Russia - Agricultural Equipment
Russia - Agricultural Equipment
Russia contains 220 million hectares or 20% of the world's supply of fertile land and could potentially feed two billion people, according to the Food and Agriculture Organization of the United Nations (FAO). However, this potential is not fully developed, since 38% of Russian land is fertile and only 13% is cultivated. Four regions (Central, North Caucasus, the Urals and Povolzhie) produce 73% of agricultural outputs in Russia.
Unlike other sectors in the economy, the agricultural sector registered 4.8% growth in 2016, largely driven by a weak ruble and the food import ban imposed by the government in August 2014. The Ministry of Economic Development forecasts 7.8 % growth by 2018.
The Russian government has made it a priority to ensure food security for the nation by increasing the amount of agricultural products produced in Russia. Therefore, there is a demand for agricultural equipment that allows increasing yield and labor capacity while ensuring ecological protection and a safe work environment. The Russian government plans significant investments in projects that will help substitute the import of meat, milk and vegetables in the next five years. The Ministry of Agriculture endorsed 464 projects totaling 263 billion rubles (approximately $4 billion at an exchange rate of 60 rubles/dollar), which will receive government support. In 2015, for example, the Russia government developed a program to subsidize up to 30% of the direct construction cost of milk plants.
The increasing need for modernized agricultural machinery in Russia is clear with inadequate agricultural machinery and equipment remaining a key weakness in Russian agricultural production. Per a recent study by J'son and Partners Consulting, in the last ten years, the Russian fleet of tractors decreased 51%, with similar reductions in the number of plows (57%), cultivators (47%). Other experts also note a decrease in seeders (52%), grain harvesters (50%), and forage harvesters (49%). Almost 60% of tractors owned by Russian farmers exceeds the typical service age of 10-12 years. One tractor in Russia serves 247 hectares, compared to 38 in the U.S. and 14 in France. Russian Minister of Agriculture Alexander Tkachev stated that the sector still needs 180,000 tractors and 80,000 combines. Russian agricultural companies buy approximately 12,000 tractors annually, approximately a third of the number required to maintain an efficient and up-to-date equipment pool. Market players and experts have consistently expressed the view that there is a significant need for large-scale replacement of old agricultural equipment in the next few years.
General deterioration in economic conditions and uncertainty in the market place coupled with increased interest rates, unstable exchange rate and political challenges limit the sector's development. The government is attempting to stimulate investment in capital purchases by offering various subsidies for strategically important subsectors, including meat and milk production.
Overall the agricultural equipment market dropped significantly in 2014. Certain types of equipment, such as cultivators and forage harvesters, increased slightly in 2015. Global Trade Atlas statistics for 2016 show that U.S. exports of tractors more than doubled from 2015 numbers, totaling $71 million. According to Russian Customs statistics, total imports of machines and equipment in Russia in 2016 increased slightly by 2.2% in monetary value but decreased in the number of machines and attachments by 17%.
Unlike other sectors in the economy, the agricultural sector registered 4.8% growth in 2016, largely driven by a weak ruble and the food import ban imposed by the government in August 2014. The Ministry of Economic Development forecasts 7.8 % growth by 2018.
The Russian government has made it a priority to ensure food security for the nation by increasing the amount of agricultural products produced in Russia. Therefore, there is a demand for agricultural equipment that allows increasing yield and labor capacity while ensuring ecological protection and a safe work environment. The Russian government plans significant investments in projects that will help substitute the import of meat, milk and vegetables in the next five years. The Ministry of Agriculture endorsed 464 projects totaling 263 billion rubles (approximately $4 billion at an exchange rate of 60 rubles/dollar), which will receive government support. In 2015, for example, the Russia government developed a program to subsidize up to 30% of the direct construction cost of milk plants.
The increasing need for modernized agricultural machinery in Russia is clear with inadequate agricultural machinery and equipment remaining a key weakness in Russian agricultural production. Per a recent study by J'son and Partners Consulting, in the last ten years, the Russian fleet of tractors decreased 51%, with similar reductions in the number of plows (57%), cultivators (47%). Other experts also note a decrease in seeders (52%), grain harvesters (50%), and forage harvesters (49%). Almost 60% of tractors owned by Russian farmers exceeds the typical service age of 10-12 years. One tractor in Russia serves 247 hectares, compared to 38 in the U.S. and 14 in France. Russian Minister of Agriculture Alexander Tkachev stated that the sector still needs 180,000 tractors and 80,000 combines. Russian agricultural companies buy approximately 12,000 tractors annually, approximately a third of the number required to maintain an efficient and up-to-date equipment pool. Market players and experts have consistently expressed the view that there is a significant need for large-scale replacement of old agricultural equipment in the next few years.
