US-based Agco in talks with China's First Tractor on joint venture - report

BEIJING (AFX) - Agco Corp, the world's third-largest maker of farm equipment, is in talks with First Tractor, China's largest tractor maker, about a joint venture that would make Massey Ferguson tractors in the country for the first time, the Financial Times reported.

The newspaper, citing Martin Richenhagen, Agco chief executive, said the US group hopes to finalise a venture with the Hong Kong-listed maker of tractors this year.

The venture would make tractors of between 40 and 100 horsepower, smaller than the machines common across the fields of the US and Europe, the paper said.

Unlike the US, Russia and western Europe, China's agriculture sector is largely made up of thousands of small holdings with insufficient purchasing power for big farm machinery.

But, Richenhagen said China's small farms were likely to consolidate into larger units as people working on small holdings migrated to jobs in the cities, the paper said.

Richenhagen said the planned tractor factory could initially produce 2,000-3,000 tractors a year but a manufacturing facility "makes sense with a volume of 10,000 units".

He said the venture might reach such a level in two to four years.

The paper said Agco plans to use the Massey Ferguson name because it is relatively well known globally. Agco acquired the UK tractor maker in 1994.

Tractors made in China would probably be designed at an Agco research and development facility in India.

First Tractor, which declined to comment, is based in Henan province in eastern China.

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