Farm Equipment Sales take off but lead times are getting longer!

Manufacturers suffer from delays in supplies and deliveries, slowing down production and increasing costs. (© Adobe Stock)

Axema, the union of agricultural equipment manufacturers, announces a significant increase in sales for 2021. The order book should end the year with an increase of between 8 and 11%. The price of agricultural production, and the government recovery plan, have clearly boosted the agricultural equipment market. The only downside currently: manufacturers are facing supply and delivery problems, which are driving down margins.

On the farmer side, demand for new equipment is currently strong. In the business survey carried out by the institution in September 2021, 90% of manufacturers and importers of agricultural equipment declared that they had a good or even very good order book for the end of 2021 and the first half of 2022. Result: the market is between 6.5 and 6.7 billion euros.

A slowdown expected for the second half of 2022

Manufacturers, however, fear a slowdown in activity in the second quarter of next year. First, they take into account the end of the stimulus plan effect from which they benefited, since it was from May 2021 that sales jumped. The mechanical backlash is therefore to be feared and 2022 could then mark the end of the bullish investment cycle that began in mid-2017. The new home market should thus reach a level of stabilization in value over 2022, mainly thanks to the good first half for which orders have already been filled.

Uncertainty about the evolution of agricultural prices, public policies and the 2022 harvests will all be factors capable of influencing the evolution of the market, not to mention the sometimes considerable extension of delivery times. They could well penalize the turnover of companies in the second half of 2022. Like the rest of the industry, the agricultural equipment sector is encountering supply difficulties.

Eight additional weeks of delay

Shortage of components, soaring prices of raw materials and cost of transport... so many parameters that directly impact the production capacity and margins of manufacturers. Steel, for example, increased by 40% if we refer to its value in August 2021 compared to August 2020. 83% of the managers surveyed had to extend their delivery time, on average by 8 weeks.

The dealers are doing their best to limit the impact on farmers, for example by providing them with replacement machines. On the manufacturers' side, the specifications of certain machines can be modified in order to deliver more quickly, or even deliver partially finished tools. Not to mention that the pressure on the supply chain increases the cost of production. Axema also states that 96% of the companies surveyed do not fully pass on the additional cost to the selling price.

24,657 tractors in the ninth month of the year

Question tractor, the indicator of the number of registration certificate issued for new machines climbs. Tractor market figures returned to their highest level since 2013. Over the first nine months of the year, 24,657 tractors were registered (source: Axema), representing growth of 14.9% compared to 2020 and 14 .5% compared to the five-year average from 2015 to 2019.

In terms of equipment, crop protection, sowing, fertilization and handling are the product families that have benefited the most from the current momentum. The brands report having a strong increase in their turnover in the wholesale market.

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