Global Ag Equipment Production Projected to be Positive Again in 2022

Agricultural equipment production ended 2021 above the previous year's levels in North America and around the world, and is forecast to increase in 2022 as well.

For this article, Power Systems Research (PSR) looks at agricultural machinery (ag tractors and combines) production in North America and Rest of the World (ROW).

ROW includes the following regions: Europe, China, India, Central/South America, Far East, Southeast Asia, Central Asia, and Eurasia. For both North America and ROW we will compare 2021 volumes versus 2020 volumes. Similarly, PSR will also look at projections for 2022.

All things considered, 2021 was a good year for ag machinery production in North America. There were nice gains and rebounds from 2020 in both agricultural tractors and combines. This is also true for ROW and specifically for India and China. India accounts for 53% of the agricultural tractor production in ROW. As for combine production in ROW, China accounts for 55% of the production.

North America

Now, looking more closely at ag tractors in North America, 2021 production increased by over 20% from 2020 calendar year totals. This is excellent for equipment manufacturers despite supply chain issues and workforce challenges. The industry is working hard to deliver machinery and equipment to farmers heading into 2022 as well.

Currently, PSR is projecting 10-11% increases in production for 2022 over 2021. This will be getting closer to 2019 (pre-COVID-19) production levels.

Moving to combines produced in North America, 2021 was also a positive year. Production gained over 7% last year versus 2020. Again, this is a good increase for OEM production as OEMs continue to deal with challenges and issues in the current operating environment.

PSR is estimating combine production will increase another 8% in 2022. This would get combine production back to 2018 levels, another good sign for the agricultural machinery market.

As the COVID-19 pandemic recovery continues in North America, we expect the ag market to lead other industrial and heavy equipment industries. A major driver of the agricultural markets and the purchase of new equipment is the financial position of the farmer at the end of the year; the good news is that commodity prices have been very favorable over the past few years; this means more cash in the pocket for farmers and a better propensity to spend sooner rather than later.

It comes down to the old saying that a tractor can always run “one more year” before replacement if absolutely needed.  So those farmers on the fence can lean towards a purchase more easily following a favorable harvest season with healthy commodity prices.

Net farm income, a broad measure of profits, increased by 25% in 2021 over 2020. The increase was from $95.2 billion to $119.1 billion. The agricultural machinery market has weathered the pandemic better than other industrial sectors and will continue its growth pattern in the next few years. The recovery will be steady, and we expect levels of production in 2022 to reach those of 2018.

Temporary disruptions and stagnation were seen in 2021, but it is safe to say that the speed of recovery will increase from 2022. PSR forecasts that there will be an increasing trend to sell agricultural machinery and to provide comprehensive services that facilitate equipment acquisition (leasing and other financial services), development of solutions to improve harvest efficiency, and creation of a prompt maintenance system in case of problems.

Agricultural machinery production has maintained a solid performance globally over the past few years, and PSR anticipates that situation to continue in the short run. Considering how the market rebounded in 2021 with varying challenges and issues related to COVID-19, PSR believes that production growth will continue into 2022.  

EDITOR’S TAKE:

Awesome upbeat forecast for the production and sales of agricultural equipment in 2022. Increasing production and sales in unison is yet another demonstration of the pent-up purchasing power that is waiting to be unleashed by farmers/ranchers. The January Tractor and Combine report issued recently by the Association of Equipment Manufacturers demonstrated how 2022 simply picked up where 2021 left off. In our opinion, this will also transcend into the truck marketplace. Reach out to farmers/ranchers in your area. Offer “Get Ready for Spring Planting or Calving” service specials. Make sure they know about your amazing parts department and the deals you have for them. And, of course, let them know about AgPack - your way of helping them reduce operating costs and fight inflation head on.