General deterioration in economic conditions and uncertainty in the market place coupled with increased interest rates, unstable exchange rate and political challenges limit the sector's development. The government is attempting to stimulate investment in capital purchases by offering various subsidies for strategically important subsectors, including meat and milk production.
Overall the agricultural equipment market dropped significantly in 2014. Certain types of equipment, such as cultivators and forage harvesters, increased slightly in 2015. Global Trade Atlas statistics for 2016 show that U.S. exports of tractors more than doubled from 2015 numbers, totaling $71 million. According to Russian Customs statistics, total imports of machines and equipment in Russia in 2016 increased slightly by 2.2% in monetary value but decreased in the number of machines and attachments by 17%.
According to the Association of Agricultural Equipment Producers "Rosagromash," in January 2017 sales of self-propelled combines decreased 15.1% in comparison with January 2016 while sales of tractors increased 53.5%. Both imports of large foreign tractors (above 100hp) and sales of local assembly plants increased. A federal program, adopted in 2013, has stimulated Russian production of agricultural equipment by offering subsidies to local equipment producers.
Prospects for foreign manufacturers in the Russian market are still mixed, but agricultural equipment market development trends appear somewhat promising. The current economic situation presents challenges to developing a strong market for foreign equipment, but there are opportunities available. However, the factors mentioned above have decreased demand for new agricultural equipment and forced agricultural producers to delay capital investments or look for cheaper options and, at least in the short-term, switch to local agricultural equipment producers. Recently reduced subsidies to local equipment producers and increased government support for priority projects are levelling the playing field for some foreign equipment.
The leading subsectors of agricultural equipment are:
• Forage, irrigation and soil preparation equipment including plows, harrows, cultivators, seeders, and fertilizer spreaders.
• Equipment for dairy livestock breeding, swine, and poultry production; milk processing and animal feed preparation equipment.
• Equipment for vegetable production including greenhouse technologies.
In 2016, the sector showed 4.8% growth including 3.4% in livestock, 2.1% in poultry, 52% in vegetable production. Forage production increased 3.7% in 2016. The sector still requires significant investment to ensure that it is equipped to provide food security for the nation.
International firms interested in the Russian agricultural machinery market may wish to consider exhibiting at one of the key Russian agricultural trade shows. These events are powerful marketing tools and serve to reassure Russian buyers that the international supplier is committed to establishing and maintaining a presence in the Russian market, with sales often made at these events. Foreign companies may also find opportunities as financially healthy Russian companies seek to expand in order to satisfy a growing demand for domestically produced food. For example, there may be opportunities to sell meat, fruit, and vegetable processing equipment due to increasing sales in these segments.
Over the long-term, it is important to remain connected with potential customers and use every opportunity to maintain a presence in the market.
Source: export.gov
Prospects for foreign manufacturers in the Russian market are still mixed, but agricultural equipment market development trends appear somewhat promising. The current economic situation presents challenges to developing a strong market for foreign equipment, but there are opportunities available. However, the factors mentioned above have decreased demand for new agricultural equipment and forced agricultural producers to delay capital investments or look for cheaper options and, at least in the short-term, switch to local agricultural equipment producers. Recently reduced subsidies to local equipment producers and increased government support for priority projects are levelling the playing field for some foreign equipment.
The leading subsectors of agricultural equipment are:
• Forage, irrigation and soil preparation equipment including plows, harrows, cultivators, seeders, and fertilizer spreaders.
• Equipment for dairy livestock breeding, swine, and poultry production; milk processing and animal feed preparation equipment.
• Equipment for vegetable production including greenhouse technologies.
In 2016, the sector showed 4.8% growth including 3.4% in livestock, 2.1% in poultry, 52% in vegetable production. Forage production increased 3.7% in 2016. The sector still requires significant investment to ensure that it is equipped to provide food security for the nation.
International firms interested in the Russian agricultural machinery market may wish to consider exhibiting at one of the key Russian agricultural trade shows. These events are powerful marketing tools and serve to reassure Russian buyers that the international supplier is committed to establishing and maintaining a presence in the Russian market, with sales often made at these events. Foreign companies may also find opportunities as financially healthy Russian companies seek to expand in order to satisfy a growing demand for domestically produced food. For example, there may be opportunities to sell meat, fruit, and vegetable processing equipment due to increasing sales in these segments.
Over the long-term, it is important to remain connected with potential customers and use every opportunity to maintain a presence in the market.
Source: export.gov