World demand for agricultural equipment is forecast to rise 3.8% per year through 2012 to $112 billion, according to a report by The Freedonia Group, Inc., a Cleveland-based industry market research firm.

Gains will be paced by the accelerating mechanization of the agricultural sectors in large markets such as China and India. Farm sectors in these countries are still significantly unmechanized and inefficient in comparison to those found in more developed markets.

The rapid rise throughout the world in staple food crop prices and localized shortages in 2007 and early 2008 indicate a growing necessity for increasing farm productivity and efficiency in developing countries.

Strongest growth in agricultural equipment demand will be registered in developing countries, with China and India holding by far the best prospects.

Other large developing nations with sizable agricultural sectors such as Brazil, Indonesia, Russia and Thailand will also post healthy gains as a result of increasing mechanization. Besides benefitting from rising incomes, farmers in developing regions will continue to strive to increase productivity through further automation and replacement of older equipment and of draft animals used during various stages of the farming process.

The U.S. will experience gains that lag the world average due to decelerating growth in economic and agricultural sector output in the country.

Western Europe will post particularly anemic growth, coming off a strong 2007 when demand (in dollars) was bolstered by a strong Euro and several other less significant factors such as Germany’s biofuel boom-related forage harvester purchases.