Agricultural Machinery. Economic Report

Agricultural Machinery Economic Report 2013

VDMA AGRICULTURAL MACHINERY REPORT 2013 1 Content Table of 2 Foreword 4 Agriculture and Agricultural Policy 6 Production and Business Climate 6 World 6 European Union 8 Technology and Market Development 8 Information technology 9 Market and Technology Developments in Individual Industry Segments 14 Regional Market Development 14 Germany 15 France 16 Poland 17 Croatia 17 Turkey 18 Russia 20 Ukraine 21 USA 22 Brazil 23 China 24 India 26 Charts and Tables 26 Agricultural Machinery in the European Union 27 Ex- and Imports Worldwide 28 Tractor Production and Markets in Selected Countries 28 German Market Volume for Agricultural Machinery by Segments 29 European Tractor Registrations 29 Agricultural Income in the European Union 30 Key Facts of the Agricultural Sector in the European Union 31 Members of VDMA Agricultural Machinery Condensed Version for the Public

VDMA AGRICULTURAL MACHINERY REPORT 2013 2 Foreword Dear Reader, Approximately 5.5 billion in export turnover, an effective market presence in more than 180 countries and significant growth rates in the future markets of Eastern Europe and East Asia make it clear that agricultural machinery and tractors from German production are in demand worldwide as never before. However, this is no accident, since these products symbolise efficient technology that holds its value, allowing farmers and contractors around the world to meet increasing productivity requirements in the field and barn in a reliable manner. Here, from a company and product perspective, dedication to innovation and quality and consistent customer orientation constitute the central success factors of the industry. Open Markets - A Yardstick for Sustainable Success in the Global Agricultural Machinery Business This is what has permitted us to be undisputed export world leaders for many years. By now approximately 10% of the agricultural machinery and tractors manufactured worldwide are from Germany. However, of course our ability to supply products internationally under marketable conditions depends not only on individual entrepreneurial capability. On the contrary, in order to continue proceeding successfully in global competition in the future, we are dependent upon fair and transparent political framework conditions. In the end, this is critically important for our capacity for growth as an industry, and ultimately also essential for the stability and security of companies and jobs. Continuing new protective barriers in Eastern Europe and East Asia Fewer grounds for optimism are thus provided by current protectionist endeavours, which are again being implemented more intensively in several extremely relevant agricultural markets. These political measures are very intentionally being directed against machinery imports from Germany and the rest of Europe. The situation is currently becoming particularly critical in Russia, which now accounts for around 40% of all agricultural machinery exports to countries outside the European Union. Instead of adhering to the market economy agreements contractually guaranteed as a result of accession to the WTO, Moscow is presently seeking every opportunity to erect new protective barriers. For instance, beginning in autumn there is to be a scrapping fee for mobile agricultural machinery which, depending on the weight of the particular machine, will amount to between 4,000 and 12,000. Whereas Russian producers only have to guarantee proper recycling, international agricultural machinery manufacturers are obliged to pay the fees imposed directly to the state treasury. This proposal is being justified in terms of environmental protection; in fact, it is of course an extremely transparent protectionist measure. The continuing non-transparent conditions for accessing subsidy programmes within the framework of machinery investment likewise appear to distort competition. Although in future direct subsidies in the amount of 15% are to be possible for all manufacturers, regardless

VDMA AGRICULTURAL MACHINERY REPORT 2013 3 of country of origin, current political practice nevertheless already indicates that here too onesided subsidy opportunities for domestic machinery are being sought. The present protectionist policy of the Russian Customs Union, in which Russia and the neighbouring countries Belarus and Kazakhstan participate, goes a significant step further. Within the framework of a so-called "safeguard investigation", in other words an investigation to examine protective measures for national industry, at the end of 2012 the Eurasian Economic Commission decided, completely unexpectedly, to introduce a protective tariff of 27.5% in addition to the existing customs duty of 5% for combine harvesters, resulting in a combined amount of 32.5%. To be frank, with this decision the Customs Union has allowed itself an affront which runs counter to all of the international regulations, especially since this obvious protective barrier was erected even before the beginning of the ostensible investigation procedure. However, with their protectionist policy, Russia and the other states of the Customs Union are not the only negative example: Other important trade partners of the German agricultural machinery industry, including China and India, are also attempting, contrary to the concepts of globalisation, to obtain a one-sided advantage for specific local industries with the aid of short-sighted protectionism. Competition as the basis for innovation The fact that this will not succeed in the long run is as obvious, as the VDMA position in all these cases is clear: Open markets are and remain an essential yardstick for sustainable success in the global agricultural machinery business. For years past, and for the future, this is what the economic policy lobbying of VDMA has stood for and continues to represent - without restrictions. In this regard, very specifically we rely on three fundamental principles, aiming to: 1. promote free trade and consistently draw attention to every type of protectionism, 2. strengthen the WTO as a multilateral guarantor for global free trade, and 3. call for the formation of bilateral free trade agreements as an interim solution, as long as no WTO agreement is possible. One thing is clear: Dynamism and innovation arise only through competition. The European Union as a market demonstrates this on a daily basis. After all, with an import ratio of more than 50% in the agricultural machinery sector, we are one of the most lucrative sales markets, particularly for those who are protecting their own markets. Anyone who relies solely on state regulations and restrictions will scarcely win in the long term. Our task in VDMA is thus to continue to take a position, in a clear and straightforward manner - with respect to both German and European policy. Only in this way can the future be shaped sustainably with regard to agricultural machinery - in the interest of all stakeholders, including manufacturers, the market and end customers. Yours sincerely, Dr.-Ing. Hermann Garbers Chairman of the VDMA Agricultural Machinery Association Frankfurt, May 2013

VDMA AGRICULTURAL MACHINERY REPORT 2013 4 1. Agriculture and Agricultural Policy Growth in agricultural income At the moment, when we speak of positive framework conditions for the agricultural machinery industry, they are mainly attributable to the income development in the agricultural sector. Naturally, farmers find it easier to invest in machinery when they have a sound financial basis. Especially small and medium-sized farms in Europe invest for the most part when they have adequate financial reserves, and less on credit. gross domestic product for the agricultural sector, France is also above the EU average of 1.2%. In Germany, agriculture only contributes 0.6% to the gross domestic product. The largest items in the turnover of the French agricultural sector are grain, wine, milk and beef. In Germany, dairy farming is dominant, while the Italian agricultural sector is relatively diversified, with a high share of fruit and vegetable cultivation. The situation is similar in Spain, the fourth largest producer of agricultural products in the Union, where, however, pig farming also plays a large role. Agricultural income in the European Union (EU) did not grow further in 2012, yet the statistical office published an index value at the previous year s level, which is comparatively high. The 2012 income index is almost 30% above the reference year of 2005 throughout the EU, in some countries even significantly higher. Both in Europe and worldwide, similar factors play a role in this development. Producer prices for agricultural products have risen generally. The last boom of 2007/2008 was followed by a rather brief downswing phase and then again a rally in the agricultural markets as from 2010. The corresponding price index of the Food and Agricultural Organization of the United Nations (FAO) is currently about twice as high as it was ten years ago. Particularly sales prices for grain and oil seed have remained surprisingly high in the past months. A decisive factor for this development is the permanently increasing demand in the world, but also a partly scarce supply due to crop failures, as for example in 2012 in the Black Sea region. France leads value creation in Europe When analysing the agricultural value added within the EU, differences from country to country become evident. France is the country with the highest production of agricultural goods in Europe with 79 billion (in 2011) clearly ahead of Germany ( 52 billion) and Italy ( 48 billion). With a share of 1.4% of Agricultural Production according to main product categories, in value referring to 2011 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Fläche für Grafik France Germany Italy EU Source: German Agricultural Ministry, Eurostat, excluding "other" products There is a lot of movement in the agricultural sector in the large agricultural countries in the eastern part of the European Union. Some countries in the region have developed their agricultural sectors significantly in recent years. Poland and Hungary are striking examples, where not only absolute value creation was noticeably increased but also the sector s share of the total economy. There is likely to be a slight declining tendency in agricultural income in 2013. It can be expected that prices will fall slightly in 2013 after a probably higher harvest yield. In addition, the cost of farm inputs further reduces farmers margins. However, income prospects remain comparatively good; this is also evident from the satisfaction Other animal products Milk Pigs Cattle Other plant products Fruit/Vegetable Wine Grains

VDMA AGRICULTURAL MACHINERY REPORT 2013 5 scores in the survey of farmers carried out by VDMA. EU agricultural policy is gradually taking shape After the more detailed international overview of the instruments of agricultural policy in the leading agricultural nations in last year's Economic Report, in this year s edition we will focus on the continuing discussion around the shaping of support in the EU. As was to be expected, the decisions on the support measures for the period 2014 to 2020 have been delayed. Negotiations between Brussels, the national governments and the representatives of farmers interests were still at a crucial stage at the editorial deadline. The basis for these negotiations was only created in February 2013 when the so-called multiannual framework was passed by the European Council the total budget for agricultural policy is also fixed within this framework. With almost 60 billion, this budget currently makes up 42% of the entire EU administration spending. With that, agriculture remains the most important policy area for the European Commission, even if its share of the total budget was ten percentage points higher a decade ago. With a volume of 420 billion over the seven years, the new financial framework for agricultural policy is nominally 1.8% above the budget for the years 2007-2013. Adjusted for inflation, a decline of about 11% (in real terms) is assumed. 1 For Germany, the German Farmers Union has calculated a nominal reduction of direct payments and market expenditure by about 5% compared to the previous budget and a reduction of at least 14% in funds under the so-called second pillar (rural development). Changes to both the first and the second pillar of funding are foreseeable. Agricultural policy is intended to become green, and this aim is a recurrent theme in the plans of the European Commission particularly as an argument to justify spending to tax payers. The payment of per-hectare premiums (so-called direct payments) from the first pillar will be made proportionately dependent on greening measures. Mainly three requirements are planned: Compulsory crop rotation, grassland preservation and the allocation of ecological focus areas - similar to the past set-aside areas. The latter are highly controversial, so that the planned portion of 7% of the entire farm area will not be maintainable or will have a flexible arrangement. Higher flexibility for the individual member states is in general to be expected. The partial re-nationalisation of European agricultural policy was already introduced ten years ago within the framework of the last minor reform (at the time planned as a midterm review ) with the increase of the rate of modulation, among other things. The so-called trialogue discussions between the Commission, the Council and the European Parliament should be completed by the end of June 2013. The Commission still sees a need for clarification on the following points: Redistribution or a better equalisation of the level of the direct payments within the EU Capping of direct payments per farm Definition of greening measures including sanctions for non-compliance Targeted support programmes for young farmers, small farms and farms in less favoured areas Higher transparency (for tax payers) Support of industry organisations, e.g. for crisis management Due to the delays so far in the course of negotiations, it has been proposed to postpone the implementation of the new rules to 2015. However, due to the budget restrictions which are 1 Calculated at 2011 prices.

