16 November 2001

15% farm income rise helps German industry

A 15% rise in German farm incomes is helping to remedy what threatened to be a devastating year for the countrys farm machinery industry thanks to BSE.

"Sales were high last autumn but then came the big shock of BSE in November," said Gerd Wiesendorfer, market research manager for Germanys agricultural machinery association VDMA. The result was, what he described as, "disastrous sales" in the first quarter of the year, particularly for grassland machinery. "Baler sales fell by 50% and tractors by more than 7% to about 24,000 units," said Mr Wiesendorfer.

But improving farm incomes led to a swift recovery in the second quarter of the year. Combines for example, performed much better than expected with sales up by 1% in the first half of this year compared with the same period last year.

Aside from favourable deals, based on lower interest rates, as combine makers tried to clear old stocks, the improved sales were underpinned by better yields and prices.

"Compared with most other EU countries which suffered poor harvests, German farmers enjoyed a dry harvest, 10% higher yields and good prices. Also pig returns were at the top of the cycle and milk prices were good, which more than compensated for lower returns from beef," said Mr Wiesendorfer.

Meanwhile manufacturers remain cautiously optimistic about the prospects for next year for two reasons. First, commodity prices seem to be stabilising at relatively high levels. Second, cost cutting and co-operation among medium sized machinery makers is expected to help them exploit the rapidly developing markets of eastern Europe, according to Wilhelm Voss, managing director of Krone.

"Medium sized companies such as Krone, are reducing marketing costs and working together with other firms to exploit potentially very large markets in eastern European countries such as the Ukraine and the Czech Republic," said Mr Voss.

Mr Wiesendorfer underlined the key importance of eastern Europe and North American markets for German manufacturers. "There is no capacity for growth in western Europe. New markets in eastern Europe and North America are becoming increasingly important," he said. &#42