Market Trends of Latin America Agricultural Machinery Industry
Increase in Area Harvested in Latin America
- As farms in Brazil consolidate into larger units, the demand for more powerful agricultural machinery is growing. Data from the Brazilian Institute of Geography and Statistics revealed that Brazil's agricultural production area expanded from 86.7 million hectares in 2021 to 91.1 million hectares in 2022. This consolidation trend is driven by the desire to share heavy machinery costs. Recent regional trends indicate that larger farms are acquiring smaller ones. Urbanization is a key driver, offering rural residents new opportunities. As a result, many are moving to urban areas, leading to a decline in small landholdings and reduced farming profits. Fewer small farmers mean larger landholdings, which boosts farm mechanization. This mechanization heightens the demand for agricultural machinery, allowing quicker coverage of larger land areas and enhancing productivity and yields. Typically, small-holding farmers cultivate crops primarily for self-consumption, limiting their use of agricultural machinery.
- In Mexico, the rising demand for agricultural machinery is driven by the need for heightened agricultural productivity. This is fueled by the country's growing food demand, which parallels its population growth. According to the USDA Foreign Agricultural Service, corn consumption in Mexico jumped from 43.8 million metric tons in 2019 to 45.7 million metric tons in 2023. Such a spike underscores the pressing need to boost crop productivity, a challenge that can be met through agricultural advancements, including the adoption of modern farming machinery.
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Brazilian Tractors Dominate the Market
- The use of tractors brought about an important change in agricultural mechanization in the country. Compact and utility tractors are used in Brazil as small-sized tractors with less horsepower. They are also helpful in landscaping operations, tilling, mowing, etc. As lawn making is one of the country’s famous activities, the usage of these tractors is rising. There were a total of 2,735 lawn care services in Brazil as of 2023. The high number of lawn care services in the country supports the usage of tractors below 80 HP, thereby driving segmental growth.
- The continuous launch of tractors below or with 80 HP is boosting the segment’s growth. For instance, in 2023, XCMG Brazil launched the agricultural tractor XT804-4D at Agrishow 2023 (International Fair of Agricultural Technology in Action) in São Paulo, Brazil. The tractor comes with 80 HP and is specially developed to meet the growing demand of the national market and bring more power and comfort to farmers in Brazil.
- International vendors that started investing in Latin America also brought their expertise to the field of agriculture equipment. These players use their global presence and capabilities to invest in research and development to innovate traditional farming activities. Innovative agriculture technologies and products help farmers increase yields from the same acreage of land. Furthermore, the Brazilian government released a Crop Plan for the 2022-2023 season. This bill allowed small farmers to get credit to buy agricultural machinery, including tractors, at a 5% annual interest rate. Therefore, advancements in farm technology and mechanization of the production systems of major crops such as soybeans are anticipated to increase the market's growth during the forecast period.
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