U.S. agricultural equipment exports will continue to decline in 2017-18 in the absence of major increases in global agricultural commodity prices. Such increases are unlikely. High interest rates in markets such as Brazil and South Africa will further constrain the recovery of U.S. exports. Low interest rates in others, especially the Eurozone, may mitigate somewhat the effects of low agricultural commodity prices. Weak local currencies relative to the U.S. dollar will also remain a barrier to exports of U.S. agricultural equipment. Low petroleum prices, if they continue, will hold down farmers’ production costs, while restraining economic growth and demand for imported foodstuffs in petroleumproducing countries.
When global agricultural equipment markets are likely to bottom out is an open question. The German trade association VDMA Agricultural Machinery has identified “the saturation of the established markets” in Europe and the Western Hemisphere as the key obstacle to recovery. North American observers have mixed expectations for 2017, with U.S. dealers reportedly “less pessimistic,” while many of their Canadian counterparts expect increased sales. Both groups view their used equipment inventories as an obstacle to higher sales of new machinery.
In a generally bleak international marketplace, some bright spots could be found in 2016. The Russian and Ukrainian markets have shown significant growth, especially for equipment to produce grain, oilseeds and other commodity crops. U.S. exports to Russia were up an impressive 35 percent overall in the first six months of the year. Exports to Ukraine grew even more dramatically, by 204.3 percent.
Source: U.S. Department of Commerce, International Trade Administration