Agrievolution - Global Alliance for Agriculture Equipment Manufacturing Associations



Agricultural Engineers Association

UK - Agricultural Engineers Association
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Machinery industry positive despite tougher environment

UK farming has recently been through two good years in 2021 and 2022, when prices for many agricultural commodities were high and crop yields were high. Although input costs were also on an upward trend, the full impact of these rises won’t have been felt until late 2022 or into 2023. Arable and dairy farms did particularly well in those two years, thanks to surging grain and milk prices. As they are the main buyers of new agricultural machinery, that led to an increase in orders for many types of equipment. However, disruptions to global supply chains, along with rising costs and labour shortages, meant manufacturers struggled to keep up with demand.

In 2023, the situation for farm incomes has taken a turn for the worse. Many agricultural commodity prices have come down from last year’s highs, particularly for arable crops and milk. At the same time, many farm inputs remain expensive and subsidy payments are gradually being redirected towards environmental land management schemes, following Brexit. On top of that, this year’s harvest was slightly below par as wet conditions delayed drilling of some spring crops and then a hot, dry June and wet July affected both yields and quality. Milk production has also struggled to show any growth. One slightly brighter spot was livestock production, where prices remained exceptionally high by historic standards, although these sectors are particularly dependent on declining subsidies.

As a result, farmers have less money to spend this year and increased economic and political uncertainty will also be holding back some investment decisions. When added to some machinery purchases having been pulled forward into 2022 due to extended lead times, demand for farm equipment has inevitably been weaker this year. Market data are still generally within the range seen in earlier years, though; a steady decline rather than a cliff edge.

The backlog of orders which built up during the previous two years has meant that tractor registrations have been running slightly ahead of last year’s level. Most of the growth has been for high-powered machines, which were more likely to have been hit by supply chain delays. Deliveries of combine harvesters and telescopic handlers have been even stronger, with the latter likely to be at a record high and the former at their highest for nearly a decade. Sprayers have also seen substantial gains but deliveries of most other implements have been lower than both last year and the recent average.

Despite the downturn in the market, our member companies are still satisfied with the current business environment, on balance. That is true, even though it remains difficult to recruit staff in a labour market which is short of workers. Rising prices and higher interest rates are also a drag on margins, as they are across the economy, with little sign of growth over the last two years and little prospect of it resuming any time soon.

AGRIEVOLUTION
The Agrievolution Alliance is the global voice of agricultural equipment manufacturers
that represents over 6000 companies around the world.
www.agrievolution.com

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