Product Profile: Farm Tractors

HS CODE: 870190
• The farm tractors market was valued at US$ 55.37 billion in 2018 and is expected to register a CAGR of 5.8% from 2020 to 2025.
• Analysts forecast the global agricultural tractor market in terms of volume, to grow close to 2 million units by 2022.
• India is the 7th largest exporter of farm tractors having an export share of 4.9%. In the past five years where global trade of farm tractors grew at less than 1%, India’s exports of farm tractors grew at 4%.
• US is the largest importer of farm tractors with import figures US$ 3.19 billion. Other top importing countries include France, Canada, Germany, UK and Spain.

Tractors can be used for an eclectic range of end-use applications including agriculture, construction, road building, and transportation of material. Among these, farm tractors are used for various agricultural purposes, having the largest share in tractor market. They are used to mechanize various agricultural processes like ploughing, tilling, planting, irrigation, and other activities.

Source: ITC Trade Map, figures in US$ billion

From 2014 to 2018, trade of farm tractors remained sluggish at around US$ 20 billion and a CAGR of 0.5%. This was attributed to the sudden collapse in agricultural prices, which made agriculture less lucrative. Also, the US, which is the world’s largest importer, was just emerging out of a recession.

Top exporters of the farm tractors

Source: ITC Trade Map

According to the above table, Germany tops the list of exporting economies followed by USA, France, Japan and UK. India is the 7^th largest exporter of farm tractors having an export share of 4.9%. In the past five years where global trade of farm tractors grew at less than 1%, India’s exports of farm tractors grew at 4%.

Top importers of farm tractors

Source: ITC Trade Map

US is the largest importer of farm tractors with import figures of US$ 3.19 billion. Other top importing countries include France, Canada, Germany, UK and Spain. Per unit cost of importing farm tractors is highest in Canada and Australia at around US$ 33.1 thousand. On an average, the price of agricultural tractors ranges between $2,500 and $25,000 which is a challenge for financially-unstable farmers.

Product roadmap

The farm tractors market is bifurcated by Horsepower into Less than 40 HP, 40 HP to 99 HP, 100 HP to 150 HP, 151 HP to 200 HP and 201 HP to 270 HP, 271 HP to 350 HP and Greater than 350 HP Tractors, and by Type into Orchard Tractors, Row-crop Tractors, and Utility Tractors.

Self-driven or automatic tractors are anticipated to be the future of the farm tractors market. The feasibility of this technology is yet to be seen. However, upon implementation, this has potential to completely transform market dynamics. Burgeoning farm mechanization rates, especially in developing countries, rising costs of farm labor, and shorter replacement cycles of tractors are the major factors attributing to the growth of global tractor sales. Fragmentation of land holdings and hefty dependence of the market on commodity prices may restrain the market to a certain extent.

Demand of farm tractors in the Asia/Pacific region will be more than twice that of any other region. Significant population expansion and economic growth in India, China, Indonesia and Thailand will drive an acceleration in agriculture and processing activities, making their agricultural sectors more efficient and productive, boosting associated tractor sales. Central and South America will post strong sales gains as well, due primarily to the large and increasingly mechanized agricultural sectors in Brazil and Argentina. In developed markets having mechanized set ups like USA and Germany, sales of farm tractors will continue to be majorly determined from the demand side story.

Growth patterns

The proliferating focus on the development of innovative infrastructure for agri-businesses will create lucrative opportunities for several stakeholders operating in the global market. The implementation of advanced technologies such as GPS and telematics is expected to result in increased productivity and efficiency in agricultural industries across the world. The introduction of precision farming and bolstering demand for advanced technology will result in the evolution of the market. Implementation of innovative agricultural equipment will also help to achieve short-term productivity and remove additional constraints to the agricultural value chain. The introduction of farm mechanization will boost demand in the global farm tractor market.

Source: ITC Trade Map, figures in US$ billion

India’s major export destinations are US, Nepal, Bangladesh, Mexico and Italy. Exports from Indian farm tractors have also surged over the last decade in Argentina, Brazil and Mexico though less in terms of absolute values. Simultaneously, Indian tractor manufacturers and exporters also need to tap and concentrate on other countries in the region, like Bolivia, Chile Colombia, Ecuador, Paraguay Peru and Uruguay. These markets have good opportunities for farm tractors as their agricultural activities are significant.

For example, Colombia is one of the largest producers of coffee, banana, rice, corn and others. Chile is good for grapes, corn and wheat. Ecuador is a significant player for banana, flowers and cocoa. Peru is good in paprika, bananas, citrus and avocado. The increasing demand of 40HP to 100HP (horsepower) farm tractors across the LAC region is certainly going to create lucrative opportunities for Indian tractor manufacturers in Latin American markets. Indian tractors are more economical and well equipped with digital dashboards, attractive designs and modern technology necessary to meet the demands.

India is the largest tractor market in the world and is estimated to grow at 10% annually for the foreseeable future.  It is also the largest tractor producer, accounting for about 35% of global volumes.  The major market share is garnered by the 31-50 HP segment, which accounts for 82% of sales volumes of 711,478 units in 2018. Although tractors are at the core of farm mechanization, farm production has gone way beyond simply utilizing tractors. Now, the emphasis is on increasing productivity by moving away from traditional farming methods to adopting other powered equipment and implements, thus becoming a prime driver of growth in this sector.  To boost this, the government is working to provide easier and smooth access to credit for farmers and developing farmer-friendly policies, tying into the new and growing trend of collaborative farming in India.