TRACTORS AND COMBINES IN MYANMAR
TRACTORS ANDCOMBINES IN MYANMARMarket Situation , Growth Outlook, and Farm-Level EconomicsJune 2017Photo: made-in-china.com
PART IBackgroundMarket SituationGrowth OutlookConclusions and Next Steps
Yoma Bank asked MBI to study the market situation foragriculture equipment in Myanmar. Yoma’s goal was to shedlight on the growth potential for its hire-purchase financingprogram.Yoma’s primary concern was knowing if the marketsfor 4-wheel tractors and combines were starting toreach capacity.BACKGROUNDMBI approached the study through: A review of existing studies related to Myanmar’sequipment market Field interviews with farmers who had purchased4-wheel tractors and combines In-depth interviews with equipment dealersThe study was limited to the Ayeyarwady Delta region,within 200 km of Yangon. This initial study was meant toserve as a model for replication and expansion to otherareas of Myanmar.
MARKET SITUATION In a 2016 USAID-funded report on mechanization in Myanmar’s Ayeyarwady Delta region, Myat Thida Win and Aye Mya Thinzarshowed that purchases of 4-wheel tractors and combines have expanded rapidly from a very small base from 2013 onwards. Many more 2-wheel (walking) tractors and pumps have been sold than 4-wheel tractors or combines, but the cumulativepurchase value of 4-wheel tractors and combines has surpassed 2-wheel tractors and pumps.5,0004,000Surface-water 000200520102015Total Purchase Value (Millionsof MMK)Cumulative Number ofMachines6,00020,000Combine18,000Surface-water 0002005Source: USAID report4WT2WT20102015
MARKET SITUATION The USAID study found the following mechanizationrates for 2015-16 paddy cultivation: While mechanization for land preparation is quite highat 94%, it is notable that 68% of land preparation isdone with 2-wheel tractors. In a report on agricultural mechanization in Myanmar,New Holland dealer CPCL found that Ayeyarwadyhad the highest overall rate of mechanization ofany region in Myanmar, at 88%. Bago was the lowest,at just 38%.949080MachineryDraft70% of Households Using Land Preparation: 94% Harvesting: 50%100Machinery and Draft Animal Usein Paddy Cultivation2015-166050504038403020121020Land PreparationThreshing40Combine HarvestingHauling Inputs orCropsSource: USAID report
MARKET SITUATIONLabor Scarcity and Costs Are Driving Mechanization Multiple farmer interviewees commented on the scarcity of farm labor in their area, attributing the problem to migration both within andoutside Myanmar. Some farmers said labor scarcity was the main reason they decided to buy a tractor or combine. Farm labor costs have trended sharply upward as scarcity has increased.Labor Rates Reported by FramersKyats per dayMaubinKawaKyauktaga3 Years Ago3,0004,0003,500Now5,0007,0008,800Annual Growth Rate18.6%20.5%36.0% The scarcity and cost of labor has and will continue to drive Myanmar farmers to mechanize. The USAID study also cited a sharp increase in labor rates as a key driver of mechanization, although they found lower labor ratesoverall (about 3,750 Kyats per day in 2016).
MARKET SITUATIONLabor Scarcity and Costs Are Driving Mechanization“Laborers from this area have moved to Yangon, Thailand, and Malaysia. It’s already verydifficult to find farm labor, and I expect it to become even more difficult in the future.”Kyauktaga farmer“Laborers are hard to find because they’ve gone to Thailand or to work in factories.Farmers need more machines because laborers are in short supply.”Kawhmu farmer“There is a labor scarcity because people have gone to work in factories. Using thisequipment means we have less labor management risk.”Maubin farmer
