According to a research report from Orient Securities, agricultural machinery demand is expected to remain under pressure in 2025. Domestically, the production of medium and large tractors is projected to decrease by 1.2% year-on-year, while the production of small tractors is anticipated to fall by 15.4%. Internationally, the UK's total sales of agricultural tractors in 2025 are expected to hit their lowest level on record (the lowest since before World War II). In the United States, sales of agricultural tractors and combine harvesters in October 2025 declined by 19.6% and 26.8%, respectively. Looking ahead, agricultural machinery demand is expected to see a marginal improvement in 2026. Domestically, as 2026 marks the inaugural year of the 15th Five-Year Plan, the annual Central Document No. 1 is anticipated to continue supporting agricultural development. Overseas, a gradual easing of interest rates and trade risks is also expected to contribute to a demand recovery.
Despite the decline in domestic agricultural machinery demand in 2025, the industry is poised for marginal improvement in 2026. Firstly, broad policy support is expected, as 2026 is the first year of the 15th Five-Year Plan; the national No. 1 Central Document will place greater emphasis on agricultural modernization. Secondly, renewal policies are set to continue with a sharper focus on precision; large-scale equipment renewal initiatives will likely remain supported in 2026, but funding channels will be separated from the consumer goods trade-in program to concentrate more specifically on the agricultural machinery sector. Thirdly, policies are also leaning towards machinery upgrades; the National Development and Reform Commission's document released on December 24 explicitly called for vigorously developing new productive forces in agriculture, with a key emphasis on strengthening efforts to address shortcomings in agricultural machinery equipment. Finally, on the export front, growth in China's agricultural machinery exports is expected to bring new growth momentum to the sector's demand.
After two years of contraction, overseas agricultural machinery market conditions are expected to recover. Demand for agricultural machinery abroad was relatively weak in 2024-2025, primarily due to soft agricultural commodity prices, trade conflicts, and a high-interest-rate environment. Looking forward, overseas demand is projected to begin recovering in 2025. Firstly, regarding agricultural commodity prices, forecasts from BMO Capital Markets suggest global agricultural prices are expected to stabilize and rebound during 2026-2027. In terms of the international situation, as US trade tariffs are gradually implemented, agricultural trade is anticipated to recover. Furthermore, with the Federal Reserve expected to implement three interest rate cuts in 2025, leading to lower rates, this should continue to ease borrowing costs for agricultural machinery and subsequently boost demand.
Relevant mentioned companies include First Tractor Company Limited (601038.SH) and Zoomlion Heavy Industry Science & Technology Co., Ltd. (000157.SZ).
Key risks include macroeconomic fluctuations leading to investment falling short of expectations, grain prices underperforming, persistently high overseas interest rates dampening demand, an escalation of international trade frictions, and rising raw material prices negatively impacting corporate profits.