The improving global economy will stimulate demand for industry machinery.
New York, NY (PRWEB) April 27, 2014
The Tractors and Agricultural Machinery Manufacturing industry benefits from the essential nature of agricultural equipment, such as tractors and combines, to modern-day farming operations. Nevertheless, the industry faced significant challenges over the past five years. When farmers delayed new equipment purchases amid tough domestic and global economic conditions, demand for big-ticket items like large tractors (i.e. over 100 horsepower) plummeted. However, the industry has since recovered from its 2010 lows, driven by increasing global farm production. Consequently, IBISWorld expects revenue to rise at an annualized rate of 2.1% over the five years to 2014 to total $3.8 billion. “However, crop prices are expected to slump in 2014, leading to lower profit margins for farmers,” according to IBISWorld Industry Analyst Antal Neville. These farmers are expected to reduce purchases, causing revenue to decline 3.5% in 2014.
International trade is essential to the industry, as exports account for more than half of revenue, while imports satisfy three-quarters of domestic demand. The United States accounts for about three-quarters of both imports and exports. “The industry's major players all have operations in both the United States and Canada and routinely sell merchandise in both markets,” says Neville. This factor, coupled with the two countries' shared border and the North American Free Trade Agreement, explains the United States' prominence in industry trade. However, rising agricultural investment in newly industrialized countries, such as Brazil and India, is expected to increase exports to these emerging economies moving forward.
Technological investment has become a major part of the industry landscape. Innovations include tractors that drive themselves to plant straighter crop rows, in addition to prescriptive-planting technologies that use GPS and soil data to calculate the maximum yield for every acre of crop plantings. To support the large research and development (R&D) budgets that these new innovations require, companies are consolidating, both in Canada and globally.
Over the next five years, improving demand for agricultural products worldwide and pressure to increase yields will stimulate demand for industry machinery, both abroad and domestically. Greater global demand for food and biofuels, rising productivity and strong export growth will drive demand for new machinery and equipment.
For more information, visit IBISWorld’s Tractors and Agricultural Machinery Manufacturing in Canada industry report page.
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IBISWorld industry Report Key Topics
This industry manufactures agricultural machinery and equipment and powered home lawn and garden equipment. Agricultural equipment includes tractors, harvesting and seeding machinery and other machinery, such as grinders, mixers, wool presses and windmills.
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