The VDMA Agricultural Machinery Assn., a European trade group that represents more than 3,200 companies, says the Russian ag equipment market hasn't yet reached its full potential.
VDMA points to increasing prices for major agricultural commodities, particularly for grain, and rising agricultural exports fueled by depreciated national currency as creating favorable conditions in Russian agriculture. However, the Russian ag machinery market has been subjected to the pressure of lower demand, as well as economic and regulatory risks.
"We come to AGROSALON in 2018 with cautious optimism and commitment to Russian farmers," VDMA president Christian Dreyer said in a statement.
In the first half of 2018, the European and Russian brands recorded a decline of between 10-25%, depending on the segment. However, there has been a shift to higher investments in Western technology. VDMA says it anticipates the demand to recover in the medium term and believes that medium sized farms and smaller ag holdings will join the trend.
“We consider the moderate market decline in 2018 as a normal cyclical adjustment after the strong growth during the previous years and we observe no fundamental reason for further deterioration. We expect some recovery of the market in 2019 in major segments subject to stable exchange rate and predictable regulatory policies," said Mikhail Mizin, VDMA representative in Russia.
The group also says Rusian farmers need to have an open-ended choice of the most innovative and advanced machines and technologies in order to stay competitive globally. Russian manufacturers do not produce all types of ag machinery and equipment to satisfy that demand from farmers.
The industry is also concerned about continued protectionism in Russia, which uses both open and hidden instruments to restrict competition and discriminate against foreign brands. The regulatory framework is being permanently revised to create more and more prohibitive rules of localization and toughen the eligibility criteria for state support, says VDMA.
“There is still a huge replacement need for medium and powerful tractors in Russian agriculture," Dreyer said. “According to estimations of the Russian Ministry of Agriculture, the annual need for new tractors is 56,000 units, and we need to think how to unite efforts in order to satisfy this demand as today the market is really far from these figures." Protectionist policies would make filling those needs harder, he added.