Agricultural machinery market expected to rise

Market forecast to register CAGR of 14.5% during 2018-2023

Photo: Agrochemex

Vietnam’s agricultural machinery market was valued at $115.2 million in 2017 and is expected to register a compound annual growth rate (CAGR) of 14.5 per cent during 2018-2023.

According to a Research and Markets report, leasing of agriculture machinery has been observed in Vietnam as local production of agriculture machinery is low. Agricultural co-operatives and private enterprises are the providers of machinery for lease. Organizations that offer leasing services have efficient machinery in tillage, harvesting, threshing, drying, grain storage, and transportation. These organizations are found especially in the Mekong Delta and the Red River Delta.

Rice, maize, and sugarcane are the most cultivated crops, with rice being the most mechanized crop, at more than 70 per cent of the cultivated area. To make this expensive machinery affordable to farmers, the government is introducing support schemes to drive growth in the market.

The tractor segment is the biggest in Vietnam, accounting for nearly half of the market. The segment was valued at $38.6 million in 2017 and is projected to register a CAGR of 12.6 per cent in 2018-2023.

Though agricultural wages are low and many workers in industry are poor, people prefer industrial jobs over agriculture, as agricultural production in Vietnam is on the decline. This situation has led to a shortage of agriculture labor in the country during the farming season. The shortage of seasonal agriculture labor is a major driver of the implementation of machinery, as the work of laborers can be replaced with machines.

Vietnam has a practice of sharing property equally among children in a family, which is one of the main reasons for fragmented land holdings in the country, both inter-farm and intra-farm. As property inheritance is increasing, so is the number of owners on the same land, which reduces the size of each plot. It is harder and less economic for farmers to use modern agriculture machinery in small plots, as it is difficult and time consuming to maintain boundaries and transport between plots.

Major Developments in the market

• The Bank for Agriculture and Rural Development of Vietnam (Agribank) and Tata International Vietnam have signed a cooperation agreement to support farmers in purchasing equipment.

• The Vietnam Engine and Agricultural Machinery Corporation will trade $1.33 billion shares on the Unlisted Public Company Market (UPCoM).