Russia’s Farm equipment sales now in freefall

Amidst record crop failures and with all resources now going to Putin’s global war projects, things are only getting worse for the collapsing Russian agricultural sector, with domestic sales of new equipment dropping by 16.5% year-on-year to 167.5 billion rubles in the first ten months of 2024, according to the Russian Association of Specialized Machinery and Equipment Manufacturers (Rosspetsmash). Production and exports have also declined by 12.6% and 9.6%, respectively, amounting to 205.8 billion rubles in production and 14.1 billion rubles in exports.

Sector-Specific Declines

The most substantial decrease was observed in fertilizer application machinery, with sales plummeting by 63.2% to 202 units. Grain harvester shipments fell by 27.7% to 2,870 units, seeders by 22.5% to 2,760 units, and agricultural tractors by 13.2% to 3,390 units. Conversely, sales of mowers, reapers, and balers saw increases of 4.1%, 11.7%, and 32.7%, respectively.

Contributing Factors

Dmitry Babansky of SBS Consulting attributes the negative trend to several factors, including a high key interest rate, increased equipment costs, and low agricultural product prices. The Central Bank’s elevated interest rates have rendered commercial loans and leasing options less accessible to farmers, leading to reduced investments in new machinery.

Import Market Impact

Sales of imported agricultural machinery in Russia have declined by over 20% in the same period, according to Alexander Altynov, Chairman of the Association of Agricultural Machinery Dealers (ASCHOD). He notes that current economic conditions discourage agricultural producers from investing, partly due to rising rates on popular leasing programs. Altynov adds that machinery is traditionally one of the first areas where savings are made.

Market Conditions and Outlook

Rosspetsmash reports a growing surplus of machinery on dealer lots, indicating a significant drop in demand without a corresponding shortage of supply. The association cites the high Central Bank rate and insufficient funding for key government support measures, such as Program 1432, which subsidizes discounts on Russian agricultural machinery. This year, 10 billion rubles were allocated to the program, but Rosspetsmash argues that at least 20 billion rubles annually are necessary to meet industry needs.

The association warns that without additional support, the agricultural machinery market could contract by 15–20% by year’s end, potentially leading to job cuts and reduced tax revenues. Rosspetsmash emphasizes the need for increased funding for Program 1432 and the implementation of concessional lending programs to stimulate demand and support the industry.

One of the historical cornerstones of the Russian economy, the agricultural sector has consistently been a lifeline in the darkest of economic times. This time, things may be different.