VDMA AGRICULTURAL MACHINERY REPORT 2013 6 already effective, the downward adjustment to the level of the direct payments will already take place as from next year. Only Romania, Bulgaria, Croatia and the Baltic States can expect higher payments than at present due to the efforts made to equalise per-hectare payments within the Union. 2. Production and Business Climate Worldwide production volume grows to over 90 billion The production of agricultural machinery has experienced surprisingly dynamic development in the past three years. VDMA estimates the worldwide volume for 2012 at 91 billion, which represents growth of 12% compared to the previous year. China is again the record holder for growth with an increase of about one quarter. Furthermore, North America and Eastern Europe achieved double-digit growth rates. Turkish manufacturers were the only ones to experience a decline after the exceptional year 2011; they were, however, to some extent able to compensate for lower domestic demand through higher exports. The estimate for 2013 remains optimistic. The global production forecast is at 96 billion, which is equal to a growth rate of 6%. A decline is only anticipated for Eastern Europe, mainly due to home-made problems, whereas China as well as North and South America will achieve above-average growth rate. Production in the European Union, on the other hand, is more likely to stagnate albeit at a high level. Production and Trade of Agricultural Machinery in billion Euro, worldwide totals 90 80 70 60 50 40 30 20 10 Production Trade 2005 2006 2007 2008 2009 2010 2011 2012 Source: VDMA, totals of official exports from 46 countries World trade in machinery remains lively The manufacture and distribution of agricultural machinery and tractors are global business fields, as can be seen from a high volume for world trade. The total value of exports last year was 45 billion. 2 With that, the trade volume more or less equalled the production trend, so that the export share has stabilised at 50%. The trade share could, however, drop slightly in the coming years as local production is to be increased through political measures in important sales markets such as Russia, China and Brazil. Germany remains in first place in the ranking of export nations, followed by the United States and quite far behind Italy, France and China. European production rose by 7% in 2012 In the year 2012, the production volume in the European Union amounted to more than 28 billion, corresponding to approximately 30% of global production. The region, with the major locations Germany, Italy and France, thus leads worldwide, although market share is continuously being lost, primarily to China. Last year an additional problem was the weak demand in some domestic markets. This applied particularly to Italy, where the strongly diversified agricultural machinery industry realised only a flat turnover development, due to the fact that the home market shrank by more than 10%. Conversely, in France the strong domestic market resulted in an above-average growth in production of 11%. The situation was similar in Germany, the leading agricultural machinery location in Europe, which reached a new all-time production high of 7.66 billion. Growth was achieved particularly in the soil tillage, sowing and plant protection equip- 2 Based on exports and from a national viewpoint, i.e. internal trade among the EU member countries is also included as export.

VDMA AGRICULTURAL MACHINERY REPORT 2013 7 ment segment. The German agricultural machinery industry has good utilisation of production capacity to date. Until April, production lead time averaged four months, one month longer than the European average. Incoming orders for German manufacturers are approximately at the high level of last year. In the first quarter of 2013 turnover was 1% higher than in the previous year; a stable turnover is anticipated for the year as a whole. Manufacturers in Germany can continue to count on strong demand from their two most important sales markets, Germany and France. Whether this will compensate for the decline in other major markets such as the United Kingdom and Poland remains to be seen. Due to increasingly high-quality features, whether in relation to engine technology or electronics, as well as a continuous growth in size, the average value of the machines is rising. Thus, even with a lower number of units, a stable or slightly increasing turnover is possible. slightly below zero on the scale of +100 to 100, due to pessimistic expectations; however a positive mood now prevails again in relation to both the current business situation and turnover expectations for the coming six months. At the same time, further economic differentiation is occurring within Europe. Whereas 2011 saw unanimous enthusiasm for the rapid upswing, last year the climate barometer fell significantly, first in Southern Europe and then also in Scandinavia. On the other hand, manufacturers in Germany, France, and also Austria, for instance, have indicated great satisfaction over the past two years. For the coming six months, manufacturers of arable farming equipment are currently the most confident. However, the majority of component manufacturers also anticipate increasing orders, which could be a positive indicator for the entire industry. On average, the number of employees in Europe is remaining roughly stable. Flexibility gained through the use of temporary employees continues to play an important role. Production of Selected Machines in Germany in units 2010 2011 2012 Change Combine harvesters 5.460 8.026 8.004 0% Forage harvesters 1.890 2.548 2.685 5% Mowers 14.737 18.474 21.259 15% Tedders and rakes 15.453 19.039 22.981 21% Balers 5.474 6.548 6.331-3% Ploughs 3.739 4.610 4.476-3% Seed drills¹ 7.125 9.465 11.726 24% Field sprayers 2.982 3.450 3.891 13% Source: Turnover statistics VDMA Agricultural Machinery Association, ¹ without precision seed drills Regionally differentiated business climate The monthly business climate index of the European agricultural machinery industry, the CEMA Business Barometer, has performed well since the beginning of the year. In the second half of 2012, the index value fell to In a worldwide comparison, the European business climate of the agricultural machinery industry is currently below average. The satisfaction level of the manufacturers and distribution partners was even higher in most of the countries, especially in India, Brazil and the United States, as a result of the semi-annual global survey, conducted for the association network Agrievolution. More than 50% of the interviewed managers in the three countries mentioned evaluated the current business situation to be good or very good in Western Europe, recently only every third interview partner gave such high ratings. For the first time in three years, also the Japanese representatives speak of a favourable situation. The Japanese agricultural machinery market is currently growing again, based on high subsidies. In addition, the export business is supported by the massive devaluation of the Yen.

VDMA AGRICULTURAL MACHINERY REPORT 2013 8 3. Technology and Market Development Information technology for the agricultural machinery industry Guest article by Dr. Matthias Rothmund, Horsch Maschinen GmbH In the past decade, electronic communication technology has taken a firm foothold in the agricultural machinery sector. While in the automotive field we usually have closed control systems, the combination of machines from different manufacturers presents a particular challenge in the agricultural machinery sector. In the standardisation of electronic communication between control and operating systems of tractors and implements in the so-called ISOBUS system, the agricultural machinery industry shows an unequalled joint commitment among manufacturers. The operation of mounted equipment such as seed drills, fertiliser spreaders and sprayers via the tractor terminal is today already well-established and proven. However, the automatic steering of the machines alone is not enough for a precision farming system. Also crucial is how the information is used ahead of the task and how it can be transmitted after the measure is completed. Up to now, the desktop software used by farmers for planning and analysing arable farming so-called field record programmes or farm management systems was used parallel to the machine data. Since the introduction of ISOBUS, a standardised interface is available which enables the transmission of task files to the machine and back; however, it is currently still not even close to being supported by all producers of this software. The original idea of precision farming, i.e. the use of resources optimised to meet the specific needs of each partial area, is now experiencing a renaissance through the availability of standardised communication interfaces. Until recently, the spreading of seed, fertiliser and plant protection products according to the specific needs of partial areas failed because of the high technical complexity and was confined to a few pioneers. Only through tinkering, expert knowledge and high financial expenditure was it possible to translate the findings on different soil types and growth conditions for the plants in the field into technical variable control of the amounts applied depending on the specific position. Today, agricultural machinery is usually already equipped ex works to fulfil the requirements, e.g. with GPS and ISOBUScompliant controls as well as electronically switchable partial widths and flow rate control. Variable control of application amounts can therefore easily be achieved through additional software functions on the implement. Here the agricultural machinery industry and the software companies jointly face new, significant challenges. There is a rapid development from the desktop software so far only used locally to interlinked farm management systems. The integration of consultants and contractors into the operating procedure requires the consistent exchange of data between the machines and software systems of different origin. The increasing use of telemetric systems necessitates the continuous synchronisation of data with and between different platforms instead of the purely task-related data exchange via USB flash drive between desktop software application and machinery, as has been the case up to now. In those areas in which cross-manufacturer control and operation of agricultural machinery is already successful, intensive work is currently ongoing on the standardisation of furtherreaching methods and formats for the exchange

VDMA AGRICULTURAL MACHINERY REPORT 2013 9 of data. In this way, automation systems are made possible, which not only function with different machines but also enable the farmer to interlink machinery systems with the most diverse services. For example, an additional service could combine the yield potential map for a field drawn up by a specialised provider with the latest weather forecast to calculate a recommendation for nutrients (on a day-to-day basis) for a specific partial area and a specific crop. This could then be transmitted online to the tractor-fertiliser spreader combination, where it could be used to determine a setting value for the machine on the basis of the task information regarding the fertiliser to be used plus the sensor information on the current nutrient situation assessed in real time. If besides the technical functions of the machine the data infrastructure for the system interlinking of services is available and easily applicable, precision farming becomes a matter of course for the farmer because an optimised use of resources not only has a positive effect on the environment, but also increases profitability. Market and Technology Developments in Individual Industry Segments In the following chapter, we would like to describe market developments of the major business sectors, with a regional focus on Western Europe respectively Europe as a whole, including significant technological aspects. Almost a third of the sales volume for agricultural machinery in Europe can be attributed to one leading machine, namely the tractor. Following a decline to 167,000 units in the year 2010, the market for tractors in the EU recovered again over the past two years. The largest individual European market, France, had a significant influence on the overall trend. In France the above-average downturn of 20% in 2010 was followed by a considerable recovery in 2011/2012 to just under 40,000 units, 3 the level of the boom year 2008. The statistical annex of this report lists the sales and registrations of tractors for most European countries. Next to France, in recent years Germany has become established as a leading European market, considerably ahead of other markets. In 2012 the number of tractor registrations in Germany levelled off at a quantity last reached almost 30 years ago; however at that time engine performance was significantly lower. Currently trends in the two leading markets are diverging: The first quarter saw a decline of 12% in Germany, with an increase of the same amount in France. In terms of the number of registrations, Italy is in third place. However, following continuous growth in recent years, the Polish market has already reached almost the same level, with 19,113 registrations. With regard to the performance segment above 50 hp, Poland is already considerably ahead of Italy. In 2012 the average engine performance of new tractors was 102 hp in Poland and 94 hp in Italy. In addition to weaker trends in the entire region of Southern Europe, last year there was also a significant market downturn in Scandinavia and Finland, which ultimately resulted in a slight decrease for Europe as a whole. In terms of the number of units sold, rather than value, the market thus remained considerably below the level of the strong years 2007 and 2008. The global longliners dominate the European market with their offerings. More than 80% of the registrations are accounted for by the companies John Deere, Case New Holland (with the brands New Holland and Case IH/Steyr), AGCO (with the brands Massey Ferguson, Fendt, Valtra and Challenger), Same Deutz-Fahr (Same, Deutz-Fahr, Lamborghini and Hürlimann), and Claas, which for the past ten years has likewise been represented with tractors in the market. However, recent years have also seen an increasing number of tractors of Asian origin (from 3 Excluding telescopic loaders

VDMA AGRICULTURAL MACHINERY REPORT 2013 10 Japan, Korea and China), primarily in the lower performance segment. Accordingly, the battle for market share has intensified. The trend for 2013 so far indicates a further decline in the market. VDMA anticipates a 5% decline in the number of registrations (to 180,000 units) by the end of the year. In recent years, a decisive theme for engineers in the tractor companies has been the constant adaptation of engines and vehicles to new emission stages. Providers of selfpropelled mobile machinery are of course likewise affected. This has resulted in the development of the following two technology approaches regarding exhaust aftertreatment: One is the SCR 4 technology, which uses a urea solution to reduce nitrogen oxides, and the other one introduces a filter to reduce soot particles in the exhaust. The process has not yet been completed. The next stage (IV) will be introduced on the first of January, 2014, for the engine class between 56 kw and 130 kw. So far the greatest adaptation required was for the implementation of the preceding stage IIIB. Stage IV will result in a further slight reduction of the proportion of nitrogen oxide. The introduction of a fifth stage is currently being discussed, which in addition to particle mass is also to include the number of particles in the calculation of limiting values. This is to be implemented in a similar form in connection with the regulations for trucks, effective beginning in 2014 (Euro VI). From the present perspective, the universal application of particle filters would then be indispensable. Likewise it has yet to be clarified whether diesel engines under 19 kw and greater than 560 kw will also be included in the system of exhaust emission regulations. The European umbrella organisation, CEMA, supports this in principle. The theme of exhaust emissions is connected with the goal of lowering tractor fuel consumption and achieving the greatest possible efficiency. This aspect is currently particularly emphasised by manufacturers, especially since over the past three to four years every farm has had to handle a continuous increase of overall production costs. 4 SCR stands for selective catalytic reduction. For both tractors and the machinery being propelled, the tractor implement management (TIM) project is a technological milestone. This is a strategy promoted by a group of mainly German agricultural machinery manufacturers, where the implement is used to control the tractor. This inverse control of the tractor/implement combination affects the entire work process in the field, whether in relation to adjusting the driving speed or the speed of rotation of the power take-off shaft. The signal which is given to the tractor by the implement, based on its sensors, is decisive. As in the case of tractors, in the European combine harvester market there was also a perceptible revival following the slowdown in the year 2010. In the past season, 7,200 units 5 were delivered, which corresponds to growth of 5% in comparison to the previous year. In France, which leads in European grain cultivation, with a volume of 68 million tonnes and an area of over 9 million hectares, 2,234 new combine harvesters were sold in the past season. This was a growth of 11%, but probably does not represent the maximum potential of the market, especially since considerably more combine harvesters were sold annualy a few years ago. The forecast of the French association amounts to 2,400 units for the current season, which would correspond to further market growth of 7%. In Germany approximately 2,000 new combine harvesters were sold each year for the past two years. The market also seems to be levelling off at this amount for 2013. Due to a weaker demand in several other European countries, manufacturers currently anticipate a decline in sales figures in Western Europe, to just under 7,000 units. Sales Volumes for Combine Harvesters* in units 2009 2010 2011 2012 Western Europe 7.980 5.580 6.850 7.180 5% World 34.750 34.960 38.240 37.250-3% Source: VDMA members, * "Western" brands This trend is more than compensated for worldwide by higher investments in large markets such as the USA and Brazil, as well as in China. From January to April 2013, sales of combine harvesters 5 The following market volumes cited for harvesting machinery relate to the Western brands. Change

