French farm machine firms to raise prices in supply squeeze

PARIS, May 27 (Reuters) - Farm machinery makers in France, the European Union’s biggest agricultural producer, plan to raise their prices this year to cope with surging raw material costs and scarce components during a boom in demand, an industry group said on Thursday.

An upturn in orders from farmers, who are benefitting from high crop prices after several lean years, has coincided with global supply chain disruption linked to the COVID-19 pandemic, creating production difficulties for equipment makers like U.S.-based AGCO Corp and Deere & Co.

In France, nearly all manufacturers expect to increase their sale prices in response to supply chain pressures, industry association Axema said, citing a latest survey of firms.

The price of steel, which can represent 30-40% of the production cost of farm equipment, has more than doubled over the past year, it said, calling for the EU to ease trade curbs aimed at averting unfair steel imports.

Like carmakers, manufacturers of tractors and other agricultural machines have been affected by shortages of semiconductor chips as well as tight supply of plastics.

Around 10% of Axema’s survey respondents had already resorted to production halts or experienced order cancellations, with around half expecting to see these occur in the coming months, the association said.

“We’re facing a demand boom and a supply crisis,” David Targy, head of Axema’s economic service, told reporters.

Factoring in production headwinds, farm machinery sales in France are expected to rise by 5-7% this year to around 6.4 billion euros ($7.8 billion), after being stable in 2020 during a volatile year marked by factory stoppages during lockdowns and an upturn in farmer demand, Axema said.

Some 200 million euros of aid for farm equipment, as part of the French government’s stimulus measures following the pandemic, should further bolster orders in the coming months, it added.

European farm machinery association CEMA’s monthly business climate index reached its highest since 2008 in May.

$1 = 0.8203 euros Reporting by Gus Trompiz. Editing by Mark Potter