As 2024 comes to an end and the new year begins, it is time for balance sheets and forecasts, and the agriculture and agricultural machinery sector is no exception.
The results of the past year certainly do not make one rejoice, on the contrary; the general uncertainty in foreign markets and the Italian market, caused by growing geopolitical instability, is reflected in the performance of Italian agricultural technology production.
As the trade association FEDERUNACOMA reports in its recent report on the State of Agricultural and Green Care Machinery in 2024, the sector closes the year with a significant drop compared to 2023.
The association forecasts a 19.5 percent decline, with a total value of 13.2 billion euros-about 3.2 billion less than in 2023. The figure on the production of mechanical equipment for agriculture is derived from the sum of the different types of machinery but is certainly indicative of a complex situation. Which nevertheless leaves positive glimmers, at least on a global horizon and assuming the deployment of significant incentives and structural resources.
The Manufacturers' Association report provides a very clear snapshot of the global economic situation - with due differences between markets, of course. In general, the picture is one of "moderate growth, between light and shade”.
Indeed, global growth in the first half of the year was moderate at 3.2 percent. This was mainly due to the decline in inflation, which boosted household spending despite the difficulties posed by the increasingly complex geopolitical situation.
The second half of the year saw GDP growth in several Western economies, including the United States, Canada, Spain, the United Kingdom and Japan. However, there were also significant signs of slowdown in some major economies, notably Germany, but also China.
What about the situation in Italy? Here are some data from the FEDERUNACOMA report:
However, growth is projected to accelerate to above 2 percent in the 25-26 biennium, driven by more favorable financial conditions and expansionary measures promised and planned by the government.
Globally, the situation is also expected to improve in 2025. In the euro area, GDP is expected to grow by 1.3 percent in 2025, driven by a recovery in real incomes and improved credit conditions. Globally, growth should be just above 3 percent, with slow disinflation and less restrictive monetary policies supporting demand. However, some risks will remain, such as the unstable geopolitical situation, the economic policies of new governments, and tensions in the Middle East.
According to the trade association, "consumption of agricultural commodities has increased over the past 20 years, driven primarily by population and income growth in developing countries. Agriculture's share of global GDP has also fluctuated widely over the years and now stands at around 4.1 percent. An indispensable sector as ever, but one that plays different roles in different markets.
What are the global trends and prospects identified by FEDERUNACOMA? In the medium to long term, from 2023 to 2033, "middle and low-income countries will continue to drive growth in food demand and production, contributing 80 percent of global production growth [...]. The role of India, Southeast Asia, and sub-Saharan Africa will increase, while that of China will decline." Here are some projected numbers for that 10-year period:
And the European Union, how is it? Not great, but recovering. EU agricultural markets are "moving towards partial stability" after severe shocks and high volatility in recent years due to pandemics, conflicts and instability in key areas such as the Middle East. Some positive signs:
However, there is no shortage of risks: "adverse climatic events, geopolitical conflicts, plant and animal diseases, and difficulties in accessing fertilizers are the main risks facing farmers."
In Italy, the agricultural sector reached 72.7 billion euros in production value, with +1.9 percent in production value and +7.9 percent in production value added.
The global situation is varied and generally not easy. This is well illustrated by FEDERUNACOMA data:
As we have seen, the situation in Italy is not rosy either, in the wake of the general contraction of the sector worldwide, all the more so in a country such as Italy that is strongly committed to the export of finished products. For this very reason, the decline in exports is holding back Italian production and, consequently, the demand for machinery and equipment.
FEDERUNACOMA again reports: "Forecasts point to a 19.5 percent drop, for a total value of 13.2 billion euros, or 3.2 billion less than the previous year. [...] Tractors account for just over 2 billion euros (-25 percent compared to 2023), incomplete tractors and spare parts for around 1 billion (-28.6 percent), operating machinery and equipment for 6.2 billion (-16.5 percent), components for 3.3 billion (-17.5 percent), while gardening and landscaping machinery accounts for 700 million, down 22.2 percent on the previous year".
As we can see, the decline in agricultural machinery sales in 2024 is broad-based, affecting different types of machinery and therefore different sectors of the agricultural industry. But what are the causes?
The trade association points out how, in the first half of the year, the fall in domestic demand weighed on the decline in sales. "The Italian market of technologies for the primary sector - which in 2023 had closed with a loss of 12.9 percent for tractors and also declines for other types of equipment - recorded even more pronounced declines in the ten months from January to October, with tractor registrations at -14.6 percent, combine harvester registrations at -31.5 percent, tractors with loading platforms at -18.2 percent, telehandlers at -14.9 percent and trailers at -2.4 percent."
However, the decline in domestic machinery production is mainly due to the sharp drop in foreign demand, given the strong tendency of Italian companies to export to global markets.
The picture is clear: "In the first six months of the year, exports of tractors, tractor parts and other agricultural machinery fell by a total of 9 percent to 3 billion 408 million euros, while still maintaining a trade surplus of 2.2 billion. The United States, France and Germany, in that order, have been confirmed as the main destinations for Italian agricultural technology, followed by Turkey".
But, as they say, all is not lost, and while the industry's global performance has been difficult and complicated for 2024, a glimmer of growth is opening up about the immediate future.
As FEDERUNACOMA President Mariateresa Maschio explains, "According to 60 percent of the manufacturers surveyed, a turnaround could materialize from the second half of 2025. The recovery could be favored by a stabilization of the overall economic framework, but as far as domestic demand is concerned, much depends on the implementation of the incentive system for the purchase of the latest agricultural machinery".
According to a recent article by the Manufacturers' Association, "The agricultural machinery sector will grow significantly in the coming years, but the geography of the markets will change. The large markets of Europe and North America will maintain a high level of investment to ensure high quality standards, and the two Asian giants, India and China, will tend to stabilize mechanization at the large volumes achieved in recent years, but the emerging markets will be Southeast Asia and Africa. [...] Demand for agricultural machinery is likely to grow very strongly in those regions of the world where population growth is leading to strong agricultural development, requiring much greater technological resources than at present. A key country," the conference was told, "is Indonesia, which already has nearly 300 million inhabitants, making it one of the most populous countries in the world and destined to increase its demographic weight in the coming years.
Not only that, but many other "developing" countries (we're finding it harder and harder to call them that old-fashioned these days) will be driving the agricultural machinery market in the not-too-distant future: Vietnam, the Philippines, Thailand in Southeast Asia. And even more so Africa, thanks to the rapid population growth expected by 2050: Nigeria, Ethiopia, the Democratic Republic of Congo in particular.
There should be no shortage of signs of recovery. Also because it should be borne in mind that the contraction of the global market in 2023-24 is mainly due to cyclical factors and not to a real downturn in global demand.
As described by the President of FEDERUNACOMA at EIMA, "In the medium to long term, the need for agricultural technologies for the primary sector will increase, driven by a steadily developing agriculture, and the increase in the world population, estimated at 10 billion people by 2050, will make it necessary to increase agricultural production by 50 percent over current levels".
But that is not enough. She emphasized that "the agricultural machinery sector faces a critical challenge, not only in terms of increasing production yields, but also in terms of sustainability. The agromechanical sector must produce technologies that adapt to the most diverse environmental and climatic contexts and that help agriculture solve problems related to water scarcity and loss of soil fertility."
A coordinated and well-planned investment strategy to support the production of agricultural machinery and agricultural production in these complicated times is needed more than ever, both in Italy and worldwide, especially in view of the expected growth in demand in the near future. The technologies and economic solutions are available; it is now a question of implementing them.
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