VDMA AGRICULTURAL MACHINERY REPORT 2013 11 rose more than 50% in both the USA and Brazil. In South America the demand is driven by current record harvests, particularly for soybeans, as well as by expanded areas under cultivation. In the USA, high earnings in arable farming will probably continue to have a positive influence on machinery investments. high. Trends in the market are correspondingly stable for the current season. For combine harvesters in particular, very long operating times are common during the season. Reducing the burden on the driver is thus correspondingly significant in the further development of the machinery. Electronic assistance systems ensure that the threshing process proceeds optimally, taking into account all current harvesting conditions. However, at the same time the driver can choose between various options such as high throughput speed or especially careful threshing. Nevertheless, removal of the harvested product if possible with no interruption is also essential for an efficient threshing process. The timing of loading into another vehicle and removal is coordinated by inter-machine communication. This automated procedure is also found in self-propelled forage harvesters, where due to the continuous parallel course driven by the harvesting machinery and the transport vehicle, the assistance systems assume an even greater importance for the coordination of the two components. In 2012, the forage harvester market worldwide comprised approximately 3,000 machines, with Germany alone accounting for one quarter of these. With 678 machines, the German market, which expanded due to the special economic conditions associated with biogas production, remained at a high level in the past season. For 2012/2013, sales figures in Germany will probably fall to just over 600 units. In the case of balers, a distinction is made between machines for round bales and (big) square bales. In 2012 approximately 3,600 big square balers were sold worldwide, compensating for the sales slump in the two preceding years. The worldwide round baler market for Western brands amounted to around 30,000 units, one third of which were sold in Western Europe. The increase in demand for balers is partially due to the fact that prices paid for straw and forage continue to be very The implementation of the TIM project described above can be illustrated by using balers as an example. In this case the baler regulates the driving speed of the tractor according to the utilisation of the machine, with the goal of achieving trouble-free, continuous operation of the baling process, with maximum bale density and yield per unit area. During the past five years, market cycles for forage harvesting equipment (mowers, tedders and rakes) were more volatile than in the preceding years. In the two years following the special economic situation for the milk sector in the 2007/2008 season, farmers exhibited considerable restraint with regard to forage harvesting equipment. In contrast, in 2011/2012 sales figures again came close to reaching the previous record of four years earlier. Worldwide sales rose an impressive 19% in comparison to the year before, to 82,000 units. In contrast, in the 2012/2013 season ending in June, the market has again weakened somewhat. A few strong markets such as France and Austria continue to be the exception. For Germany, it is anticipated that the quantity sold will be approximately 8% lower than last year. However, the demand for new equipment that combines cost savings opportunities with high feed quality will probably increase further in the medium term. Although the European model of milk production based on green dry feed is comparatively costly, it is valued by consumers. For the forage loading wagons, which are used primarily in Western and Central European grassland locations, there was a relatively dynamic market trend for 2011/2012, which now seems to have stopped for the time being. In the

VDMA AGRICULTURAL MACHINERY REPORT 2013 12 current season, manufacturers are experiencing a decline of more than 10%. In terms of technology, manufacturers are continuing to work on loading grass or hay with the trailers at the highest possible speed with low losses and increasing loading capacity. Agricultural transport machinery assumes a key role as farmers strive for efficiency. The most recent VDMA estimate of the market volume of this industry segment in the EU is 880 million. This is a small part of the overall market, however some machinery and equipment used across industries can probably be added. For agricultural trailers and transport vehicles, the physical limits with respect to dimensions and mass have been reached. Accordingly, it is a matter of minimising the unladen weight of the equipment. The coordination of agricultural logistics chains is increasingly being brought into line with the dispatching programmes of professional logistics providers. During the harvest, the time frame is sometimes very tight, for instance due to weather conditions, and a good transport chain is therefore decisive for the economic success of arable farmers. The discussion of harvesting and transport machinery will be followed by a summary of market developments for arable farming equipment. The number of units of soil tillage equipment sold across Europe rose 7% in 2012. According to VDMA statistics, which in the existing form extend back to the year 2001, it is the first time such a large number of units has been recorded for the European market. Over the past decade, the plough displayed the most impressive market growth. In 2012 France replaced neighbouring Germany as the largest market again for the first time in the past six years. The extensive arable land of Poland is also increasingly being ploughed with Western European brands. The choice of which equipment to use is influenced by soil conditions as well as by costs, yield stability, and the plants resistance to disease. The variety of equipment offered by machinery manufacturers is increasing. For the year 2013, the industry also anticipates a small growth in turnover. This is based on high order volumes for the large markets France, Germany and Russia. Whereas combined equipment for soil tillage and sowing has already been widespread for some time, the combination of sowing and fertilising equipment is comparatively new. Both types of combination have the same goal: Carrying out as few passes as possible in the field, for the purpose of cost savings, and to minimise compaction of the soil. Due to further increased fertiliser prices, when selecting a mineral fertiliser spreader European farmers and contractors are increasingly deciding in favour of equipment with weighing technology. Here a pioneering role is being played by the markets in the region of Northwestern Europe. Denmark is in the lead, with 60% of new spreaders being equipped with weighing technology. In accordance with the precision farming approach, the yield potential of individual sections of the field is also taken into account when applying mineral fertiliser. By means of appropriate sensors, the application amount is varied as required, as the spreader crosses the field. A challenge for fertilising equipment manufacturers is the widely differing qualities of fertilisers used, which nevertheless are to be applied equally. In the opinion of VDMA, the ever more sophisticated technology of leading manufacturers, particularly in the field of fertilising, should also provide a guideline for legislators. The industry in Germany is therefore working on anchoring appropriate provisions concerning application accuracy and edge spreading in the German Fertiliser Regulation for the purpose of environmental protection. With regard to environmental protection, naturally there is also a focus on plant protection equipment. Precision in plant protection is achieved, for instance, by lower application amounts facilitated with individual nozzle control, and greater effectiveness is attained by further increased boom widths and faster driving speeds. Plant protection machinery requires a high degree of sensitivity toward users and consumers, which we provide with increasingly sophisticated technology and intensive product training, explains Dirk Hollinderbäumer, chairman of the CEMA Plant Protection Technology Product Group. Obviously, as in the case of harvesting machinery, control of this work process is accomplished with ever increasing automation and electronic assistance. From the middle of this year, the legal provisions for

VDMA AGRICULTURAL MACHINERY REPORT 2013 13 placing plant protection equipment on the market will be harmonised across the EU for the first time. Moreover, beginning in 2014 there will be a standardisation of provisions for equipment control, which in the medium term will be specified in all EU countries for at least three years. Expectations of soil tillage, sowing, fertilising, and plant protection equipment manufacturers regarding future market developments are consistently positive. In the latest survey for the CEMA Business Barometer, representatives of this industry segment indicated above-average satisfaction, based on a good order situation. In May, almost 50% of those surveyed anticipated that turnover would increase further in the coming six months, while only 25% expected a decline. In the industry, machinery used in farmyards and barns is referred to as livestock equipment. Here feed mixing wagons for dairy farms play a central role. Depending on the number of animals to be fed, farmers will either choose a self-propelled machine or towed equipment. Good milk prices in the past two years again stimulated investment somewhat, however the German market is presently exhibiting a saturation trend, with a decline of around 10%. Milking and cooling equipment is the core element of the livestock equipment sector. Sales volumes in Germany amounted to approximately 204 million in 2012 an increase of 4% in comparison to the already high level of the previous year. At the beginning of 2013 order volumes decreased somewhat, so that the milking and cooling equipment sector is expected to exhibit a slightly below-average trend. The importance of automatic milking systems, also referred to as milking robots, continues to increase. For milking as well, the theme of automation thus dominates technological trends. What began with milking is now being applied to other processes in dairy farming, including feeding and animal inspection. Monitoring of the health of animals, for example, is supported by appropriate sensors. The market for gardening and landscaping equipment must be considered somewhat separately from the general agricultural machinery economic cycle. An increasingly clear distinction is being made between end user equipment, where prices play a major role and which is already manufactured mostly in Asia, and equipment for professional use, which is the focus of VDMA and its members. Professional gardening and landscaping is performed by municipalities as well as by private companies. Already more than half the turnover of these companies is based on orders from the private sector, i.e. private individuals who wish to have a garden established or maintained, for instance. In Germany, approximately 16,000 gardening and landscaping companies offer their services for this purpose. Over the past three years in particular this service sector exhibited very strong growth: The number of operations and employees rose by 10%, and the turnover increased by 25% since 2009. Following partially double-digit growth rates in previous years, in 2012 the German market for equipment used in gardening and landscaping declined slightly for the first time, estimated by VDMA as a decrease of 3% to approximately 660 million. There was an above-average decline for winter maintenance equipment, where the mild winter of 2011/2012 with relatively little snow had a noticeable effect. Nevertheless, manufacturers are optimistic for the future. The majority anticipate that turnover will rise again this year, for both the domestic market and exports. The trends that determine the new product programmes of manufacturers increasingly relate to electronic controls and automation. However, the themes of environmental compatibility and low noise emissions also play an important role.

VDMA AGRICULTURAL MACHINERY REPORT 2013 14 4. Regional Market Development German farmers are in a positive mood The results of the Agrarian Business Barometer, a business climate index for the German agricultural sector based on a representative survey in collaboration with VDMA, have reflected a very positive mood among farmers since the spring of 2010. In the latest quarterly survey, half of the participating farmers assessed the current economic situation as very good or good. Only 6% considered their situation to be negative the percentage of pessimists has never been lower. It is therefore hardly surprising that the willingness to buy new machinery is also still comparatively strong. for agricultural machinery. Demand is increasingly directed at larger models. In Germany, this currently means an average engine output of 145 hp in the segment above 37 hp (37 kw). The share of tractors with more than 200 hp has increased to 16%. Last year, 36,264 tractors were newly registered, of which 30,162 had an output of over 50 hp. Arithmetically speaking, this means that every eighth farmer bought a new tractor. In addition, about 90,000 second-hand tractors change owners each year. It is currently apparent that demand is weakening slightly after the last two record years 2011 and 2012. In the first four months, new registrations were 3% below the level of the previous year. The forecast for the total market in 2013 is a decline of more than 5%. The German agricultural machinery market reached a new all-time high in 2012 with a volume of 5.4 billion. With that, two strong boom years with respective growth rates of 23% and 14% followed the years 2009 and 2010, in which market decline was below the European average. With 324 per hectare of agricultural land, investments were clearly above those of the other bigger European countries. Germany probably even occupies one of the top positions worldwide in this comparison. As mentioned, investment plans continue to be strong so that the market will remain more or less at the same level in 2013. Agricultural Machinery Investment in per hectare of agricultural land (2012) Netherlands Germany France Italy EU Ø United Kingdom Poland Spain Source: VDMA, Eurostat 36 104 174 150 150 142 324 599 In value terms, tractors represent a share of about one third of the entire German market Market Volumes in Germany in units, referring to the calendar or seasonal year 2009 2010 2011 2012 Tractors 29.464 28.587 35.977 26.264 Combine harvesters 2.324 1.457 2.015 1.964 Balers 2.077 1.915 2.144 2.384 Forage harvesters 456 608 695 678 Mowers 9.279 8.439 9.681 11.077 Tedders and rakes 8.307 7.231 8.702 10.678 Source: VDMA The manufacturers of tillage and sowing equipment and implements for the cultivation of arable crops also experienced a very dynamic course of the market. It is striking that the use of ploughs for tilling the soil is still very popular. In contrast to the development in other regions of the world, their use has even increased again in recent years. Approximately 3,000 ploughs were sold throughout Germany in 2012, of which half had more than four ploughshares. Turnover expectations for 2013 remain positive, particularly for cultivators and short disc harrows. The turnover development for seed drills and field sprayers was also very lively. However, contrary to the development in other European markets, the proportion of self-propelled field sprayers has not increased further. The number of fertiliser spreaders sold decreased again in 2012. The market saturation as a result of the 2008 record year with almost 5,000 implements sold appears to have a continued effect. On the other hand, the

