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First Increase in Agricultural Machinery Industry Sentiment Index in Over Three Years

AUTOMOTIVEFirst Increase in Agricultural Machinery Industry Sentiment Index in Over Three Years

The index (numerical value) representing sentiments in the agricultural machinery and equipment industry increased by just 0.45 percentage points. As noted in the biannual May report on the sector’s sentiment by the Polish Chamber of Commerce for Agricultural Machines and Equipment (PIGMiUR), this is the first, albeit small, increase since March 2021, marking over three years. Thus, the Chamber indicates a return to a value of -3.28. “Perhaps this is the first sign of better sentiments among entrepreneurs,” PIGMiUR speculates.

The Polish Chamber of Commerce for Agricultural Machines and Equipment (PIGMiUR) conducted a survey on the current and expected economic conditions in the industry at the end of April and beginning of May this year. This cyclical survey has been conducted every six months since June 2014. Its outcome is a numerical value—the index that reflects the sentiments in the agricultural machinery and equipment industry among entrepreneurs who participate in the survey.

Sentiments in the agricultural machinery and equipment industry remain below -3 points

Sentiments in the agricultural machinery and equipment industry remain low, as indicated by the data collected by PIGMiUR at the end of April and beginning of May 2024. According to the latest Chamber report, the index value is still below -3 points.

“For the past three years, we have seen a consistent downward trend in sentiments within our industry. Particularly in the last two years, these sentiments have significantly deteriorated, caused by, among other things, the problems faced by agricultural producers. Examples include the surplus agricultural products in warehouses and the lack of adequate government action on controlling grain transported from the eastern border. The difficulties faced by farmers and the halt in investment in agricultural equipment have directly impacted the condition of companies in the sector,” notes Hubert Seliwiak of PIGMiUR.

Expectations for improved conditions in the agricultural machinery and equipment industry

However, the Chamber notes a slight “upturn” in industry sentiments. For the first time since March 2021, PIGMiUR records an increase in the index value. “It is indeed small, just 0.45 points to -3.28, but it might be the first sign of improved sentiments among entrepreneurs,” the authors of the May report hope. However, they remind that the negative value presented in this document indicates that negative sentiments and pessimistic future expectations still dominate among entrepreneurs.

“Too little time has passed since the peak of the crisis in the agricultural sector, marked by nationwide protests aimed at making the authorities and the public aware of the issues that need immediate attention for farmers and breeders. Farmers still remind of unresolved problems from time to time. We presume that there is currently a general expectation of what and when things will be addressed, and this stagnation translates to the level of sentiments among entrepreneurs in the agricultural machinery and equipment industry,” states Hubert Seliwiak.

According to the Chamber, entrepreneurs in the agricultural machinery and equipment sector are increasingly expecting an improvement in market conditions. As shown by the PIGMiUR survey, significantly more entrepreneurs believe that the economic situation will improve. Currently, over 14.5% of the survey participants expect a slight improvement compared to 6.5% six months ago. This is partly why this slight increase is noted in the latest report.

Expectations for sales in their own companies are slightly better than six months ago

Additionally, PIGMiUR points out that expectations regarding sales in their own companies contribute to the slight improvement in the index value. Currently, over 58% of entrepreneurs predict that this year’s results will be worse than in 2023. “This is still a high percentage, but six months ago, it was over 64%. Thus, there is a slight increase in expectations for improved sales results this year,” the Chamber notes in its report, anticipating that the index value would likely be higher if the investment plans had remained at least at the level of the second half of 2023. “Unfortunately, in this aspect, we observed a slight decrease, resulting in only a slight increase in the index value,” reads the PIGMiUR document. Despite this, it managed to note a slight increase in optimism among entrepreneurs, even as market data and the number of new tractor registrations in Poland continue to decline. “This might indicate that just before the season, many farmers decided to invest in machinery, often in accompanying fieldwork equipment. Hopefully, this is a good sign for the rest of the year,” the report’s authors hope.

How is it in EUROPE? Data based on CEMA

The Chamber also references European results. Here, as shown in the PIGMiUR report based on data outside Poland, the overall economic indicator for the agricultural machinery industry in Europe has slightly deteriorated again, following a sharp decline in previous months. “In April 2024, the index dropped from -55 to -57 points (on a scale from -100 to +100). The survey again confirms that direct customers of manufacturers, namely dealers, are unable to pass on their numerous past orders to end customers,” the Chamber notes.

“Perhaps farmers or breeders in Europe holding off on investing in new machinery is a deciding factor. They too have recently complained about the conditions they have to operate under. This was visible, for example, in protests in most EU countries. Under their influence, the European Commission has announced a review of its agricultural policy,” reminds Hubert Seliwiak.

According to the survey, dealer stock levels in most European markets are significantly higher than even in 2019, which went down in history for the high level of dealer inventories.

“The further deterioration of the business climate for the second consecutive month is solely the result of current company assessments, which stem from already lower future expectations,” reads the conclusion of the PIGMiUR report. It notes that, according to survey participants, the current situation is worse than in over seven years. “Only 5% of industry representatives rate the current business situation as favorable. On the other hand, future expectations have stabilized at a low level. Nonetheless, two-thirds of survey participants expect a decline in turnover within the next six months. Meanwhile, there is a further and significant improvement in expectations for incoming orders (an indicator not included in the overall barometer calculation),” summarize the authors of the Chamber’s document.

These results come from studies by the CEMA association, which brings together European agricultural machinery manufacturers.

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