GROWTH OUTLOOK FOR 4-WHEELTRACTORS AND COMBINESMacro View Market participants agree that the farm equipment market still has strong growthprospects, even after the enormous growth it has experienced over the last few years.Annual New TractorSales - Units90,000 According to John Deere, just 5,000 tractors are sold each year in Myanmar,while 80,000 are sold in Thailand, a neighboring country of similar size. TheCPCL mechanization report found that Myanmar needed 6,425 more 4-wheeltractors and 3,213 more combines based on its number of irrigated acres.80,00080,00070,00060,00050,000 Likewise, Sonalika said the current supply of 4-wheel tractors isn’t sufficient anddemand is expanding. Sonalika thinks the market will continue to grow if the rightfinancing schemes are in place.40,000 Farmers in Kawhmu, Kawa, and Kyauktaga said rice in their area was only about40-50% combine harvested this year, implying room for growth in thosegeographies. This finding is consistent with secondary : John Deere dealer
GROWTH OUTLOOK FOR 4-WHEELTRACTORS AND COMBINESCustom Work Demand TrendHas demand for custom work trended up, down, or stayed the same?N 21KawaTrended upTotalMaubinKyaktagaStayed the sameKawhmuTrended up73Trended down The majority of farmers (12 out of 21respondents) said demand for customwork has trended up.05Stayed the same2Trended down1Trended up0Stayed the same0Trended down Only 2 farmers said demand had trendeddown. One of these was in Kawhmu andthe other was in Kyauktaga.1Trended up0Stayed the same2Trended down Overall, farmers in Kawa and Kawhmureported more favorable trends thanfarmers in Kyauktaga or Maubin.0Trended up12Stayed the same7Trended down202468101214
GROWTH OUTLOOK FOR 4-WHEELTRACTORS AND COMBINESCustom Work Price TrendTotalMaubinKyaktagaKawhmuKawaHave custom work prices trended up, down, or stayed the same?N 22Trended up1Stayed the same Prices for custom work seem to have stayedmostly the same.8Trended down1Trended up3Stayed the same Overall, 12 out of 22 respondents said priceshad stayed the same. 6 said they had trendedup and 4 said they had trended down.2Trended down3Trended up0Stayed the same2Trended down0Trended up Responses varied by location. Most farmers inKawa and Kyauktaga said prices had stayed thesame. Both farmers in Maubin said they hadtrended up. Responses in Kawhmu weremixed.2Stayed the same0Trended down0Trended up6Stayed the same12Trended down402468101214
GROWTH OUTLOOK FOR 4-WHEELTRACTORS AND COMBINESSecond-Hand Market and Maintenance There were differing opinions on the second-hand market for farm equipment and how it may impact the growth outlookfor new equipment. New Holland said the second-hand market for farm equipment is growing in Myanmar, noting that a Facebook group forused farm equipment has generated interest. John Deere said there is an active market for second-hand Kubota tractorsfrom Thailand, but these machines are losing popularity. Dealers expect that tractors originally sold new in Myanmar will move into the local second-hand market in about 3 years,although there is uncertainty about how well these tractors will be maintained. Sonalika said new tractors should last 4-5 years without a major overhaul. After that time, Sonalika expects that mostowners will overhaul their machines rather than buy new ones.
Growth prospectsThere appears to be substantial room for growth inMyanmar’s equipment market overall. However,considerable variation by geography is expected. Themarket in certain areas will become saturated earlierthan in others.New equipmentCONCLUSIONSAND NEXT STEPSFarmers we interviewed mainly want to purchase more 4-wheeltractors and combines. There is also growing interest in othertypes of equipment, especially rice straw balers, planters,mowers, new tillage implements, and excavation equipment.FinancingExisting hire-purchase financing terms seem appropriate.Some farmers requested lower down payments forcombines.More research requiredGiven the small sample size of this study, the results arenot conclusive. The study should be extended to at least 2more key geographies (e.g. Dry Zone, Shan State corn belt).