VDMA AGRICULTURAL MACHINERY REPORT 2013 15 machinery growth especially for fertiliser spreaders is pronounced, so that development in unit sales differs from turnover. We are already approaching the end of the season for forage harvesting machinery and are seeing a noticeable drop in demand for 2012/2013 after a very strong previous year. Retail sales figures up to the end of March were almost 10% below those of the previous year. Sales of forage loading wagons fell even more sharply by about a quarter. Combine harvesters are the most important agricultural machines in terms of value. With 332 million, this harvesting machinery had a share of 6% of the total agricultural machinery market in the calendar year 2012. A slightly more stable market development is discernible for the 2012/2013 season. So far, the forecast of 2,000 units is being exceeded according to the data received each month from the manufacturers. After an excellent previous year, balers will return to the volumes usual until now (approximately 1,800 units for round balers and 400 for big balers). The market for forage harvesters is shrinking again after the exceptional boom years. Owing to the larger area of silage maize grown to meet the demand for biomass in the biogas facilities, up to 300 new machines have been sold additionally each year since 2009, i.e. at least 40 to 50% more than the normal level of the German market, which is leading worldwide in this machinery category. The area to be harvested will remain this size in the foreseeable future, but demand for replacement purchases in the season of 2013 appears to be lower again for now. The market for transport equipment has further strong potential. The optimisation of the transport chain from field to farmyard or to agricultural trade businesses is being advanced further. Due to the continuing good milk prices, a medium-term steady willingness to invest in livestock equipment including milking equipment is becoming apparent. At least one other cost factor has fallen away in the meantime for dairy farms: the price for one kilogram of quota, which up to 2015 sets the maximum production amount, has recently reached only one euro cent. On the whole, VDMA expects a more or less stable agricultural machinery market in 2013 with a continuing volume of about 5.4 billion. Germany still has one of the leading positions in the ranking of the assessment of sales markets. The mainly positive determining factors support this expectation. Farmers are also rather optimistic for the coming harvest. This is particularly due to the fact despite the severe winter the damage caused by winterkill is likely to be slight due to the snow blanket. In addition, in the latest survey within the scope of the Agrarian Business Barometer, the statements made by the farmers with regard to farm inputs, i.e. on the cost side, were slightly more positive than so far. Consequently, the percentage of farms complaining of liquidity squeezes has shrunk to merely 4%. The positive basic attitude of the farmers and contractors is an important message for the longer-term market outlook. However, besides potentially declining producer prices for their products, German farmers see the new framework conditions of agricultural policy as from 2015 as a threat to their economic situation. In comparison to the 2012 year s end, farmers were much more aware of this aspect as an uncertainty factor. France as the now stronger agrarian superpower in Europe Last year, France experienced growth of 13% to 4.8 billion, thus having a significant influence on the positive trend for agricultural machinery, together with Germany. After a somewhat slow recovery from the recession phase of 2009/2010 as compared to the neighbouring country, French farmers have again invested strongly in machinery. In 2013, France is likely to be one of the few European countries in which further growth is possible for the agricultural machinery sector. Market Volumes in France in units, referring to the calendar or seasonal year 2009 2010 2011 2012 Tractors¹ 36.800 31.312 35.409 39.089 Combine harvesters 2.455 1.637 2.008 2.256 Balers 4.751 3.198 4.047 4.426 Forage harvesters 313 240 296 290 Source: Axema, ¹ including telehandlers

VDMA AGRICULTURAL MACHINERY REPORT 2013 16 Incomes in the French farming sector showed an increase by 5% in 2012 and thus performed weaker than incomes in Germany. It is, however, worthy of positive mention that for the first time again almost all farms in the very diversified agricultural sector were able to achieve higher profits. In the previous years, there were always some sub-sectors, e.g. producers of wine, fruit and vegetables, that lost out. Only the gardening and landscaping segment also battled with economic problems in 2012. The tractor market maintained its top position in Europe with 39,100 units 6 and growth of 10%. The particularly surprising development in the area of tillage equipment was that sales were higher in France than in Germany last year with more than 3,000 ploughs sold (an increase of 40%). The volumes for short disc harrows were also clearly higher than in the neighbouring market. France has also strengthened its lead in the area of selfpropelled plant protection machinery. Despite this above-average growth in the segment for cultivating machinery, it is surprising that orders have increased further in 2013 and thus a high sales volume can again be expected. The market for combine harvesters grew by 12% to 2,250 units in the past season. With that, it was noticeably above the previously normal level, not taking the record sales figures in the two season years 2007 and 2008 with more than 2,500 machines each as a measure. The area of 9 million hectares for grain would suggest slightly higher demand for machinery than in the neighbouring country (with its 6.5 million hectares). France remains in top position regarding the market ranking of the CEMA Business Barometer, which emphasises the expectations for further growth in turnover in the next six months. If nothing changes in the good income situation for farmers, only the discussion on agricultural policy remains, which, in the past, sometimes caused more uncertainty among French farmers than was the case with their fellow farmers in other countries. 6 excluding telescopic handlers Polish agricultural machinery market has strongest growth in the EU Polish farmers achieved good crops in 2012, although prospects had not been very good at the beginning of last year. About one quarter of the area cultivated with winter grain had to be ploughed up due to damage caused by frost. Even so, through higher hectare yields and good results with summer grain, Polish farmers achieved a better grain crop than in 2011, reaching 29 million tonnes in the end. The increase of 7% is based on strong growth in summer wheat, grain maize and summer barley. In contrast, however, they experienced a slight decline in root crops. Together with the EU support measures aimed at the modernisation of agricultural holdings and the good prices for agricultural products, the overall good crop result for 2012 has also been reflected in the agricultural machinery market. The total market volume grew by a good 14% reaching 1.5 billion one of the highest growth rates within the EU. Imports of agricultural machinery even increased by almost 22% to 1.3 billion. The tractor market achieved a total of 19,315 units most of the tractors had between 75 and 100 hp. However, the strongest growth in demand was for tractors between 130 and 160 hp. Besides the Czech supplier Zetor, practically only Western brands play a role in purchase decisions, even though a large number of Ursus tractors can still be seen, especially on smaller Polish farms. Polish Agricultural Machinery Market in million Euro 775 934 Source: VDMA 1.230 979 1.258 1.317 1.507 2006 2007 2008 2009 2010 2011 2012 Altogether, the Polish agricultural sector has developed very positively in recent years. Structural change has set in and led to stronger

VDMA AGRICULTURAL MACHINERY REPORT 2013 17 competitiveness also in the export of agricultural products. Now, on average farms are much larger than they were just a few years ago and are well equipped with modern machinery. The EU subsidies from the rural development programmes in the financial framework 2007 2013 have already been almost completely paid out or allocated. In this period, a total of almost 10 billion was paid out to farmers and companies the largest sum within the EU. A clear decline in demand is currently evident, e.g. for tractors, due to expiring support measures and the meanwhile often well-equipped farms. In the first three months, new registrations decreased by 17%. At the moment, a gulf appears to be opening up between the theoretically still strong investment plans and the orders actually placed with dealers. It seems to be a matter of wait and see, and the market appears to have reached its peak. Nonetheless, Poland has established itself as the fifth largest agricultural machinery market in the EU and in the short and long term will have significant demand for replacement purchases of machinery. Disillusionment preceding Croatia s accession to the EU Croatia signed the treaty of accession to the EU in December 2011. In all likelihood the country will thus join the Union on 1 July 2013, as the 28th member. Nevertheless, so far EU membership prospects have had only limited effects as an engine for growth. In fact, for years the economy has fluctuated between stagnation and recession. At best, Croatia s agricultural sector views the accession to the EU with mixed feelings. Although the country produces many highquality agricultural products, the production processes are comparatively inefficient and not very competitive. Thus in many places there is a concern that less expensive products from the EU will sooner or later replace domestic products. In addition, accession to the EU will be accompanied by the loss of former markets in the CEFTA 7 region. Critics say that Croatia has done too little to prepare 7 CEFTA stands for Central European Free Trade Agreement, an agreement among seven Balkan states and Moldova. its agriculture, which has a small-scale structure, for EU accession. The Croatian agricultural machinery market has exhibited considerable volatility in recent years. The level that preceded the economic crisis of 2009 has so far remained out of reach. One reason for this is the discontinuation in 2010 of the subsidies for capital investments. Until then many farmers and contractors used the subsidies to finance up to 40% of the cost of a wide range of agricultural machinery and tractors. In contrast, the EU subsidies, which replace the state subsidies for capital investments, are available only for a limited selection of agricultural machinery. Since in addition the applications are comparatively complex and knowledge about the subsidies has not yet reached every farm, so far the absorption rate is still relatively low. Last year the agricultural machinery market trend was also influenced by the summer drought suffered by many farmers in Southeastern Europe. Croatia s grain yield thus fell 14% in comparison to the previous year, to 2.7 million tonnes. As a result, agricultural machinery imports, which comprise almost the entire market volume in Croatia, decreased by 21% to 96 million. On the other hand, the market share of used machinery rose to approximately 40%. The boom which many had anticipated as a result of Croatia s EU accession has thus failed to occur for the time being, and will probably not commence at least for the near future. Nevertheless, in the long term one should continue to keep an eye on the country on the Adriatic Sea. Due to its climate and good soils, Croatia has the potential for productive agriculture. Sooner or later structural change will also begin here not least in order to ensure long-term competitiveness with the open markets of the EU. This will ultimately result in an increased need for modern agricultural machinery. Turkey as a bridge builder for the Middle East region In addition to its international political role, not to be underestimated in stabilising the entire Middle East region with current challenges due to numerous political trouble spots in neighbouring countries Turkey is also very important in

VDMA AGRICULTURAL MACHINERY REPORT 2013 18 relation to agriculture. The country is on the move, and for years has enjoyed political stability. The agricultural sector contributes decisively to the overall economy, with a share of 13%. Agricultural products, analogously to the varied climatic conditions in the country, are very diverse. The most important products include grain (primarily wheat, barley and maize), cotton, tobacco, grapes, sunflowers, legumes, dried fruit, fruit/citrus fruit, tomatoes and tea. Turkey is the largest exporter of hazelnuts (accounting for approximately 80% of the global trade volume); these are produced by 200,000 families on farms with an average size of three to five hectares, along the coast of the Black Sea. Turkey is also the world leader in the production of apricots, cherries and figs. of complaint by the agricultural machinery manufacturers in the recent months as some credit loan programs expired or have become less attractive. Whether a special programme will be introduced once again within the framework of the elections in the year 2014 remains to be seen. In practice, a major role is played by direct payments (usually related to quantity) and loan subsidies, where every potential subsidy recipient is ranked according to a point system. A certain amount of bureaucracy is involved in obtaining the state support, however according to various organisations, even small farms benefit from the interest rate subsidies, for example via the very extensive branch network of the state agricultural bank, Ziraat bankasi. The Turkish market for agricultural machinery has recovered strongly since the last recession in 2008/2009. Following the record year of 2011, with sales of more than 60,000 tractors, demand has again normalised somewhat, however it remains at a comparatively high level. For 2012, VDMA estimates a total market volume of 2.7 billion, considerably more than that of the United Kingdom or Italy. It is unlikely that this level can be maintained in the medium or long term. The Turkish association anticipates a stable tractor market of approximately 50,000 units for 2013. National production, only a small percentage of which is being exported so far, is accordingly seen as stable with 55,000 units. Agricultural policy has attained a position of prominence in Turkey in recent years. The goal of the government is to improve opportunities for young people in rural areas, as well as to promote structural change and the development of the agricultural value-added chain. Since around six years ago, the government has been employing more intensive measures in this regard. The latest upswing of the agricultural machinery market was largely attributable to greater subsidisation. The OECD refers to a 28% share of subsidies in current agricultural incomes (as compared to 20% ten years ago). The focus of the subsidies is readjusted from year to year. With regard to the agricultural policy, in general it can be anticipated that the subsidy budget will decrease again in the coming years, what has already been a matter Subdued impetus in the Russian Federation Since 2012, market developments in the Russian Federation have reflected its accession to the World Trade Organization (WTO). From membership in the WTO, a state first of all expects better access to international markets, but on the other hand it must also open its own markets to foreign companies. Russia aims to increase exports of oil, natural gas, metals and agricultural products. At the same time, Russian industrial operations and agricultural companies are to obtain more favourable access to modern technology. This was also the hope of German manufacturers of tractors and agricultural machines; however it soon proved to be a false expectation. Although the regular customs duties for tractors and combine harvesters were reduced in accordance with the WTO agreements, immediately afterwards protective tariffs for combine harvesters

