AGCO: Russian Farming Sector Needs Overhaul

Chairman and chief executive of AGCO Corp. Martin Richenhagen said that Russian agriculture production is being undermined by credit conditions in the country that discourages farmers from purchasing machinery and land, Dow Jones Newswires reported.

Richenhagen further said in a recent interview, that farmland utilization has fallen about 42% since the collapse of the Soviet Union nearly 20 years ago because Russian farmers lack adequate equipment to farm all the available land. He said the volume of tractors and combines in service in Russia has fallen by half in the past decade. The average age of the equipment still in use is 15 years old.

Richenhagen attributed the aging, dwindling fleet to a lack of financing for equipment purchases. Most Russian farmers don’t own the land they farm. As a result, they usually lack sufficient assets to qualify for equipment loans, he said. Moreover, the difficulty of repossessing equipment for nonpayment of loans keeps most foreign banks from venturing into the Russian equipment market. He said the government needs to do overhaul farm-sector lending, especially in the wake of shrinking government programs to promote equipment purchases.

Last year, AGCO launched a joint venture with Russian machinery maker Concern Tractor Plants to build diesel engines for farm equipment. Concern Tractor is owned by Russian industrial conglomerate Agromash Holding. AGCO also is considering its joint-venture options for production of combines in Russia.