PART IIINTERVIEW RESULTS
CHARACTERISTICS OF FARMERINTERVIEWEESInterviews by Location A total of 27 farmers were interviewed in 5locations around Yangon. Most interviewees were men.Hlaing Thar Yar2Kawa11Kawhmu The average age of interviewed farmers was 50years. The youngest was 27 and the oldest was 70.8Kyauktaga4Maubin20227504970N 27681012Interviewee GenderN 27Interviewee 5202530
CHARACTERISTICS OF FARMERINTERVIEWEESCrops FarmedN 25 Most interviewees farmed rice and beans. All farmers but 1 said they own a farm. Theaverage owned farm size was 47 acres and themedian was 35 acres. The largest owned farm was270 acres.Rice Only9Rice and Beans13Rice, Beans, Corn, and Peanuts2Own Farm AcreageMninimumAverageMedianMaximum0473570N 27Fish Farm102468101214
WHAT EQUIPMENT AREFARMERS BUYING? Farmers interviewed had purchased 28 tractors and 7 combines. 75 and 90 HP tractors were the most popular, with farmers reporting that thetrend is toward larger tractors. Sonalika said 90 HP was its most popular tractor size across the country.Tractor HorsepowerN 25Equipment PurchasedN 2790 HPTractor28976 HP275 HPCombine70510152025301365 HP150 HP102468101214
WHAT TRACTORS ARE FARMERS BUYING?Tractor BrandN 26Kairo Sonalika and New Holland were the mostpopular tractor brands among thefarmers surveyed. A Sonalika dealer said Kubota dominatesMyanmar’s paddy market, but this wasnot borne out in the farmer interviews.1Kioti2New Holland10Shwe Phone (Gun Su Hine)1Sonalika13Zator102468101214
WHAT COMBINES ARE FARMERS BUYING? One farmer interviewed in Kawhmu owned 4Shwe Phone (Gun Su Hine) combines, as well as 1tractor. Although farmers spoke a lot about wanting tobuy Kubota and Yanmar combines, only 1 farmerreported owning a Kubota combine.Combine BrandN 3Farm Group1Kubota1Shwe Phone (Gun Su Hine) Outside this study’s farmer sample, Kubota andYanmar combines seem to be the most popular.However, New Holland plans to introduce its firstcombines to Myanmar soon, and John Deere willalso be offering a combine.4World1012345
WHAT IS THE RATIONALE FOREQUIPMENT PURCHASES?Why did you want to buy this tractor/combine?“Labor is scarce. We need advanced technology.”Kawa farmer“Before I bought a tractor, my work was not time efficient because I had to depend onanimals and walking tractors.”Kyauktaga farmer“I bought a tractor so I could be more comfortable and do custom work.”Hlaing Thar Yar farmerMaubin farmer“I was attracted by the 10% down payment.”Kawhmu farmer
HOW ARE FARMERS USINGTHEIR EQUIPMENT? Of the 27 farmers interviewed, 26 said they use their equipment forcustom work in addition to work on their own farms. Most farmers said custom work was their main use, with a few sayingtheir main use was on their own farms. Some said it was about even.Equipment UseN 27Primary UseN 25CustomOwn Farm and Custom1526Own Farm41Own Farm Only6Even081523300481216
HOW ARE FARMERS USINGTHEIR TRACTORS?Activities (Tractor)N 20Land Prep. / Tillage Farmers use their tractors mainlyfor land preparation / tillage. A fewuse them for harvest activities, andone uses his to excavate fishponds.14Land Prep. / Tillage and Harvest3Harvest2Excavation (Fish Farm)10246810121416
HOW MANY ACRES PER DAY CANFARMERS COVER?Maximum Acreage Per Day For tractors, most farmers said the maximum acres theycould cover is approximately 20 acres per day. Responsesranged from 10 to 28. For combines, farmers said they could harvest between 5and 10 acres per day. Land preparation with a tractor takes 45 minutes per acre.Combine harvesting is 1.5 hours per acre. A Sonalika dealer said farmers need to do at least 15-20 acresper day to justify investing in a tractor.TractorN 12CombineN 3Minimum105Average228Median208Maximum2810
WHAT BENEFITS HAVEFARMERS SEEN?Cost Savings Farmers said their labor costs were reduced byapproximately 50% after they bought tractors. Onefarmer in Kawa said owning a tractor reduced overallfarming costs by 20%. Farmers still have to pay tractor/combine operators andworkers who harvest beans by hand. Besides labor cost savings, many farmers noted thatmechanized farming was more efficient and required lesstime. Several also remarked on the time and cost savingsbenefits of eliminating draft animals from their operations.“Owning a tractor has many advantages. Forexample, I can start any time I want and I don’thave to wait around for workers.”Kawhmu farmer“My work is now more time-efficient and I don’thave any problem finishing within the season.”Kyauktaga farmer“I was able to sell my draft animals and nolonger need to care for them.”Kawhmu farmer
HOW DOES THE CUSTOMBUSINESS WORK?Custom Work Prices Tractors – For custom work with tractors, nearly all farmersreported prices of 8,000 Kyat per acre for cash payment and10,000 Kyat per acre for credit payment. One farmer inKawhmu said his price was 4,000 Kyat per acre exclusive offuel, down from a previous price of 5,000 Kyat per acre. Combine – Two farmers in the sample said they do custom riceharvesting with combines. Both were in Kawhmu. One saidthe normal price is 50,000 Kyat per acre, but it can be as highas 70,000 Kyat per acre for difficult conditions. The other saidthe price is 40,000 Kyat per acre during the rainy season and35,000 Kyat per acre during the dry season.Payment and Credit Terms Credit terms of 4 months seem common for custom work with atractor, although a few farmers said they don’t want or areunwilling to accept credit payments. One farmer in in Kawa saidhe gives credit for 70-80% of the job and collects the rest afterharvest. Payment for combine harvest occurs at harvest or within30 days. A tractor owner in Kawa said about 1 out of 20 farmers/customers fails to pay. Another in in Kawhmu said “If we don’ttake credit, we can’t really work.”