VDMA AGRICULTURAL MACHINERY REPORT 2013 19 were introduced within the framework of a safeguard investigation, initiated by the Eurasian Economic Commission at the request of the Russian combine harvester manufacturers. For tractors and self-propelled mobile machinery, a scrapping fee is currently on the agenda, which is to apply not only to imported machinery, but also to machinery produced locally by Western manufacturers. German Exports of Ag. Machinery to Russia in million Euro 491 603 716 278 Source: German Statistics Agency 392 662 694 2006 2007 2008 2009 2010 2011 2012 In addition, state support of investment in modern machinery was restructured, so that Western machinery no longer benefits from the formerly well received interest subsidies. In the view of VDMA, the introduction of the protective tariffs violates the WTO agreements. Although the safeguard investigation, which led to the temporarily imposed tariffs, is basically permissible, the introduction of protective measures before the conclusion of the investigation is not allowed. In addition, the statistical data upon which the safeguard investigation is based differ from actual market developments. The decline in production on the part of Russian operations is probably not attributable, as claimed, to increased imports, but rather to an inappropriate model policy and a severe drought in large parts of the country. For example, in 2012 the grain harvest amounted to only somewhat more than 60 million tonnes, as compared to 95 million tonnes in the preceding year. Yields also declined for oil seeds and other crops. The tariffs imposed apply not only to complete machines but also to assemblies such as threshing modules, chassis and engines. From a political point of view, no significant advantage currently arises for foreign companies producing in Russia. Nevertheless, production on site has several advantages, such as shorter delivery times and the targeted adaptation of models produced to the requirements of the market. In the medium term, access to subsidies could improve again. Despite the political obstacles and a severe drought in many parts of the country, in 2012 the Russian agricultural machinery market was very robust. Some market segments, such as highperformance tractors and machinery for soil tillage and forage harvesting, exhibited further growth. The combine harvester market declined only slightly, while deliveries of components for assembly on site tended to increase further. Thus, in 2012 deliveries of complete machines of Western brands amounted to only 290 units (as compared to 297 units the previous year and 552 units in the year 2010). At the same time, in comparison to the preceding year, the production of Western combine harvesters on site almost doubled to 1,359 units. In 2012 there was a sharp decline only in the case of potato and sugar beet machinery. Due to growing protectionism and an increasing credit squeeze, the mood in Russian agriculture is subdued. Following the expiry of loans with interest subsidies, agricultural operations have to resort to expensive bank loans with interest rates of 20%. This is used only for short-term financial needs, for the purchase of farm inputs (e.g. fertilisers and plant protection products). The current subsidy policy provides for refunding part of machinery investments to farmers. The conditions regarding which machinery will benefit from the direct subsidies are unclear. If the new subsidy is not in effect by May or June, part of the planned investments will be postponed until next year. Agricultural operations are currently making machinery investments almost exclusively with their own funds, or by having recourse to investors from outside the industry. Conditions for this continue to be quite favourable. Like their Western European colleagues, Russian farmers are also benefiting from the good demand worldwide for wheat, maize, sunflower seeds and soybeans, as well as from increased prices. In contrast to 2010, the year of the previous poor harvest, last year the Russian government refrained from imposing a ban on grain exports.

VDMA AGRICULTURAL MACHINERY REPORT 2013 20 Dominating large agricultural holdings in Ukraine Ukraine was less badly affected by the drought last year than Russia. The only regions with severe damage were those in the east and south of the country. With about 38 million tonnes, the grain harvest was at the average level of the past few years. Declines in wheat and rye crops were compensated by an increase in soybeans and particularly maize. The country was able to cover its domestic demand with the 2012 harvest and benefited from growing international trade. According to the Ministry of Agrarian Policy and Food of Ukraine, the country s exports of agricultural products increased by almost 40% in 2012, reaching a total volume of USD 17 billion. National production will exceed domestic demand by 200%. The very positive development of grain exports was one of the main driving forces behind a flourishing agricultural machinery market. With the exception of sugar beets and potatoes, the growth trend from the previous year continued in 2012. Tractors as well as tillage, sowing and plant protection equipment showed the strongest growth. The Belarusian manufacturer MTZ remains the absolute market leader for tractors with a market share of approx. 80% regarding the number of units. The robust and reasonably priced machinery is predominantly in the performance segment from 80 to 120 hp. MTZ has a well-established service network and a prompt supply of spare parts. The mechanics are well familiar with the machinery and can carry out some repairs themselves. Regarding fuel consumption and ease of operation, the tractors clearly do not match those of Western European competitors. However, customers show comparatively low willingness to pay more for the additional value. MTZ tractors are facing increasing competition from India and China. Although the prices of these products are competitive, locally there is neither a service network nor a functioning spare parts supply. Particularly Chinese manufacturers, however, want to invest more in the Ukrainian market in the coming years, even in own local manufacture. Chinese tractors are already being used for fruit and vegetable cultivation. The larger tractors and combine harvesters are traditionally from Germany and the United States. With 56%, imports from the United States increased significantly more strongly than those from Germany with only 11%. As a rule, Western tractors are only bought from 220 hp upwards. Ukrainian farmers and agricultural holding companies are increasingly investing in modern tillage and sowing equipment in combination with the high-performance tractors. Precision seed drills are particularly in demand. Here European technologies are in close competition with those of suppliers from North and South America. For plant protection, self-propelled machines are still in the minority compared to towed implements. But the large consolidated fields and distances will probably further strengthen the trend towards self-propelled machinery. Fertiliser spreading is carried out both in combination with sowing and in a separate pass. Today, professionally run farms attach a high degree of importance to adequate fertilising. Regarding livestock, the production emphasis is on pigs and poultry, corresponding to domestic meat consumption. There are already large complexes with very high productivity. The cost of animal production is even slightly below the German level. Demand for livestock housing equipment is correspondingly high. Lately, milk production has also increased slightly. Prices for milk and dairy products are at quite a high level, which should lead to an additional thrust of investment. Following the change in government, the situation is again stable so that investors in the agricultural industry do not even shy from a long-term return on investment such as that in the meat industry. Demand for forage, feeding and milking machinery will increase with the expansion of dairy farming.

VDMA AGRICULTURAL MACHINERY REPORT 2013 21 Therefore, prospects are quite good for 2013/2014. There is enormous potential in the market. The leading agricultural holding companies show what results, i.e. hectare yields and profitability levels, can be achieved in the market. Industry experts estimate that these holdings and their associated agricultural companies already cultivate more than 40% of the entire arable land in Ukraine, with a growing tendency. In contrast, small and medium-sized family-run farms with an area of 500 to 3,000 hectares are still struggling. As they do not process and market their products themselves, they have to sell them at much lower prices to intermediate sellers. They feel the credit crunch and have to resort to very expensive refinancing until the harvest is brought in. They can simply not afford modern, high-performance machinery. As a rule, they are confronted with strict statutory requirements and bureaucracy as they do not have the good political networks that the agricultural holding companies have. These farms do not receive any support from the Ukrainian government. Thus, there is no or only limited access to modern technology for a large portion of the excellent Ukrainian arable land. Midwest last summer are surely still remembered by many. The consequences of the drought continued to be felt in the 2013 growing season until spring, despite an ample snow cover during winter. In contrast, recently the precipitations in the region have been too much. Since until now the agricultural machinery market has not been involved in the effects of the unusual weather conditions, and has also benefited from special depreciation opportunities, a slowdown in the course of the year is now anticipated. However, the initial situation is very favourable: With 185,500 new registrations (an increase of 10%) last year, the tractor market in third place worldwide in terms of the number of units, following India and China reached a level close to the ten-year average. Nevertheless, for the agricultural sector the consideration of performance classes is decisive. In the segment above 100 hp, nearly 32,000 tractors were newly registered, a larger number than in any of the past 30 years. Professional operations have thus invested heavily. This agrees with reports concerning agricultural incomes and hence the purchasing power of farmers: The income for field crops rose in the year 2012 by 5% to USD 220 billion and this despite a severe drought in large parts of the corn belt. The reason: In comparison to similar periods of drought in the past, for instance at the end of the 1980s, when only around one-fifth of the area was covered by insurance, in 2012 approximately 80% of the area was protected against harvest losses. Thus an estimated USD 15 billion in compensation awards flowed into arable farms. The forecast for income from the sale of arable crops in the year 2013 is presently 11% lower than last year, whereas the areas under cultivation have generally been expanded. Soaring agricultural incomes despite crop failure in the USA The images of afflicted arable and livestock farmers in their dry fields in the American The tractor market has seen a further sharp rise in the first four months of 2013 the segment above 100 hp increased by 30%. Among other things, the ongoing opportunity of special depreciation at a rate of 50% in the first year continues to induce farmers in the USA to invest their money in machinery. The large agricultural machinery corporations anticipate up to 5% growth in the USA market, which would be associated with a considerable flattening of demand in the coming months.

VDMA AGRICULTURAL MACHINERY REPORT 2013 22 declined by 25%, while tractor exports remained somewhat more stable. Nevertheless, in the first three months of 2013 the trend intensified further: One third fewer tractors were exported, and exports of combine harvesters were halved again. There still seems to be no recovery of the demand for agricultural machinery of Brazilian manufacture in the largest sales markets, primarily countries in the Mercosur trade union. Source: University of Illinois Seemingly unlimited growth in Brazil In terms of growth, Brazil is currently one of the leading agricultural machinery markets worldwide. Since June 2012, each month sales of tractors and combine harvesters have been higher than in the previous year, with especially high growth rates in the first quarter of 2013, marking all-time record highs. For the period up to the end of April, the increase amounted to 28% for tractors, and 58% for combine harvesters. One reason cited for this favourable development is the expansion of cultivated areas, particularly for soybeans, and the associated greater machinery requirements. 8 Furthermore, the income of arable farmers rose in the past two years, which is attributable to three factors: The generally good world market prices for major agricultural products, good harvests, and a more favourable exchange rate for US dollars against the Brazilian real. In international markets, soybeans and grain are usually traded in US dollars, with the result that local farms achieve more domestic purchasing power with exports. The dynamism of the domestic market is fortunate for manufacturers in Brazil since, in contrast, the export business is very sluggish. Brazilian agricultural machinery exports decreased by 12% in 2012 to the equivalent of USD 1.36 billion. Harvesting machinery alone 8 The area of Brazil used for soybean cultivation, amounting to approximately 28 million hectares for the year 2013, has increased by 40% in five years. On the other hand, with 55,810 units, in 2012 Brazil was one of the largest tractor markets worldwide. This was the second highest result in the history of Brazil. Only in 2010, slightly more tractors were sold with 56,400 units, however at that time the figures included many small tractors due to a state subsidy programme. Despite these superlative results, the market size does not seem excessive in the light of a potential customer group of five million farms, and approximately 55 million hectares of arable land. In comparison: In the USA, with three times the area of arable land and a good two million agricultural operations, approximately 170,000 tractors are sold each year. In 2012, the Brazilian combine harvester market was likewise at a record level with 6,300 units. The Brazilian association Anfavea recently calculated the market volume for tractors and harvesting machines with USD 2.2 billion for 2012. Sales of new Tractors in Brazil in units 20141 30691 Source: Anfavea 43415 45437 56420 52296 55810 2006 2007 2008 2009 2010 2011 2012 The 2013 harvest will again be comparatively abundant. In the case of soybeans, a new record harvest of over 82 million tonnes is anticipated. Thus, for the first time Brazil could surpass the largest producer, the USA. Most of the soybeans are shipped to China, where approximately 60%

