Falling demand for ag machinery in Russia and throughout much of Central and Eastern Europe during the past 2 years has left farm equipment makers worldwide watch as sales plummeted from previous record-high levels.

VDMA, the Agricultural Machinery Assn. based in Frankfurt, Germany, estimates that worldwide sales of ag machinery declined by 16% last year. In its “Economic Report 2010 — Agricultural Machinery,” the association says that sales fell to $69.6 billion (57.5 billion euro) from nearly $83 billion in 2008.

Equipment manufacturers in the EU felt the brunt of the decline, as their market volume dropped by 19% last year, to $25.3 billion (20.9 billion euro). “Over the past few months, economic disparities have intensified further,” said Dr. Bernd Scherer, managing director of VDMA. “While market growth has been recorded in some regions — such as Brazil and the U.S. — the overall investment mood in Western Europe remains subdued.”

VDMA reports that, based on sales so far in 2010, shipments of farm machinery from EU manufacturers could slip another 8%, to $24.4 billion (19.3 billion euro) this year.

“While clear improvement can be felt in some Central European markets, the demand for new machinery in France and Spain remains subdued,” Scherer says.

Protectionist Measures. VDMA says that “protectionist endeavors in some markets” are a growing challenge for manufacturers. They refer to such measures as “a drop of bitterness” for equipment makers.

“For instance, at present Russian industry is vigorously promoting the extension of import duties previously applied only to combines and forage harvesters to include other product segments,” Schere says. “At the same time, 50% localization [domestic content] is aimed at as a prerequisite for participating in state aid programs. Similar tendencies are exhibited in the Chinese award policy for public invitations to tender, where the order volume largely goes to domestic agricultural machinery companies.”

German exports to Russia have declined by 60%, according to VDMA. Previously, Russia was second-largest customer for German machinery, but has now slipped to sixth.

Overall, German exports to Russia have decreased by 31%, and those from the U.S. have fallen to $6.3 billion, or -27%. And according to the association, U.S. tractor exports, which are strongly dependent on Eastern Europe, were 39% under 2008 shipments. Italy, the third largest exporter of agricultural machinery, also registered a decline of 27%, although deliveries to Asia increased.