Supply and demand of agricultural machinery in Brazil

Abstract

This study aims to analyze the main impacts of both economic and agricultural policies on the supply and demand for agricultural machinery in Brazil, with a special attention to the years from 1995 through 2010. After using both graphical and econometric analysis, it was found that there is a direct and positive relationship between the planted area and the demand for agricultural machinery, as well as an inverse relationship between the prices of agricultural machinery and the demand for it. Although the Brazilian federal government created the Moderfrota program (program for the modernization of the agricultural tractor fleet and related accessories, and harvesters) in 2000, and although the demand for agricultural machinery has increased since then, the results of both graphical and econometric analysis do not show a linear relationship between this program and the increased demand for agricultural machinery in Brazil. The demand for agricultural machines is more affected by area variations (cross elasticity is 2.72) than by price changes (price elasticity is -1.41).