The rise in sales of farm equipment proves that state governments are serious about advanced farming and farmers’ prosperity
It has been said that essential commodities will always find a place in manufacturing. The Covid-19 just proved that true.
Farming and harvesting are two of the farmers continue to till land. This puts them in need of implements. Some of the common ones include: tillage implements, weeding, threshing, water lifting devices, harrows, clod crushers, levellers, ploughs, tractors, just to name a few.
In the midst of the Covid-19 outbreak and a nationwide lockdown, many states are gearing up for a bumper paddy harvest. As the unprecedented lockdown led to non-availability of agricultural labourers, the states are opting for mechanisation of the paddy harvest. According to an industry source, the government plans to employ nearly 14,900 harvesters across one state alone.
Considering that farming is the mainstay of most developing countries, it’s no surprise that countries with large populations have been largely engaged in this activity. According to the FAOSTAT, the Asia Pacific region contributed to more than 60% of the global population in 2017, with India and China being two of the most populous countries in the world. Hence, the increase in food demand in this region has led to a surge in the use of technologically advanced farm equipment for higher productivity in crop production.
The predominance of small-scale manufacturers and increasing focus on rice cultivation is also widely seen across various countries in the Asia Pacific region. Further, a shift from the adoption of labour-intensive farming techniques to advanced technological equipment in the agricultural sector across (mainly Asia Pacific) countries has led to increasing demand for tractor and various farming equipment such as harvester and spraying and threshing equipment for renting purpose.
No More Underground
Though few speak about farm equipment and implements, it has become an integral part to agriculture. Urbanisation is playing a vital role in migration of farmers and this is causing a shortage of farm labour. It is also increasing labour cost, along with rising demand for crop productivity and operational efficiency. All these factors are projected to drive the growth of this market. The increasing government subsidies for farming equipment in developing countries further provides opportunities for growth of the farm equipment rental market, which is another scope for it.
At a time when the Indian automotive industry has been reporting no sales in the month of April, Mahindra & Mahindra has announced that its farm equipment sector sold 4,716 units in April 2020 in the domestic market, while it exported 56 units as well. Hemant Sikka, president, farm equipment sector, Mahindra & Mahindra, said, "The lockdown has not made it easy for auto makers. But even the farm equipment machinery has had to open partially. Going forward, several positive factors including a good Rabi output, opening of procurement centres by the government, indication of good crop prices, reservoir levels etc., augur well for tractor demand. However, the rate of improvement will depend on how quickly the on-ground sales operations, including the start of NBFCs are normalised, following the relaxation of the lockdown."
An acute shortage of labour is prompting farmers to take to mechanisation. But with tractor dealers shuttered and banks and financial institutions snapping the credit lines for purchases, the world’s biggest market for farm equipment is in disarray. Close to 95% of tractors in India are bought on credit.
For Escorts, it’s a different story. “The government may have exempted the agri-machinery and spares
from lockdown, but the sale of tractor remains locked out as they do not fall within the essential category,” says Shenu Agarwal, chief executive at Escorts Agri Machinery.
In spite of this, the farm equipment machinery is expected to see demand. Another global company has also seen promise in the agricultural equipment market in India. Kubota Corporation is making a major investment in Indian tractor maker Escorts in a bid to further tap into the huge agricultural market
in the country. In a further move, which the pair said strengthened their collaboration, Escorts will buy a
40% stake in Kubota Agricultural Machinery India, which the former established in 2008 to gain a foothold in the Indian market. It makes a range of equipment including tractors, combine harvesters, transplanters, power tillers and implements.
Help at hand
According to official figures, there are around 10,000 farm equipment retailing and manufacturing shops
across India in the organised sector, while thousands of others exist in the unorganised space. The Ministry of Home Affairs (MHA) in an order issued last week exempted all sorts of agriculture machinery repair and retail shops from the lockdown.
Numerous equipment are seeing demand based on geographical diversity and the kind of farming done. For instance, the 71-130 HP segment of the farm equipment market is projected to grow at a significant CAGR of 7.3% during the forecast period of 2017-2022.
The 71-130 HP segment accounted for a larger share in 2018 and is projected to grow at a higher CAGR from 2020 to 2025.The increased government support in the Asia Pacific is expected to fuel the demand for 71-130 HP equipment during the forecast period.
The average availability of farm power for the cultivated areas of the country has significantly increased from 0.29 kw per hectare in early 2000's to 2.02 kw per hectare in 2017-18. Moreover, the share of power from the tractor segment in terms of overall farm power is increasing substantially over the years, therefore there is a dire need to increase the availability of farm power from 2.02 kw per hectare to 4.0 kw per hectare by 2030 to pace up with the growing demand for food grains in the country.
While there are several technology benefits on the pre-harvest side, on the post-harvest side, technology can provide the most immediate benefit to farmers and agri in general via farm linkage and market access to farmers. Market linkage and access solutions are being provided by all types of companies working in the Agri sector — inputs advisory, microfinancing companies and most widely by supply chain companies that buy directly from farmers and sell produce in the cities, giving farmers a better price at their doorstep.