 9.3 percent drop, the latter with a 11.8 percent contraction. The United Kingdom, which, instead registers a +1.6 percent sales increase. Moving to Asia, Turkey's strong increase (+24 percent in October) stands out, while - even further east - the "Indian giant" is confirmed at the top of the global market. As many as 871 thousand tractors were sold in India between January and November (more or less the same number as in 2022), which by the end of the year should take the subcontinent over 900 thousand once again. 

A market conditioned by geopolitical variables. The data on global market trends were illustrated on January 18 by FederUnacoma President Mariateresa Maschio during the press conference streaming the 2024 edition of EIMA. "For our sector, 2023 is to be counted among the extremely difficult years. A set of factors has conditioned the market," said FederUnacoma's president, "that have contributed to penalizing the agricultural equipment trade, even in the presence of a demand that we know is potentially very high. In the global scenario, the factors that have weighed most heavily and continue to weigh on the global agri-mechanical sector today are, in particular, those related to economic uncertainty, brought about in large part by the war between Russia and Ukraine and the resulting blocklists and trade sanctions, and now exacerbated by the new conflict in the Middle East. Inflation-which has led particularly in Europe to a significant increase in production costs and thus in the final price of machinery-and rising interest rates, practiced primarily by the European and U.S. central banks, are additional elements of instability that are affecting sales of agricultural machinery.   

Long-term trends. However, the 2023 downturn is part of a scenario characterized, in the medium and long term, by significant growth in world tractor demand, as moreover evidenced by tractor sales data over the past eight years. Indeed, if the 2015 and 2022 levels are compared, showy increases can be seen in almost all markets. The United States went from 205,000 units in 2015 to 271,000 in 2022, India went from 484,000 tractors to 912,000, Western Europe from 171,000 to 196,000, Japan went from 20,000 to 34,000 tractors, Canada from 24,000 to 31,000, Russia from 22,000 to 35,000, and all the major countries were at high levels. In the eight years under consideration, the total number of tractors surveyed worldwide rose from just over 1.9 million to nearly 2.5 million. The trend is closely linked to developments in agricultural economies. "All countries face the need to meet a growing food demand in terms of both quantity and quality of production. In every production context and for every model of agricultural enterprise," Mariateresa Maschio stressed, "the endowment of modern mechanical equipment is fundamental, not only to increase yields, but to reduce the use of fertilizers and pesticides, decrease water consumption, preserve biodiversity, and improve the quality of life of rural communities. This is precisely why, even in the dramatic phase of the pandemic, when the temporary halt in production in all major countries, difficulties in transportation and logistics, and general economic uncertainty severely affected almost all production sectors, the agricultural machinery sector showed good resilience.

Then, what should we expect in the future? The final weeks of last year and the first weeks of the new have been marked by a further worsening of the geopolitical picture, with the armed conflict in the Middle East creating new tensions in logistics and supply chains (just consider what is happening in the Red Sea) and threatening to light the inflation fuse again. To venture into predictions is a gamble at present. However, while it seems likely that in the short term, the market could still be conditioned by international variables and cyclical factors, in the long term, those structural factors referred to earlier are likely to prevail, confirming those growth trends seen between 2015 and 2022. According to the Food and Agriculture Organization (FAO), over the next nine years, that is, by 2032-land use for agricultural purposes is set to increase by a total of 15 percent, and along with it, intensive cultivation (+6 percent). Again FAO estimates that as new land is put under cultivation, agricultural yields are also expected to increase over the next three years, particularly in the regions of India, North Africa, sub-Saharan Africa, the Middle East and the Pacific, with percentage increases ranging from 24 percent in the Indian subcontinent and sub-Saharan territories to 14 percent in the Asian Pacific region. The trend will also affect Latin America and the Caribbean (+12 percent) and China (+10 percent), while North America (+8 percent) and Europe and Central Asia (+7 percent) are expected to see less pronounced growth rates. In short, if 2024 is shaping up to be a year with several shadows - in November, the climate index released by Agrievolution (the alliance of associations representing agricultural machinery manufacturers worldwide) entered negative territory - it does not pave the way for a prolonged recessionary phase. The Export Planning consultancy predicts an increase in world trade in agricultural machinery over the next four years, which, geopolitical tensions permitting, should record an average annual growth rate of 6.3% for tractors between now and 2027.