By 2029, the world population is expected to reach 8.4 billion people according to the Food and Agriculture Organization of the United Nations (FAO). Further, a robust per capita income growth is expected to continue especially in the emerging markets. Two main factors are fundamental to drive the demand for agricultural commodities, which is buttressed by continued growth in productivity and greater availability of resources. Also, agricultural commodities find their application as food, feed, and raw materials for industrial applications that include biofuels. The aforementioned is expected to comprehensively drive the demand for farm equipment across the world along with technological advancements such as automation, among others. Before we delve further into the market for farm equipment, a panoptic view of the current market condition for the key commodities is deemed pertinent.
In 2019, an increase inworld production of cereals was registered driven by larger wheat and other coarse grains harvests, after two years with stable world production. On the contrary, the output of rice was similar to the levels of 2018, and the maize crop was lower. Further global cereal stocks dropped as a result of reduction measures of stock held by China. Above all the growth of production surpassed that of consumption. The production and consumption of cotton also increased during 2019. 2019 also witnessed an increase in world milk production by 1.3% along with the increase in the production of Biofuels, which utilizes cereals and sugar crops in its production and was augmented by government policies of certain countries along with subsidies. Further despite the negative impact on meat production during 2019 due to the African Swine Fever (ASF) resulting in lower meat production in China, the situation was offset by higher production of meat in the United States, Argentina, the European Union, and Turkey. The global demand for oilseed was low during 2019 due to reduced feed demand by China in China and uncertainties stemming from bilateral trade disputes. With regards to Sugar growth in consumption remained strong in many developing countries, during 2019.
While the aforementioned is mainly a production outlook, the global demand for agricultural products will be determined by aspects like consumer preferences, disposable income, policies, population dynamics, prices, urbanization, and various social factors. From the perspective of individual consumption patterns of population, as result of global economic development, per-capita-food expenditures across all income groups are expected to increase in absolute terms with an increasing proportion devoted to higher value items such as vegetable oils, livestock products, and fish, underscoring how high-income availability influences the respective consumption preferences which in turn influences the agriculture industry. Further FAO also predicts that the proportion of household income spent on food is projected to remain on average at 43% in 2029. Other driving factors are the shift in consumer preferences driven by social-cultural changes, as well as rising female participation in the workforce especially in high-income and emerging economies, forming the basis of sugar and vegetable oils. Nevertheless, the advent of COVID 19, has reportedly led to shortages of seasonal labor due to lockdown as well as has necessitated force adjustment of consumer demand leading to disruption of trade logistics, to a certain extent. Further with trade restrictions and extreme weather, 2019 also posed challenges effectuating a slight downward-draft in the farm equipment market growth For instance, LEMKEN GmbH & Co. KG globally known for manufacturing agricultural machinery which had reportedly launched compact disc harrows in 2018 called Rubin 10, had experienced a steep decline in sales.
Nevertheless, as the world is expected to normalize without experiencing a total stop in the agricultural commodities market, the farm equipment market is expected to witness healthy growth. This has been evidence by a myriad of market development in recent years. Some of them are being elucidated below:
May 2020 – Product Launch
A family business that is essentially a global agricultural machinery manufacturer founded in 1913 known as CLASS, had reportedly launched the JAGUAR 960 TERRA TRAC model reaching a milestone becoming the first organization to manufacture a forage harvester with a factory-integrated crawler track assembly. Earlier in March, the organization also reportedly inaugurated a new facility in Memari of the district of Burdwan the reported rice bowl of state of West Bengal, India to make the latest agricultural machinery commercially available to local consumers.
March 2020 – Investment
The KUBOTA Corporation headquartered in Osaka, Japan has reportedly announced its plans to invest in leading Indian tractor manufacturers, Escorts Limited with the rationale to increase its presence in India - the world’s largest tractor market, which succeeds the establishment of a joint-venture tractor manufacturing company with Escorts Limited. Building upon this partnership, this investment facilitates, product development through the indigenization of global R&D for emerging and global markets, manufacturing, sales, distribution as well as parts procurement with a guaranteed supply of economically viable products in and for India.
August 2019 – Fundraising
It was reportedly announced by the strategic business development and investment arm of Yamaha Motor Co., Ltd. (Tokyo: 7272) Yamaha Motor Ventures & Laboratory Silicon Valley (YMVSV), that it had led a Series A funding round for Advanced Farm Technologies (AFT), a developer of robotic farming equipment that includes the T-6 robotic strawberry harvester. By capitalizing on $100 million Yamaha Motor Exploratory Fund, this investment reportedly depicts YMSV’s focus on disruptive technology solutions that meet the challenges of the global food supply chain. With additional investments from Catapult Ventures, Impact Venture Capital, and Kubota Corporation a total of $7.5 million was raised.
June 14, 2019 - Strategic Alliance
A part of the $20.7 billion Mahindra Group, Mahindra & Mahindra’s Farm Equipment Sector (FES), had reportedly announced an investment of CHF 4.3 million (US$ 4.3 million) for an 11.25% stake in Gamaya SA., which is a Switzerland based agri-technology firm. By this strategic decision, Mahindra & Mahindra enables itself to extend complete solutions to the global farming community so that they can adapt to this increasing technology-intensive industry. With the ability to develop and deployprecision agriculture and digital farming technologies the organization expects to set a new yardstick in farming and its related services.
Therefore, form the snapshot of current market conditions of agricultural commodities and the recent market developments, it discernible that the farm equipment market trend is poised to witness a healthy growth trajectory during the coming few years.