VDMA AGRICULTURAL MACHINERY REPORT 2013 23 of the worldwide harvest is consumed. At 87 million tonnes, also grain production in Brazil considerably exceeds the long-term average again. The main problem arising from these amounts consists of the logistical challenges. For example, the distance to be travelled from Mato Grosso, the main cultivation area for soybeans and maize, to the closest port on the Atlantic Ocean is at least one thousand kilometres. Most of the harvest is transported by truck, partially on very poor roads. This year there is a universal shortage of transport capacity, with the result that, according to reports of grain market experts, prices for transport have risen by an average of one third in comparison to last year. The cost of transporting one tonne of maize for this distance in Brazil is cited as USD 120. Once the trucks arrive at the shipping port, the ordeal begins in earnest. In queues kilometres long, drivers then wait for days for their grain to be loaded onto ships, and for export procedures to be carried out. It seems urgently necessary for storage capacity in the country itself to be increased, in order to alleviate this bottleneck immediately after the harvest. Market observers estimate the current storage capacity at only 15%, most of which is held by cooperatives. On the other hand, the large private-sector grain corporations have so far attempted to shift the responsibility for logistics onto local producers, who in turn are reluctant to invest. Independently of these logistical challenges, the need for machinery for use on arable land is increasing. Despite the good incomes of agricultural operations, the government is maintaining its financing subsidy programmes, providing an additional impetus for the market. In particular, this enables even smaller agricultural operations to finance new machinery at attractive conditions through their regular banks. The necessary preconditions are thus in place, so that apart from short-term fluctuations - a growing market in Brazil for agricultural machinery and tractors can be expected for years to come. For the current year, the upswing now seems assured, and new record sales figures for agricultural machinery and tractors are probable. Subsidies with major effect on the Chinese market Four kinds of agricultural subsidies of the central government have played an important role in the agricultural support: Machinery investment, disaster losses, agricultural technical services and ecological environment protection measures. The central government poured 19.87 billion into the four agricultural subsidies in 2012, including subsidies for superior crop varieties of 2.69 billion, agricultural machinery purchase subsidies of 2.58 billion, direct allowance for the foodstuff growing of 1.64 billion and general subsidies for agricultural production supplies of 12.96 billion. The subsidies for superior crop varieties covered 10 main crops, such as corn, wheat, paddy rice, cotton, soybean, underground kohlrabi and wild oat. China's agriculture has made achievements in 2012 in the support of favourable policies. The total output of grains (including paddy rice, wheat, corn, legume and cassava) has witnessed a rise during 9 consecutive years, reaching 589 million tonnes, that of meat reached 82 million tonnes, and that of milk was 39 million tonnes. Moreover, the cash crops witnessed an increase in yields. The role of the agricultural machinery use for this development according to official statistics is quite evident. Based on a subsidy amount of 8.95 billion euro between 2004 and 2012 coming from the Central Finance Authorities, farmers have totally poured 26.30 billion for the purchase of 227 million units of implements and tractors. More than 18 million farmer households have benefited from it. The policy of agricultural machinery purchase subsidy helped improving the national level of farming mechanization by 24%. The central government granted the agricultural machinery purchase subsidies of 2.58 billion in 2012, a year-on-year rise of 23%. The subsidies were used for around 6 million units of different agricultural machines, a yearon-year rise of 350,000 units. 4,560,000 farmers have benefited from this support. The total power of China's agricultural machinery was 1.02 billion kilowatts in 2012, a year-on-year rise of 4%. The level of farming and harvesting mechanization was 57%. The mechanized planting level of paddy rice was over 30%, a year-on-year rise of 4%. That of corn exceeded 40%, up 6%. The nationwide

VDMA AGRICULTURAL MACHINERY REPORT 2013 24 population of rice transplanters was more than 507,000 units, up 19%. That of combine harvester for grains was 233,000 units, up 37%. Chinese Agricultural Machinery Trade in million Euro 2500 2000 1500 1000 500 0 Exports Imports 2007 2008 2009 2010 2011 2012 Source: National Statistic Agency, VDMA In addition to what was said in a previous chapter about the production location of China, it was officially reported that China's large-scale agricultural machinery enterprises realized profits of 2.57 billion in 2012, a yearon-year rise of 25%. It was higher than the profit growth rate of 20% of China's largescale machinery industry. The companies with foreign ownership, including merchants from Hong Kong, Macao and Taiwan, realized profits of 156 million, a year-on-year decline of 15%. Many foreign-owned enterprises were speeding up the entry into the Chinese market. There were 147 large-scale foreignfunded agricultural machinery enterprises in 2012 9, accounting for 8% of total large-scale agricultural machinery enterprises. Their gross industrial output value accounted for 12% of China's agricultural machinery industry. The growth rates of assets and employees of foreign-owned enterprises were above, but the economic benefits below the average level of the industry. Among agricultural machinery sub-industries, livestock equipment, farming machinery and spare parts manufacturing industries have witnessed the fastest rises in profit terms. Shandong, Henan and Jiangsu were the most active, concentrated and competitive regions 9 Source: China Association of Agricultural Machinery Manufacturers (CAAMM) for China's agricultural machinery industry in 2012. The total output value of agricultural machinery of these three provinces accounted for almost 50% of China's national total output. The machines produced in the Jiangsu province were especially successful in the export business. The growth rate of gross output value of agricultural machinery of Inner Mongolia was 44% in 2012, and that of Jilin was 28%, both of which were higher than the average level in China. China's agriculture currently experiences the challenge that the manufacturing cost is soaring, while demand for agricultural products increases. Especially, the demand for meat, eggs and milk is sped up. The gap between vast population and limited farmland becomes increasingly serious; 260 million former farmers went to urban areas, which lead to empty villages, part-time farmer households, and an aging population. The Chinese government can work on this by strengthening family farms. The remaining people on the countryside should see their chance to earn enough money with farming. A reorganisation of the single farms and the workforce would be a good start. With the establishment of new cooperatives, an important step has already been taken. Contractors in India on the rise Worldwide, India is second only to China as a producer of agricultural commodities. Agriculture continues to have a very small-scale structure, and the degree of mechanisation is at most 30% to 40%. Due to the current system of inheritance, in which a man bequeaths his land in equal shares to his sons, farms are presently becoming smaller rather than larger. Initiatives on the part of the state to promote larger-scale structures are unlikely, at least in the near future. In India it is also not customary to sell land, and in many places the sale of land is even absolutely inacceptable. Thus scarcely any of the many migrants from the countryside, who are now looking for alternative sources of income in large numbers in the cities, would have the idea of selling their property. Instead, in such cases the land is left to be cultivated by family members or neighbours, or of necessity remains fallow. As a result of the migration to the cities, in some regions of India there is now a shortage of agricultural workers. Moreover, there are current-

VDMA AGRICULTURAL MACHINERY REPORT 2013 25 ly several state job creation programmes (such as road and railway construction) that are directed especially towards agricultural workers, who are often unemployed except during the sowing and harvesting periods. These programmes are very popular, since they are associated with a relatively secure income. However, as a result, these very workers are no longer available for sowing and harvesting. Some farmers and entrepreneurs have taken advantage of this shortage of labour and have begun to offer their services as contractors. The Indian government welcomes this development and is presently supporting both contractor start-ups and farms that make use of the services of a contractor. In the view of the government, as far as possible, in future contractors should be regarded as an alternative for all labour-intensive processes in agriculture. In this way agricultural productivity can be increased without the government having to further structural change that is so little desired in India. capital for investments. Since in the past a considerable portion of loans could not be repaid, private banks have now become very restrictive in granting loans to farmers. For smaller farms it is virtually impossible to obtain credit, while for larger operations interest rates are extremely high (averaging between 15% and 18%). Another obstacle in terms of financing is the reliance of Indian farmers on intermediaries. Many farms have no means of storing the harvest adequately or transporting it to potential buyers. They are therefore dependent on intermediaries, who are aware of the lack of alternatives available to farmers and pay the producers prices that represent only a fraction of what they themselves obtain from reselling the products. For Western agricultural machinery companies, this development can be characterised as favourable. The requirements of Indian contractors, who use their machinery extremely intensively, are much more concerned with efficiency, durability and technological progress than are those of the average Indian farmer. Precisely because of this, there is a focus on Western machinery. However, in the still significantly larger customer segment comprised of farms, demand last year exhibited a less positive trend. The tractor market, which makes up approximately 70% of the overall agricultural machinery turnover, shrank by 2% in comparison to the previous year to a total of 529,970 units (with the 22 to 30 kw performance class being the most in demand). After years of double-digit growth rates, unfavourable weather conditions on the one hand and the difficult credit market situation on the other made themselves felt. Last summer the monsoon began late and was too weak overall, leading to reduced harvests and thus lower incomes. Nevertheless, a glimmer of hope is provided by a newly enacted law, which permits access to the Indian market by retail chains such as Carrefour, Tesco, etc. (Until recently, multi-brand retailing was still forbidden in India, in order to protect the widespread small grocery stores.) Now it is hoped that, following the example of pioneers such as PepsiCo, McDonald s and Metro, the large companies will do business directly with farmers, thus providing them with a secure income. However, in the medium term, the highest priority of the Indian agricultural sector should first be not greater productivity in the fields, but rather the development of the processing chain for the foodstuffs produced. Due to poor transport routes and a lack of cold chains, losses continue to be enormous. In addition, it has become increasingly difficult for agricultural enterprises to borrow

VDMA AGRICULTURAL MACHINERY REPORT 2013 26 Agricultural Machinery in the European Union Values in Million Euro, including tractors Production Exports Country 2010 2011 2012 % 2010 2011 2012 % Germany 5485 6985 7662 10% 3912 5002 5530 11% France 2882 3566 3948 11% 2076 2511 2782 11% United Kingdom 1758 1977 2151 9% 1338 1572 1813 15% Italy 4245 4888 4972 2% 3072 3644 3939 8% Austria 1141 1300 1485 14% 999 1163 1276 10% Netherlands 813 1038 1067 3% 1492 1832 1877 2% Sweden 451 567 590 4% 529 670 651-3% Spain 601 712 726 2% 452 513 574 12% Finland 977 1179 1063-10% 574 752 679-10% Denmark 652 800 752-6% 559 725 662-9% Belgium-Luxembourg 696 821 916 12% 1145 1404 1585 13% Ireland 132 139 153 9% 135 152 165 8% Portugal 66 73 73 0% 40 44 51 17% Greece 50 57 54-6% 41 47 43-9% EU 15* 19948 24102 25610 6% 6330 8054 10500 30% Poland 775 911 1011 11% 493 636 773 22% Czech Republic 510 620 722 16% 383 487 590 21% Hungary 365 509 519 2% 319 441 466 6% Romania 35 45 54 20% 42 54 71 30% Bulgaria 36 40 44 10% 51 65 85 31% Rest of new EU members 199 253 264 4% 352 481 594 24% EU 12* (Entry 2004 and 2006) 1920 2378 2613 10% 1249 1654 1940 17% EU 27* 21868 26479 28224 7% 5144 6398 8166 28% Imports Market Volume Country 2010 2011 2012 % 2010 2011 2012 % Germany 2295 2773 3280 18% 3868 4756 5411 14% France 2609 3220 3671 14% 3415 4275 4837 13% United Kingdom 1548 1795 1925 7% 1968 2200 2263 3% Italy 824 918 901-2% 1997 2162 1934-11% Austria 744 855 894 5% 1003 1146 1227 7% Netherlands 853 1027 968-6% 931 1103 1122 2% Sweden 691 789 747-5% 788 898 859-4% Spain 739 814 699-14% 888 1013 851-16% Finland 316 372 385 4% 719 799 769-4% Denmark 498 632 630 0% 591 707 720 2% Belgium-Luxembourg 956 1195 1341 12% 530 629 694 10% Ireland 203 266 299 13% 247 253 287 14% Portugal 212 205 186-10% 238 235 208-12% Greece 103 87 64-27% 112 97 75-23% EU 15* 3072 3766 4184 11% 17294 20271 21258 5% Poland 976 1042 1269 22% 1258 1317 1507 14% Czech Republic 392 559 618 11% 527 697 755 8% Hungary 196 326 403 24% 242 394 456 16% Romania 346 442 449 2% 340 432 420-3% Bulgaria 228 359 375 5% 214 334 335 0% Rest of new EU members 671 970 1042 7% 640 889 942 6% EU 12* (Entry 2004 and 2006) 2344 3114 3491 12% 3220 4064 4415 9% EU 27* 2624 3191 3501 10% 20514 24335 25672 5% * excluding intra trade, with exports 2012 partially estimated Some countries including transfers (e.g. Netherlands, Belgium - reason for exports exceeding production) Sources: Eurostat, VDMA (incl. own calculations and estimation production 2012), CEMA

