The Canada agricultural machinery market is projected to record a CAGR of 4.5% during the forecast period (2021-2026). The COVID-19 pandemic has certainly caused uncertainty in farm income and ag equipment purchases for the year. Although the first six months of 2020, COVID-19 has created significant headwinds for the Canadian economy, total farm equipment sales have increased in July 2020 compared to 2019 (Year to Date). The increase was mainly driven by higher sales of under-40 horsepower tractors, which were up 42.1% in 2020 versus July the previous year. This is possibly due to people spending more time at home and working on their yards.
An increase in demand for large-capcity farm machinery due to shortage in farm labor, favorable government subsidies for farm mechanization, and technological innovation to develop innovative agricultural machinery are some of the factors driving the market growth. Sales of the tractor and combine are projected to continue steadily grow throughout the study period among all equipment, including 2WD tractors which have seen relatively stable sales.
CLAAS KGaA mbH, Deere & Company, CNH Industrial NV, and Kubota Corporation are some of the major players who are operating in this market. These players are strengthening their position by launching agricultural machinery equipment that caters to the needs of farmers in this region.
Key Market Trends
Increasing Demand of Tractors and Combines Amid Declining Farm Labor
The need for sustainability in the management of farm operations has induced the demand for highly-developed and efficient machinery in recent years. According to Statistics Canada, the number of farms has witnessed a declining trend in recent years with 193,492 farms in 2016 as compared to 205,730 farms in 2011. Moreover, the number of farm operators has decreased from 293,925 in 2011 to 271,935 in 2016. Hence, to meet the increasing demand for food crops, the farmers have been turning to self-propelled and tractor-mounted equipment. This, in turn, has promoted the growth of agricultural machinery during the forecast period.
Additionally, in Canada, mechanization of farm practices, primarily guided by the economic principle that the use of automated tools instead of manual labor results in cost and higher yield benefits, and is likely to drive the demand for machinery. Farm equipment sales surged in July 2020 relative to 2019, as the economy continues to re-open after the COVID-19 lockdown, and farmers took delivery of their new equipment. According to the Association of Equipment Manufacturer's tractors and combines, retail sales increased from 13,673 to 14,325 units during 2019-2020 July year to date. While sales of combines declined from 838 to 697 during the same period.
Technological Development in Agriculture Machinery
The rapid technological innovations in tractors are currently revolutionizing the technological development in farming Canada. Farm costs are inevitable with the increasing demand for food crops, thus, making tractors an inevitable part of efficient farming. The wave of modern technology has already been witnessed in tractors with the application of Artificial Intelligence-based tools for data transmission, for precise decision-making processes in cultivation. Such innovations are expected to induce the demand for technologically-developed tractors, in the long run, thereby boosting its market growth.
John deere in alliance with an innovator of intelligent control systems developed precision spaying of specialty crops. Smart-Apply Intelligent Control System which uses Light Detection and Ranging (LiDAR), is an add-on kit for air-blast sprayers that are towed behind a John Deere tractor. The company has entered into a distribution agreement with Smart Guided Systems to sell and support its Smart-Apply Intelligent Control System through the John Deere dealer channel in Canada.
Furthermore, Cognitive Agro Pilot’s system uses artificial intelligence systems that are being introduced into combine threshing systems to enable the machines to automatically self-adjust to minimize losses and improve grain quality without operator input. Cognitive Agro Pilot is an autonomous driving technology joint venture of Sberbank and Cognitive Technologies group of Russia. The product is anticipated to be made available in Canada by the end of 2021.
The Canadian Agricultural Machinery market is consolidated owing to the presence of few prominent players, accounting for a higher share in the market. The key players in the market include Deere and Company, AGCO Corporation, CNH Industrial NV, and Kubota Corporation. The main strategy adopted by the key players has been to invest in R&D to encourage innovation and maintain a strong market base.
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