The exodus of foreign manufacturers of agricultural machinery and the difficulties in establishing parallel imports in relation to spare parts and components have driven up prices for domestic counterparts. In 2022, Russian-made agricultural machinery has risen in price by an average of 30-50%. Such a sharp rise in prices has already affected the plans of farmers to purchase new equipment and upgrade the fleet, which in turn may hit agricultural productivity in the coming years. RBC writes about this with reference to market participants and the appeal of the Ministry of Agriculture to the Federal Antimonopoly Service (FAS) with a request to check the validity of price increases.
The forecast for the coming year is also disappointing: market participants expect further price increases due to a sharp reduction in government subsidies and incentives for the purchase of domestic equipment. Before the war with Ukraine, Russian equipment accounted for approximately 51% of the market, in 2022 this share rose to 61% and will apparently continue to grow in the coming years. In its documents, the Ministry of Agriculture admits that some types of Russian equipment have grown one and a half times over the year.
“A combine that used to cost 12 million now costs 19 million rubles,” Arkady Zlochevsky, President of the Russian Grain Union, quoted the publication as saying.
The increase in the cost of Russian equipment is associated with an increase in production costs. Despite the rather high level of localization (around 60–80%), a significant part of the parts was still produced in Western countries, which increases delivery costs or forces us to look for new partners. In addition, resource prices have risen: metal has added another 5-15% to the cost of parts, and rising energy prices are forcing these costs to be included in the selling prices of equipment additionally.
The abolition of subsidies for discounts on Russian equipment by the government also brought its share: experts estimate its contribution to price growth at around 10-15%. In 2023, the government allocated only 2 billion rubles for these tasks, compared to 8 billion in 2022. At the same time, market participants insist that for the normal renewal of the park, this amount should increase by 7 times and amount to 15 billion rubles a year. Otherwise, agriculture risks facing a slowdown in the pace of equipment renewal, which will inevitably lead to a drop in the quality of work and a reduction in the yield of Russian farmers.
“In the current situation, there is a risk of freezing the process of updating equipment, a shortage of combines and tractors, and the threat of falling high yields,” says Sergey Yushin, head of the National Meat Association.
Difficulties with the renewal of the fleet will have a negative impact for several years. Companies traditionally renew about 10-15% of the fleet per year, skipping one year will affect yields in the coming years, when this equipment will fail faster and it will not be possible to quickly replace it. “It will boomerang back,” Zlochevsky says, urging people to try to find a solution now. The Ministry of Agriculture responded to a request from the publication that the state was developing measures to support the industry, but did not provide specific examples.
For the first time, the real problems of Russian agriculture due to the departure of Western brands were discussed in June 2022. At that time, manufacturers and market participants admitted that it would not be possible to quickly replace foreign equipment, and the speed of import substitution leaves much to be desired and will not be able to rely on it.