Machine manufacturers are dancing on the volcano

You can hardly have missed the fact that the biennial Agritechnica mechanization trade fair is taking place in Hannover this week. Every manufacturer has new tractors or machinery to show. All these machines are not only impressive to look at, but also becoming prohibitively expensive. Now that a new wind is blowing through the agricultural sector, the question is how much demand these new machines will have.

The European arable farming sector is currently far from optimistic. Grain prices are hovering around their low long-term price level, the outlook for sugar beets is bleak, and the free-range potatoes are a minor concern. At the same time, the dairy market has also taken a turn for the worse, and the pig market has already begun its downward trend. These are hardly the kind of signals machinery manufacturers, importers, or dealers want to see when selling equipment.

cautiously positive
This makes the news published by the German Rentenbank just before Agritechnica all the more striking. Their Agricultural Barometer shows that German farmers remain slightly optimistic about the coming period. The hard figures, however, show a slight decline. The Investment Barometer fell slightly. Of the German farmers surveyed, 60% indicated they intended to invest in machinery and/or barn technology in the coming year, compared to 65% previously. In the past twelve months, three-quarters of respondents have invested in new equipment. The Rentenbank itself observes this as well, with the investment level for new barns increasing from €201 million to €243 million by 2025. This increase may be due more to higher prices than to more barns, but the bank does not report this.

A similar picture is visible among European machinery companies, according to the monthly index from the European industry association Cema. Confidence fell from 11 to 4 points last month. In Poland, Spain, Italy, and – remarkably – the UK, the mood is described as positive. In Germany and France, the situation is different. Dealers are cautious and see fewer arable and transport machinery sales in particular. Tractors and harvesters have sold reasonably well this year. Companies have sold a lot of existing inventory, resulting in fewer new tractors and machinery in stock than in the past three years.

Price increases
The huge jumps in sales prices that followed the coronavirus pandemic and the start of the Ukrainian war are behind us. Yet, new equipment isn't getting any cheaper. The major supply problems are also behind us. When a new model is launched, the price increase is usually a bit of a bitter pill to swallow. For a tractor, that can easily reach tens of thousands of euros. Prices of two hundred thousand euros for a luxury tractor are no longer the exception.

When businesses were booming, those higher costs were generally accepted. A quick tour of the country quickly reveals that machinery fleets are generally well-maintained. However, fewer tractors have indeed been sold, especially this year. According to the industry association Fedecom, 1.305 new tractors were sold through September. Last year, that figure was 1.626. This figure is the lowest since 2009. Sales have been reasonable over the past five years. Businesses have therefore already slowed down, at least when it comes to tractors. This is a European trend. In 2024, the lowest tractor sales figure in ten years was reached. 8% fewer tractors were sold than in 2023.

Expensive tractors, high cost price
Unfortunately, there are no figures on the average sales price of a tractor, but it has undoubtedly risen considerably in recent years. And yet, they can't do much more. Sure, comfort is improving, more technical features are being added, and engine power continues to rise. This also drives up the cost of mechanization, which presents a major challenge for all businesses. Especially in a slow year, it's important to critically examine your cost price. Based on current forecasts, this will become a key issue in 2026.

Machine manufacturers and suppliers in the supply chain have experienced unusual times after extreme years in 2020 and 2021. Significant investments have been made, resulting in strong sales and price increases, sometimes as high as 30% or more, being absorbed. The mechanization market has now clearly peaked and begun its decline. This is evident, for example, in tractor sales figures. This decline is exacerbated by the ever-rising prices. A sharp trough could now follow the initial peak. Manufacturers are undoubtedly well aware of this. This week, there will be a short celebration in Hannover before reality returns.

Niels van der Boom

Niels van der Boom is a senior market specialist for arable crops at DCA Market Intelligence. He mainly makes analyses and market updates about the potato market. In columns he shares his sharp view on the arable sector and technology.

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