Local farming machinery market ploughs on

While it is hard to estimate how many tractors or other agricultural machines are operational at present in Romania, everyone – authorities, farmers and dealers – agrees that the fleet of agricultural machinery is considerably undersized and obsolete. Following a good agricultural year in 2011, local dealers saw sales go up by more than 20 percent. The trend is expected to continue throughout 2012, although poor weather conditions currently point to a lower growth rate.

Simona Bazavan

Confident in the local market’s potential for growth, US-based Titan Machinery announced last month that after acquiring local agricultural equipment dealer Agroexpert last year, it estimates that in its first year of activity on the Romanian market it could double its sales to about EUR 40 million.

Romania is the first foreign market to which the American agricultural and construction equipment dealer has expanded. Based in West Fargo, North Dakota, Titan Machinery now runs 91 service and dealership offices in the US.

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According to the most recent available data, there were around 177,000 tractors in Romania in 2009 and about 24,000 cereal combines, meaning that a physical tractor covered a whopping 53 hectares of arable land compared to the European Union average of 12 hectares. Probably more important than the actual figure is the fact that 75 percent of the agricultural equipment owned by Romanian farmers is estimated to be more than five years old, requiring upgrades and in most cases replacement.

All this is good news for local dealers who should be looking at considerable future growth, judging from last year’s results too.

“Overall, the agricultural machinery market grew considerably in 2011 against the previous year. We grew by 25 percent but our competitors have also grown at a similar rate. 2011 was a good agricultural year in terms of crops and prices and this has allowed farmers to make investments in high-performing agricultural machinery,” Florin Neacsu, deputy general director of NHR Agropartners, a local agricultural machinery dealer, told BR.

NHR Agropartners is the authorized exclusive distributor of the New Holland agricultural machinery and equipment in Romania. It also imports Poettinger, Hardi, Bogballe and Guestrower products.

Not only did the number of new pieces of machinery go up, but Neacsu says that in the past few years he has also witnessed an increase in demand for more powerful and better performing machines, although the 100-150 horsepower (hp) category continues to be the best sold.

Biso Romania, another player on the local market, saw its business grow by 40 percent last year and has similar expectations for 2012 as the company plans to expand its number of local dealerships. The company sells locally the entire product portfolio manufactured by mother company Biso Schrattenecker in Austria. The firm estimates that Romanian farmers who cultivate more than 1,500 hectares spend on average up to 40 percent of their annual investment budget on equipment, Andreas Feichtlbauer, general director of Biso Romania, told BR.

While everyone agrees that the market grew last year, it is hard to make accurate estimations about the actual number of agricultural machines sold in Romania based on the information supplied by dealers, Neacsu said. He added that nor is there information regarding what he calls “grey” imports of machinery, which is registered abroad and later brought unofficially into the country, or cheaper no-brand products sold locally.

Biso Romania’s director, on the other hand, estimates that about 450 combines and approximately 2,000 new tractors are sold each year in Romania, leaving plenty of room for future growth. “If we compare this with other countries, the market is still well below its potential. Farmers still buy land instead of equipment – which is right of course. But with the help of European Structural Funds, Romania will continue to grow in the agricultural sector,” he said.

As for what can be expected in 2012, Neacsu is cautious in his predictions. “So far 2012 points to weaker results because almost all farmers had issues with the drought during the summer and autumn of last year – the rape crops were compromised and the other crops sprang late and didn’t have a chance to develop adequately before the frost. We hope that the recently fallen snow will make up for the lack of water in the soil and will protect the crops from frost. As long as we don’t have floods – this would be a disaster for local farmers,” he said.

Feichtlbauer also stressed that a lot depends on the weather as this directly impacts farmers’ revenues. The last snows are promising and the company has had a good start, in terms of the season, in 2012, he added.

Biso Romania has five offices in Romania and has announced that it will invest EUR 1.7 million in opening three more this year.

In the past three years Biso Romania has invested EUR 7.5 million in its headquarters in Drajna, home to its showroom, a service center and spare parts area, and where it has also built a production facility for 200 employees, although this is not yet operational. The company sells locally New Holland tractors and combines as well as the entire product portfolio manufactured by mother company Biso Schrattenecker in Austria.

NHR Agropartners was bought by Austrian company VA Intertrading 11 years ago and has since grown constantly, opening 10 subsidiaries country-wide and boosting its turnover 20 fold, according to Neacsu. The company now employs more than 150 people, most of whom work in post-sale services.

Financing future growth

Financing continues to remain an issue for many local farmers, especially small ones, who are looking to buy new machinery.

NHR Agropartners works with several banks and leasing institutions, as most of its clients choose credit while fewer go for EU funds. “Unfortunately the number of European Agricultural Fund for Rural Development (EAFRD) projects has decreased considerably in recent years, although there is a clear need to buy more agricultural machinery so that the local agriculture industry can get close to the standards of its EU competitors. Local farmers too would have wanted to access more projects,” he said, adding that the criteria that a project must meet in order to get EU financing often prove discouraging. “I can’t comment on a situation on which I don’t have all the information, but I don’t understand why more criteria have been introduced to disqualify projects rather than help fund absorption,” he explained.

In order to supports clients, Biso Romania launched three financial support schemes earlier this year for farmers looking to buy new agricultural equipment, two of which are in partnership with Agricover Credit IFN.

Not made in Romania

The local agricultural machinery market is dominated by imported products, especially when it comes to large-capacity machines like tractors and combines. Mihai Ivascu, marketing director of the Romanian Association of Manufacturers and Importers of Agricultural Machinery (APIMAR), told BR that an estimated 1,500 new tractors are sold in Romania each year, out of which 90 percent are imported.

After UTB Brasov, the largest local tractor manufacturer was closed in 2007 after more than 60 years of activity, and there has remained only a handful of local tractor manufacturers. They include Mat Craiova, Geda Prodexim, which operates a factory in Campina, Prahova county, Irum Reghin and Hoyo Romania, which is a Chinese investment in Rasnov, Brasov county.

simona.bazavan@business-review.ro