VDMA AGRICULTURAL MACHINERY REPORT 2013 27 Exports of Agricultural Machines and Tractors Worldwide Share of total volume in % (2012) 22% 20% 18% 16% 14% 12% 10% 8% 6% 4% 2% 0% Agricultural Machines Tractors Germany USA Italy France China Netherlands United Kingdom Belgium-Luxembourg Japan Austria Canada Brazil Finland Denmark Sweden Poland Mexico Spain Czech Republic Hungary India South Korea Turkey Israel Ireland Imports of Agricultural Machines and Tractors Worldwide Share of total volume in % (2012) 22% 20% 18% 16% Agricultural Machines Tractors 14% 12% 10% 8% 6% 4% 2% 0% USA France Canada Germany United Kingdom Russia Belgium-Luxembourg Australia Poland Netherlands Austria Italy China Sweden Brazil Spain Denmark Mexico Czech Republic Norway Switzerland Turkey Romania Sources: official national statistics, VDMA, total of the ex- or imports from 47 countries

VDMA AGRICULTURAL MACHINERY REPORT 2013 28 Tractor Production and Markets in Selected Countries in units Country Main Manufacturers Production Sales 2010 2011 2012 2010 2011 2012 India¹ Escorts, Mahindra&Mahindra², Tafe Eicher 548.397 490.051 431.635 480.377 461.744 451.254 Japan Iseki, Kubota, Yanmar 164.743 155.374 158.668 45.398 45.329 47.580 USA Case New Holland, John Deere, Kubota 170.720 158.090 165.072 168.034 185.150 Italy³ Argo, Case New Holland, Same Deutz-Fahr 61.040 67.954 72.000 23.323 23.429 19.343 Brazil Agco, Case New Holland, John Deere 71.763 63.427 64.456 55.709 52.296 55.810 Germany Agco Fendt, John Deere, Same Deutz-Fahr 50.865 60.551 59.213 28.587 35.977 36.264 Belarus Minsk Tractor Works 44.223 58.817 60.386 France 4 Claas, Massey Ferguson 20.394 27.749 28.364 29.123 35.409 39.089 different sources, VDMA; ¹up to 2010: fiscal year 1.4.-31.3.; from 2011: calendar year, ² incl. Punjab,³ incl. crawler, 4 sales excl. telescopic handlers German Market Volume for Agricultural Machinery by Segments Value in 1,000 Euro Kind of machinery 2010 2011 2012 %-change Tractors 1.345.117 1.698.747 1.900.870 11,9% Soil Working Equipment 171.296 198.888 252.848 27,1% Machines for sowing, plant protection and fertilising 170.170 197.132 250.077 26,9% Harvesting machinery 587.735 758.290 853.447 12,5% Equipment for husbandry 210.499 256.366 290.599 13,4% Conveyor equipment for agriculture 53.396 65.114 95.944 47,3% Trailers for agricultural use 54.110 67.902 83.976 23,7% Other machinery* 1.275.291 1.513.795 1.683.531 11,2% Total 3.867.613 4.756.234 5.411.292 13,8% Sources: Turnover Statistics VDMA Agricultural Machinery, Federal German Statistic Agency, * incl. parts, lawn and garden maintenance, forest equipment, repair, others

VDMA AGRICULTURAL MACHINERY REPORT 2013 29 European Tractor Registrations in units, totals for selected countries 2007 2008 2009 2010 2011 2012 > 50 hp (2012) Ø hp** France* 35.083 40.716 36.800 29.123 35.409 39.089 37.280 122 Germany 28.451 31.250 29.464 28.587 35.977 36.264 30.162 128 Italy 26.836 27.264 27.057 23.323 23.429 19.343 16.124 94 Poland 12.656 13.605 14.214 14.731 17.035 19.315 18.296 102 United Kingdom 17.089 18.564 16.326 14.486 15.217 14.964 13.986 135 Spain 17.250 15.826 11.796 10.547 10.002 8.647 7.699 113 Austria 7.558 7.722 7.735 7.921 7.766 8.294 7.772 98 Sweden 4.634 4.462 3.609 4.098 4.877 4.165 3.594 114 Netherlands 5.278 5.356 3.716 3.480 4.069 3.769 3.306 121 Norway 4.187 3.708 2.631 3.232 3.829 3.655 3.507 110 Belgium 3.472 3.897 2.909 2.858 3.281 3.377 2.553 115 Switzerland 2.591 2.590 2.653 2.746 3.083 3.330 3.138 101 Finland 4.245 4.491 4.036 4.292 4.561 2.828 2.825 148 Portugal 4.199 4.129 2.983 3.583 3.186 2.715 2.506 88 Denmark 3.961 3.427 1.878 1.791 2.286 2.185 1.729 128 Czech Republic 2.730 3.096 1.693 1.864 2.321 2.078 1.912 119 Ireland 5.029 4.531 1.748 1.315 1.543 1.893 1.887 137 Slovenia 2.084 2.451 1.823 1.417 1.490 1.463 1.212 82 Total 187.333 197.085 173.071 159.394 179.361 177.374 159.488 116 European Union 205.271 210.504 184.379 167.517 190.809 190.000 * totals excluding telescopic handlers, ** average motor power in hp, referring to 2012 Source: CEMA Statistical Group, VDMA, Federatie Agrotechniek Agricultural Income in the European Union Indicator A: Index of the real Factor Income in the Agriculture per Year-Work-Unit, 2005=100 2004 2005 2006 2007 2008 2009 2010 2011 2012 Belgium 109,8 100,0 123,1 132,5 107,2 113,4 140,7 104,9 134,1 Bulgaria 97,2 100,0 96,9 98,8 159,2 111,4 121,9 135,5 147,3 Czech Republic 96,4 100,0 105,2 109,4 129,3 105,9 124,8 167,3 169,2 Denmark 98,8 100,0 112,8 114,4 66,3 67,2 115,6 128,0 134,7 Germany 111,8 100,0 108,8 135,1 143,1 104,3 112,4 125,7 144,4 Estonia 95,3 100,0 100,0 140,1 109,8 94,2 156,3 192,3 219,4 Ireland 82,0 100,0 81,9 91,8 85,1 66,0 72,4 91,9 83,9 Greece 102,1 100,0 95,9 103,9 104,7 121,9 113,6 105,3 103,2 Spain 113,3 100,0 95,5 107,4 91,1 91,6 101,0 98,0 101,5 France 104,8 100,0 111,9 122,3 106,2 88,1 122,3 128,6 136,1 Italy 116,0 100,0 97,4 96,7 97,9 93,4 83,0 93,7 92,6 Cyprus 97,2 100,0 90,0 90,1 85,7 89,8 91,8 68,0 69,3 Latvia 95,9 100,0 130,2 135,6 114,0 101,8 131,4 136,3 164,9 Lithuania 92,5 100,0 88,9 133,2 123,4 105,9 120,6 154,5 181,6 Luxembourg 131,8 100,0 105,0 133,0 95,3 62,9 62,0 72,9 74,7 Hungary 99,4 100,0 107,3 115,8 152,6 103,7 122,2 181,2 164,0 Malta 96,9 100,0 98,3 95,7 89,0 99,6 93,9 82,2 79,1 Netherlands 100,5 100,0 123,0 121,8 104,4 84,0 108,7 99,8 114,7 Austria 102,7 100,0 112,9 127,8 125,7 95,3 111,5 127,4 117,7 Poland 108,8 100,0 112,9 137,8 119,5 133,9 153,3 182,9 157,8 Portugal 108,6 100,0 98,1 95,9 100,8 91,3 104,8 92,4 100,9 Romania 175,2 100,0 99,3 76,8 114,4 97,1 108,6 155,4 113,3 Slovenia 99,5 100,0 97,4 109,5 97,2 92,1 101,4 115,2 101,2 Slovakia 107,3 100,0 122,1 128,9 143,5 110,5 114,4 200,0 195,9 Finland 90,2 100,0 98,8 112,3 96,1 113,0 122,8 123,2 128,6 Sweden 91,7 100,0 111,3 135,7 119,5 92,0 122,7 125,4 128,5 United Kingdom 102,6 100,0 102,8 111,1 139,5 141,4 135,0 150,7 137,4 European Union 111,5 100,0 104,1 115,8 112,3 101,6 118,9 128,4 128,5 Source: Eurostat

VDMA AGRICULTURAL MACHINERY REPORT 2013 30 Key Facts for the Agricultural Sector in the European Union Agricultural land and farm structure Number of agricultural businesses Investment in machinery Country/Item Total ag. area Grassland Arable land Milk cows Total > 5 ha > 50 ha Share ag. land 2012 1000 ha 1000 ha 1000 ha in 1000 in 1000 in 1000 in 1000 Farms > 100 ha in % per ha per farm* Belgium 1.358 511 842 524 42,9 35,8 8,8 21 471 17.877 Denmark 2.647 200 2.419 568 42,1 39,0 14,0 66 272 18.460 Germany 16.704 4.655 11.847 4.165 299,1 271,7 85,2 55 324 19.916 Finland 2.291 33 2.253 289 68,2 57,7 14,6 25 336 13.333 France 27.837 8.419 18.386 3.720 516,1 377,3 192,1 59 174 12.821 Greece 3.302 717 1.690 125 674,9 157,9 6,6 7 23 472 Ireland 4.991 3.979 1.012 1.071 139,9 130,3 25,5 23 57 2.200 Italy 12.856 3.434 7.009 1.832 1.620,9 438,6 44,7 26 150 4.410 Luxembourg 131 68 61 40 2,2 1,9 1,1 47 412 28.571 Netherlands 1.872 813 1.022 1.479 72,3 51,6 11,3 18 599 21.741 Austria 2.878 1.440 1.371 540 150,2 102,8 11,3 18 427 11.941 Portugal 3.668 1.785 1.173 278 305,3 74,4 10,5 58 57 2.792 Sweden 3.066 452 2.612 348 71,1 62,1 17,0 52 280 13.839 Spain 23.753 8.377 11.286 910 989,8 464,3 103,7 55 36 1.832 United Kingdom 15.918 10.007 6.003 1.953 202,4 120,0 74,0 70 142 18.861 EU 15 123.272 44.891 68.986 17.843 5.197,4 2.385,4 620,4 172 8.912 Bulgaria 4.476 1.241 3.125 334 370,5 32,0 8,4 82 75 10.453 Estonia 941 296 640 96 19,6 13,1 2,8 73 130 9.317 Latvia 1.796 651 1.121 166 83,4 55,2 5,3 47 90 2.930 Lithuania 2.743 606 2.115 353 199,9 82,5 8,6 42 79 2.612 Malta 12-9 8 12,5 0,2 - - 179 10.710 Poland 14.447 3.229 10.797 2.506 1.506,6 675,3 26,5 22 104 2.231 Romania 13.298 4.540 8.691 1.012 3.856,3 400,6 14,4 38 32 1.048 Slovakia 1.896 531 1.343 154 24,5 8,7 3,0 91 165 35.987 Slovenia 483 286 169 108 74,7 29,3 0,5 7 248 4.089 Czech Republic 3.484 929 2.518 381 22,9 19,4 6,8 89 217 38.908 Hungary 4.686 721 3.797 245 576,8 75,2 13,9 65 97 6.066 Cyprus 118 0 85 21 38,9 4,0 0,3 17 68 2.013 EU 27 171.652 57.921 103.396 23.226 11.979,7 3.780,9 710,9 47 150 6.790 Sources: Eurostat, VDMA; data status for area, cows, agricultural businesses: 2010, * referring to farms with more than 5 ha

