Agricultural machinery Poland: Awaiting the growth of demand
Following Poland’s entry into the EU, agriculture started developing rapidly. However, the times of the greatest demand for agricultural machinery have gone now and a current fall in sales is noticeable across the whole sector.
The European market of agriculture mechanization, the value of which was estimated at EUR 28.2 billion in 2014 by the analysts of the Association of German Producers of Machinery and Equipment, is dominated by suppliers from Germany, Italy, France and Great Britain which are responsible for 2/3 of machinery production for EU’s agriculture. Even though Poland ranks high at no. 6, it has a significantly lower market share of 3.7 %.
Poland manufactures a wide range of machines, equipment and tools used in plant and animal production, storage and processing of agricultural produce, except for technologically advanced self-propelled machinery, the sales of which is based on import at 80-85%. The general rule is that the more sophisticated the machine is in a technical sense, the higher the import participation in its sales on the Polish market. Whilst in case of machines of medium and low level of sophistication a clear advantage of domestic production over import is observed – as an example, 75-80% of ploughs and sprayers available in Poland are manufactured domestically. Such machinery is also the subject of export totalling approximately EUR 800 million per annum in the recent years. The scale of it ensures that Poland has a positive international trade balance within that range.
The market structure
The foundation of the Polish machinery industry is comprised of approximately 50 plants, dominated by small and medium enterprises. There are also approximately 200 small dynamic companies manufacturing less complicated agricultural machinery and spares. Apart from the traditional means of production, Polish enterprises also offer machinery for specialist plant and animal production, including the production of healthy foods and carrying out cultivations for industrial or energy purposes. As opposed to other branches of Polish industry, the agricultural machinery industry is mainly based on the domestic capital. This does not change the fact that machinery manufactured by practically all important concerns supplying farmers with their means of production such as New Holland, John Deere, CNH, Deutz-Fahr, Kubota, Massey Ferguson, McCormick, Valtra, Lemken, Kuhn, Kongskilde and Joskin are available in Poland. This forces the domestic enterprises to strong competition for their place on the market. This is helped by the positive relation between their practical features, price and quality, as well as a realistic choice of production specialization, based on focusing on machinery with low and medium level of sophistication, adjusted to the needs of small farms (up to 10 ha) with limited financial capability.
The market fluctuation
In 2015, the interest of Polish farmers in technical modernization fell significantly. This is indicated by a clear drop (by over 13%) in the number of bought tractors – as tendencies within that segment are regarded as somewhat a barometer for the condition of the whole agricultural technology market. This was reflected in the Register of Vehicles and Drivers, to which 12.3k of new tractors were added in 2015 compared with 14.2k in 2014. In the first half of 2016, the situation became even worse: only 4.2k of new tractors were registered – 3.3k fewer than the year before.
Prior to 2016, the changes of demand for new tractors practically did not directly correspond with the size of domestic tractor production which remained quite stable, usually ranging between 3.5-3.6k. Against such a backdrop, a new phenomenon is a deep fall of tractor production in Poland in 2016 which after 8 months stands at almost 24%. If this situation persists, a deep fall in production of those machines will take place on the scale unparalleled since 2009.
However, the producers of machinery and tools co-operating with tractors have no ground for complaints – during the period between 2015-2016, a growth in demand for, amongst others, ploughs, field seeders, scarifiers and cultivators was noted. However, the increased sales of those machines has not been able to improve the general economic situation within the industry.
The farmers’ decisions to purchase machinery are influenced by two economic factors related to each other: the current and forecast financial condition of the farms and access to external financing, including especially EU subsidies.
In 2015, the remaining low prices of many agricultural crops were reflected in decreased revenue of the farmers who, consequently, postponed the purchase of more expensive machinery for better times.
The revitalization of the investment climate shall be significantly impacted by starting programmes supporting the purchasing of agricultural machinery and equipment as a part of the perspective for 2014-2020. Big money is at stake: as a part of the Rural Development Programme, the total of EUR 13.5 billion was assigned to Poland ( EUR 8.6 billion from the EU budget and EUR 4.9 billion from the national budget), including EUR 2.1 billion for investments in tangible assets.
However, the factor which may hamper the increase in demand for agricultural machinery is quite a high market saturation with agricultural technology which is a consequence of intensified investment carried out with the assistance of the EU’s previous financial perspective, as well as the events behind the eastern border: the political crisis in Ukraine and Russian import limitations for harvesters and agricultural raw materials offered by European producers.