Russia's largest maker of combine harvesters and tractors, Rostselmash, said on Friday the demand for its machines has collapsed, forcing it to suspend production from June and cut costs, since farmers have no money to buy new equipment.

Rostselmash said it will send all its workers on mandatory leave starting in June, before the harvesting season begins, moving the leave forward from August and September as in previous years.

"The measure is a forced one and is due to the current economic context in the agricultural sector. Farmers do not have the funds to purchase the equipment they need, resulting in a significant market downturn," the company said in a statement.

Expensive loans add to other woes, such as high export duties and rising costs for fuel and fertilizers, making farming unprofitable in many regions and undermining Russia's ambition to be an agriculture superpower.

The central bank's tight monetary policy has rendered commercial loans, currently at rates around 30%, inaccessible for most farmers, who primarily use them to buy new equipment.

Rostselmash said sales by all Russian farming equipment manufacturers fell by 76% for grain harvesters, 49% for forage harvesters, and 48% for tractors, compared to the same period in 2021, an agricultural boom year.

The company has laid off 2,000 workers since the fall of 2024, its CEO Konstantin Babkin told Kommersant daily earlier this month.

In recent years, it had been a beneficiary of the Russian agriculture boom. It had also successfully pushed out foreign competitors, becoming an example of "import substitution," a strategy adopted by the Russian government to reduce dependency on foreign firms in the face of Western sanctions.

Arkady Zlochevsky, head of the Russian Grain Union lobby group, warned that if farmers are unable to upgrade their machinery they will be more susceptible to adverse weather. Modern machinery helps farmers to take advantage of favourable weather windows more efficiently.

Farmers also face high export duties and rising costs for fuel and fertilizers and despite lobbying from farmers, Deputy Prime Minister Dmitry Patrushev said duties would remain in place.

"This is the result of the desire to collect more money from farmers through export duties," parliament member and farmer Sergei Lisovsky said in response to Rostselmash's statement.

Reuters