VDMA AGRICULTURAL MACHINERY REPORT 2013 31 Members of VDMA Agricultural Machinery Company Webpage Tractors Trailers / Transport Livestock Soil Working Sowing Fertilizing Plant Protection Harvest Lawn and Garden Components Others Aebi & Co. AG Maschinenfabrik www.aebi-schmidt.com AGCO Netherlands BV www.challenger-ag.com AGCO GmbH www.fendt.com AGCO Deutschland GmbH - Geschäftsbereich Massey www.masseyferguson.de AGCO Deutschland GmbH - Geschäftsbereich Valtra www.valtra.de Agria-Werke GmbH www.agria.de ALLWEILER AG www.allweiler.de ALÖ Deutschland Vertriebs-GmbH www.alo-deutschland.de altek GmbH www.altek-gmbh.de AMAZONEN-WERKE H. Dreyer GmbH & Co. KG www.amazone.de Argo GmbH www.argotractors.com AUTOKÜHLER GmbH & Co. KG www.akg-gruppe.de AVL LIST GmbH www.avl.com Röhren- und Pumpenwerk Bauer Gesellschaft m.b.h. www.bauer-at.com Becker Landtechnik www.becker-lt.de Beinlich Agrarpumpen und maschinen GmbH www.beinlich-beregnung.de BELIMPEX-Handels GmbH www.belimpex.de Ludwig Bergmann GmbH www.l-bergmann.de BONDIOLI & PAVESI GmbH www.bypy.de Bosch Rexroth AG www.boschrexroth.de BPW Bergische Achsen KG www.bpw.de BRILL GLORIA Haus- und Gartengeräte GmbH www.gloriagarten.de BSK & Lakufol Kunststoffe GmbH www.bsk-lakufol.de BUCHER HYDRAULICS GmbH www.bucherhydraulics.com Busatis GmbH www.busatis.com Th. Buschhoff GmbH & Co. www.buschhoff.de Bernard van Lengerich Maschinenfabrik GmbH & Co. KG www.bvl-group.de Carcoustics International www.carcoustics.com Caterpillar Motoren GmbH & Co. KG www.cat.com Claas KGaA mbh www.claas.com Claas Agrosystems www.agrocom.com Claas Industrietechnik GmbH www.claas-cit.com CNH Deutschland GmbH www.cnh.com Continental Teves AG & Co. ohg www.contiteves.de CRAMER GmbH www.cramer-technik.de Daimler AG - Mercedes-Benz Werk Gaggenau www.daimlerchrysler.de Herbert Dammann GmbH www.dammann-technik.de John Deere GmbH & Co. KG www.deere.com John Deere Fabriek Horst B. V. www.deere.com De Laval GmbH www.delaval.de DES Diesel Exhaust Systems GmbH www.des-systems.com DEUTZ AG www.deutz.de Dickey-john Europe S.A. www.dickey-john.eu Gerhard Dücker KG www.duecker.de Eifelwerk Fahrzeugtechnik www.eifelwerk.de Franz Eisele & Söhne GmbH & Co. KG www.eisele.de Emitec Gesellschaft für Emissionstechnologie mbh www.emitec.com ESM Ennepetaler Schneid- und Mähtechnik GmbH & Co. www.esm-ept.de Etscheid Anlagen www.etscheid.de Euro-P Kleindienst www.europumpen.de Faresin Deutschland GmbH www.faresin.de FELLA-Werke GmbH www.fella-werke.de Fendt Fördertechnik GmbH www.fendt.foerdertechnik.de Fliegl Agrartechnik GmbH www.fliegl.com Flötzinger Gerätetechnik GmbH www.floetzinger- Freudenberg Sealing Technologies GmbH & Co. KG www.freudenberg.de Frielinghaus GmbH www.frielinghaus.de FRITZMEIER Systems GmbH & Co. KG www.fritzmeier.de GEA Farm Technologies www.gea-farmtechnologies.com CARL GERINGHOFF Vertriebsgesellschft mbh www.geringhoff.de

VDMA AGRICULTURAL MACHINERY REPORT 2013 32 Members of VDMA Agricultural Machinery Company Webpage Tractors Trailers / Transport Livestock Soil Working Sowing Fertilizing Plant Protection Harvest Lawn and Garden Components Others GKN Walterscheid GmbH www.walterscheid.com Gloria Haus- und Gartengeräte www.gloriagarten.de Friedrich Graepel AG www.graepel.de GRAMMER AG www.grammer.com Grasdorf - Wennekamp GmbH www.grasdorf-wennekamp.de Grégoire Besson S.A.S www.gregoire-besson.eu Grimme Landmaschinenfabrik GmbH & Co. KG www.grimme.de Hako-Werke GmbH www.hako-werke.de Haldex Brake Products www.haldex.com System Happel GmbH www.system-happel.de HARDI GmbH www.hardi-international.com HJS Emission Technology GmbH & Co. KG www.hjs.com Max Holder GmbH www.max-holder.com Honda Deutschland GmbH www.honda.de Horsch Maschinen GmbH www.horsch.com Kalkwerk Hufgard GmbH www.hufgard.de HYDAC Technology GmbH www.hydac.com IFA-Maschinenbau GmbH www.ifa-gruppe.de IAV GmbH www.iav.com ifm electronic gmbh www.ifm-electronic.com InMach Intelligente Maschinen www.inmach.de INTER CONTROL Hermann Köhler Elektrik GmbH & Co. KG www.intercontrol.de INTERKAT Katalysatoren GmbH www.interkat.com Inuma GmbH www.inuma-aschara.com ISEKI-Maschinen GmbH Deutschland www.iseki.de Isringhausen GmbH & Co. KG www.isri.de iwis Antriebssysteme www.iwis.com JCB Deutschland GmbH www.jcb.com Jensen Service GmbH www.holzhackmaschinen.com Jetter Aktiengesellschaft www.jetter.de Ets Joskin S. A. www.joskin.com Maschinenfabrik KEMPER GmbH & Co. KG www.kemper-stadtlohn.de Kerner Maschinenbau GmbH www.kerner-maschinenbau.de Kersten Maschinen GmbH www.kersten-maschinen.de Köckerling GmbH & Co. KG www.koeckerling.de Kongskilde Industries A/S www.kongskilde.com Köppl GmbH www.koeppl-motorgeraete.de Kramer-Werke GmbH www.kramer.de Krampe Landtechnik und Metallbau GmbH www.krampe.de Maschinenfabrik Bernard Krone GmbH www.krone.de Kubota (Deutschland) GmbH www.kubota.de KUHN MASCHINEN-VERTRIEB GMBH www.kuhn.de Kverneland Group Deutschland GmbH www.kvernelandgroup.com LECHLER GmbH www.lechler.de Lely Industries N.V. www.lely.com Lely International N.V. www.lely.com Lely West N.V. www.lely.com Lemken GmbH & Co. KG www.lemken.com Lemmer-Fullwood GmbH www.lemmer-fullwood.info MAN Truck & Bus AG www.man-mn.de MANITOU Deutschland GmbH www.manitou.com Maschio Deutschland GmbH www.maschio.de matev GmbH www.matev.org Mecalac Baumaschinen GmbH www.mecalac.de Merlo Deutschland GmbH www.merlo.de MESTO Spritzenfabrik Ernst Stockburger GmbH www.mesto.de MFT Motoren- und Fahrzeugtechnik www.mft-cunewalde.de Michelin www.michelin.de Motec GmbH www.motecgmbh.de MTD Products GmbH www.mtdeurope.com Müller-Elektronik GmbH & Co.KG www.mueller-elektronik.de

VDMA AGRICULTURAL MACHINERY REPORT 2013 33 Members of VDMA Agricultural Machinery Company Webpage Tractors Trailers / Transport Livestock Soil Working Sowing Fertilizing Plant Protection Harvest Lawn and Garden Components Others MWS Schneidwerkzeuge www.mws-sm.com MX GmbH www.m-x.fr NIEMEYER Agrartechnik GmbH www.niemeyerweb.de Oehler Maschinen Fahrzeugbau GmbH www.oehlermaschinen.de OSB AG www.osb-ag.de Alois Pöttinger Maschinenfabrik GmbH www.poettinger.at Pumpenfabrik Wangen GmbH www.wangen.com RAFI GmbH & Co. KG www.rafi.de Rapid Technic AG www.rapid.ch Rauch Landmaschinenfabrik GmbH www.rauch.de Reform-Werke Bauer & Co Gesellschaft m.b.h. www.reform-werke.at Reichhardt GmbH www.reichhardt.org SAME DEUTZ-FAHR Deutschland GmbH www.deutz-fahr.de SAUER-DANFOSS GmbH & Co. OHG www.sauer-danfoss.de Schanzlin Traktoren und Maschinen GmbH www.schanzlin.de Schmiedag GmbH & Co. KG www.schmiedag.de Schmotzer Agrartechnic GmbH www.schmotzer.de Schneider Landmaschinenzentrum KG www.sgariboldi.de Schuitemaker Machines B. V. www.schuitemaker.nl Gebr. Schumacher GmbH www.gebruederschumacher.de Sontheim Industrie Elektronik GmbH www.s-i-e.de SPRAYING SYSTEMS Deutschland GmbH www.spray.de Wilhelm Stoll Maschinenfabrik GmbH www.stoll-germany.com B. Strautmann & Söhne GmbH & Co. KG www.strautmann.com Südharzer Maschinenbau GmbH www.bgu-maschinen.de SUEVIA HAIGES GmbH www.suevia.com Sulky-Burel www.sulky-burel.com TECNOMA TECHNOLOGIES SAS www.tecnoma.com TeeJet Technologies Denmark www.teejet.com THIELE GmbH + Co. KG www.thiele.de Thomas Magnete GmbH www.thomas-magnete.com Julius Tielbürger GmbH & Co.KG www.tielbuerger.de Gebr. Tigges GmbH & Co. KG www.tigges.com Trelleborg Wheel Systems GmbH www.trelleborg.com Trioliet Mullos B.V. www.trioliet.nl Väderstad-Verken AB www.vaderstad.com Vector Informatik GmbH www.vector-informatik.de VETTER Umformtechnik GmbH www.vetter-forks.com Vogel & Noot Landmaschinen GmbH & Co. KG www.vogel-noot.info VOSS Fluid GmbH www.voss.de Wabco Fahrzeugsysteme www.wabco-auto.com Wachendorff Elektronik GmbH & Co. KG www.wachendorff.de Walker-Technik GmbH & Co. KG www.walker-technik.de Hans Wanner GmbH www.wanner-maschinenbau.de WEBER-HYDRAULIK GMBH www.weber.de WELGER Maschinenfabrik GmbH www.welger.com Wiedenmann GmbH www.wiedenmann.de WIKA Alexander Wiegand GmbH & Co. KG www.wika.de WTK-Elektronik GmbH www.wtk-elektronik.de Yanmar Europe BV www.yanmar.nl Zetor Deutschland GmbH www.zetor.de ZF Friedrichshafen AG www.zf-group.de Status: May 2013

VDMA AGRICULTURAL MACHINERY REPORT 2013 34 Imprint Editors Gerd Wiesendorfer Alexander Haus Janine Heimann Dagmar Häser-Hördt Guest submission Dr. Matthias Rothmund, Horsch Maschinen GmbH Design and Layout VDMA DesignStudio Photos Lemken GmbH & Co. KG (cover) Gebr. Tigges GmbH & Co. KG (p.5) Horsch Maschinen GmbH (p. 8) Kubota (Deutschland) GmbH (p. 9) Lely International N.V. (p. 11) GEA Farm Technologies GmbH (p. 13) Grégoire Besson S.A.S (p. 18) Kongskilde Industries A/S (p. 20) Väderstad-Verken AB (p. 21) Trioliet Mullos B.V. (p. 25) Status May 2013 Subject to correction. VDMA

VDMA Agricultural Machinery Lyoner Strasse 18 60528 Frankfurt am Main Germany Phone +49 69 6603-1298 Fax +49 69 6603-2298 E-Mail gerd.wiesendorfer@vdma.org Internet www.vdma.org www.vdma.org VDMA, Titel DesignStudio