HOW DOES THE CUSTOMMARKET WORK?Operator Rates Most farmers reported operator rates of 1,000 to 1,500 Kyatper hour, but there was significant variation. For example, onefarmer in Kawa said he pays 10,000 Kyat per 5-6 hour day,which is about 1,800 Kyat per hour. Some farmers reportedoperator rates of 1,000 to 1,500 Kyat per acre. Two farmers in Kawa said they pay operators 25,000 to 30,000Kyat per month, depending on their level of expertise. Anothersaid his normal operator rate is 25,000 Kyat per month, but hepays 50,000 Kyat per month in November and December—thebusy season for green beans.Acreage and Coverage Area The average custom area per tractor per year was 598 acres. Most farmers said they travel no more than 10 miles awayfrom their homes for custom work, but three said they travelfrom 20 to 50 miles. One farmer said he charges extra if hehas to travel to small acreage jobs.Custom AcreageN 21Minimum95Average598Median450Maximum2,500
HOW DO FARMERS CHOOSE DEALERS? Most farmers in this sample said they were introduced to theequipment dealers by the Agricultural MechanizationDepartment (AMD). Others were introduced by farmerfriends or family. No farmers were aware of payments being made in exchangefor the introduction; however, all dealers interviewed (NewHolland, Kubota, John Deere, and Sonalika) said they paycommissions/finders fees to mechanics, village heads, orother farmers who introduce customers.Who introduced you to the equipment dealer?N 21AMD18Farmer friends2Family105101520
EQUIPMENT FINANCINGDown Payments Down payment amounts were either 30% or 10%. Most farmers said they funded their down payments withown/family savings. Others borrowed from friends/relativesor sold assets.Dealer Credit Analysis John Deere said it uses a 55-question form for buyer creditanalysis. Questions relate to family, education, the applicant’shouse, and other factors. New Holland’s credit application isreportedly similar. John Deere said over 10% are rejected. Sonalika uses third-parties to perform its credit analyses inthe field.How did you fund the down payment?N 27Own/family savings22Borrowed from friend/relative2Sold assets1Sold assets and borrowed fromfriend/relative20510152025
EQUIPMENT FINANCINGPaybackDefaults Most farmers expected to pay off their loans in 3 years, butseveral thought they could do it in 2 years or less. John Deere said that in two years there had been nodefaults. Likewise, Sonalika said there had been very fewlate payments or defaults to date. According to dealers, rice farmers and those working only ontheir own farms take 3 years to pay off tractors, but customfarmers with a lot of work can do it in 1 year or less. JohnDeere said a customer who runs his tractor 18 hours per daywill pay it off in 7 months. New Holland and Kubota both saidcombines could be paid back in 2 years.Farmer Feedback Farmers said they can accept terms of 10% down and a3-year maturity. There were requests for combines tobe made available at 10% down instead of the current30%.
GENDER ELEMENTS Of the farmers interviewed, 3 out of 27—approximately 11%—were women. CPCL said about 20% of its buyers are women, and Sonalika estimated 10%. John Deere said men sign the actual purchase contract 95% of the time, but there’s usually awoman involved. Women are often involved in John Deere’s big sales.
REFERENCESMyat Thida Win and Aye Mya Thinzar, “Agricultural Mechanization and Tructural Transformation in Myanmar’sAyeyarwady Delta,” report funded by USAID and the Livelihoods and Food Security Trust Fund (LIFT).Myat Thida Win and Aye Mya Thinzar, “Key Findings on Agricultural Mechanization from MAAS,” presentationdated 16 September 2016.CPCL, “Myanmar Agriculture Mechanization Sector,” undated presentation.
CONTRIBUTORSAgriSource:Joel WoodwardTim WelshAye Moe Pwint PhyuChit Suu Win Htein
75 and 90 HP tractors were the most popular, with farmers reporting that the trend is toward larger tractors. Sonalika said 90 HP was its most popular tractor size across the country. 7 28 0 5 10 15 20 25 30 Combine Tractor Equipment Purchased N 27 1 1 13 2 9 0 2 4 6 8 10 12 14 50 HP 65 HP 75 HP 76 HP 90 HP Tractor Horsepower N 25
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