“…industry has received successive price increases and has no other way out than to pass them on to farmers…”
Rodrigo Junqueira is the General Manager of AGCO and Vice President of Massey Ferguson South America.
AGCO Corporation is a multinational manufacturer focused on developing, manufacturing and distributing agricultural equipment to 140 countries, based in Duluth, USA. The company owns the GSI, Fendt, Massey Ferguson and Valtra brands.
AgriBrasilis – What has motivated the excellent performance of the agricultural machinery market in recent years? How big is the market?
Rodrigo Junqueira – We are at a very positive moment for Brazilian agribusiness, with agricultural commodity prices on the rise. With the expectation of continuous growth in demand, record harvests, and high prices for grains and, consequently, an increase in income, farmers reinvest in their properties, seeking technologies that contribute to improving results in the field, including agricultural machines that are an essential part of technification. It is a win-win equation: the heated market and increased demand have the potential to positively impact the manufacturer of agricultural machinery and the entire supply chain.
There is also a question of behavior. Brazilian farmers are among those most interested in technology, especially concerning equipment performance and cost-effectiveness. This characteristic is even more remarkable with the entry of new generations in the field, which seek to trade their machinery with the most technological machinery to obtain greater profitability, reduction of fuel consumption, and less time to carry out agricultural activities.
AgriBrasilis – What is the average age of the tractor fleet and when is renewal recommended? What market does this represent?
Rodrigo Junqueira – Brazil is the only country where farmers have up to three crops a year, in addition to having topographic conditions that demand a lot from agricultural machineries, such as in the Cerrado (Brazilian Savanah), for example, with large areas. Unlike the European farmer, that works in small areas, with fewer harvests per year, that has machines that are sometimes oversized, and changes their machinery in a shorter period of time, the Brazilian farmer generally uses the machinery for longer than what would be recommended. Considering these factors, there is a demand to update the fleet more frequently.
For example, the lifespan of an agricultural tractor can be between 10,000 and 15,000 hours of work on average. However, this period is directly linked to the type of application, type of cultivated plant (sugarcane, for example, requires more work), and how often the equipment enters the field. Tractors are used for various operations, such as soil preparation and planting, but the sprayer is the machine that enters the field the most – it enters up to 20 times during the cotton cycle, for example. Therefore, the strength of the machine and daily and periodic revisions, preventive or corrective, are important points for maintenance and longer equipment life.
According to data from Cogo Consultoria, the fleet that has been in the field for more than 20 years is representative: 39% of tractors and 48% of harvesters are more than 2 decades old. From this point of view, it is possible to perceive the expressive potential for fleet renewal, whether due to wear or adherence to new technologies.
AgriBrasilis – Do agricultural commodity prices follow machine prices?
Rodrigo Junqueira – The rise in the prices of agricultural commodities favors the remuneration of farmers, generating conditions to absorb the costs of machine price readjustment, maintaining a favorable exchange ratio. The industry has received successive price increases and has no choice but to pass them on to farmers.
AgriBrasilis – In recent years there have been delays in the delivery of agricultural machinery. What are the reasons? What is the outlook for 2022?
Rodrigo Junqueira – The supply of agricultural machinery remains unstable, still impacted by the shortage of raw materials in the last two years. This is because activities in industries that were paralyzed during the most critical months of Covid-19 were not resumed at the same pace as demands, which directly interferes with logistics and transport issues. We have been working continuously with suppliers, seeking to equalize the scenario, and we expect the second half of this year to be more favorable. That’s why we also warn about the importance of farmers planning their investment in technology, making a good plan for the acquisition of machines, and not waiting for the moment of planting or harvesting.
AgriBrasilis – Is Brazil dependent on foreign components for the manufacture of agricultural machinery? In what percentage? What can be done to minimize this dependence?
Rodrigo Junqueira – Part of the items used in the assembly of equipment are imported, mainly electronic and technological components, which require high investments in tooling (for example, transmissions), but the tendency is for the participation of national suppliers to increase year after year. To minimize dependence on imported components, we are encouraging the development of the productive capacity of local industries and the installation of factories of leading technology suppliers that are not present in Brazil.
AGCO is strongly committed to partnering and developing its supplier base, increasing turnover and the number of localized components. Our strategy is to have an optimized number of national and international suppliers, with a very close relationship in terms of capacity gains, productivity, competitiveness, quality, and the development of new solutions and technologies.