Market Trends of Agricultural Machinery Industry
Labor Shortage in the Agricultural Sector
The agriculture sector, traditionally reliant on labor, has witnessed a decline in employment in recent years. Educated youth are increasingly hesitant to undertake physically demanding agricultural work, leading to a labor shortage. This, in turn, has spurred the adoption of agricultural machinery in farming operations. For example, global employment in agriculture dipped from 27% in 2021 to 26% in 2022, as per World Bank data. Simultaneously, rising living standards have fueled a trend of rapid urbanization. Urban areas offer a plethora of job opportunities, enticing rural households to migrate. In India, for instance, the number of people employed in the agriculture sector dropped from 158.2 million in 2022 to 147.9 million in 2023, as highlighted by a survey by the Centre for Monitoring the Indian Economy (CMIE).
The Indian Council of Food and Agriculture projects a 25.7% decline in the percentage of agriculture workers in India by 2050. This mounting labor scarcity has spurred a surge in demand for agricultural equipment, as it helps expedite farm operations and bolsters the market's growth. In North America and Europe, a significant reliance on seasonal immigrant workers has emerged owing to dwindling domestic labor. This reliance has, in turn, driven up the cost of farm labor, prompting farmers to increasingly turn to cost-effective agricultural machinery.
Asia-Pacific is Expected to Dominate the Market
China is one of the top producers of farming equipment across the world, with the most popular types of agriculture machinery being the large tractors and harvesting equipment that are highly automated and have high horsepower. Most of the agricultural machinery manufacturing is focused in provinces like Shandong, Henan, Jiangsu, Liaoning, and Zhejiang, with around 2,500 agricultural equipment manufacturers. Despite advancements in technology in the agricultural machinery sector, factors like a decrease in human resources, rising agricultural labor costs, and government initiatives for farm mechanization are predicted to drive the expansion of the market. According to data from the National Bureau of Statistics of China, China produced 5,253,595 large and medium-sized tractors in 2022, reflecting a slight rebound. The large and medium-sized tractors have gradually replaced small tractors.
In Asia-Pacific, India stands out as a key player driving growth in the agricultural machinery market, mainly due to its heavy reliance on agriculture and growing interest in adopting technology. According to the Indian government, Indian tractor exports increased by over 72%, reaching USD 1,025 million from 2019-2021. The primary destination for the export of tractors is the United States (25.2%), Nepal (7.3%), Bangladesh (6.5%), Thailand (5.4%), and Sri Lanka (5.3%). Also, the production and sales of significant players in the Indian market are growing. For instance, in India, in February 2022, Mahindra's Farm Equipment Segment sold 18,910 units. Also, in February 2022, the company sold 20,437 tractors (domestic + exports), compared to 28,146 units during the same month last year.
