The Ukraine war will have “major repercussions” for the agricultural machinery sector long-term, European industry group Cema said, even as one of the region’s top manufacturers warned over the potential for the conflict to worsen.

Cema, the European agricultural machinery industry association, said that Russia’s agricultural machinery imports soared by 38% to E2.83bn in 2021, which ended less than two months before the country’s invasion of Ukraine.

With Ukraine’s imports soaring by 79% last year to E1.31bn, that leaves E4.14bn, equivalent to $4.40bn at Thursday’s exchange rate, of trade threatened by the direct and indirect effects of the war, including the likes of energy price hikes as well as sanctions and logistical disruptions.

‘Major repercussions’

“The war between Russia and Ukraine is impacting agricultural machinery trade flows, for equipment, parts and components,” Cema said.

“With an additional large number of indirect effects, such as the increased cost or shortage of energy, raw materials and agricultural goods, the conflict will most certainly have major repercussions on the agricultural machinery sector in the short, medium and long term.”

Indeed, the war, in prompting “instability, inflation, and skyrocketing energy costs,” had exacerbated a “general volatile business environment”.

The association highlighted that disruption was affecting “goods… essential to ensure global food security”.

‘Potential for a further escalation’

Germany, the world’s top agricultural machinery exporter, was the country most exposed to the war, in terms of being the top origin for imports by both Russia and Ukraine.

Exports from Germany – which is home to marques such as Claas, Deutz-Fahr and Fendt – to Russia rose by 36% in 2021 to E583.3m, with those to Ukraine up by 82% to E376.4m.

Claas last week, unveiling a halving to E166.3m in earnings for the year to the end of September said that the result was “essentially burdened by impairments in eastern Europe as a result of geopolitical changes and disrupted supply chains”.

The group, which reported that it had “ramped down production at our plant in Krasnodar [Russia] and curbed our activities… adhering strictly to all current sanctions and restrictions”, said that it viewed “the potential for a further escalation of the war in Ukraine with concern”.

‘Only likely to recover slowly’

Claas added that Russia’s farm equipment market “is only likely to recover slowly due to political factors and remain at its low level in 2023,” with the substitution of Western imports to those from other origins “taking time… to have an effect.

“Nevertheless, manufacturers from Russia, China, and Belarus will gain significant market share here.”

Belarus, an ally of Moscow in the Ukraine war, was the second biggest exporter of agricultural equipment to Russia in 2021, to a value of E441.6m, up by 20% year on year.

Belarusian exports to Ukraine, at E99.7m, more than doubled.

China, which machinery exports to Russia up by 39% to $398.6m last year, was the third-ranked origin, as it was for Ukraine, with exports up 68% at E151.3m.

The US was the second biggest exporter of farm machinery to Ukraine last year, to a value of E217.2m, double the 2020 total.