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Crete, 23 June 2008 Giuseppe GAVIOLI - CNH Tractor Product Agricultural and Construction Equipment AgEng2008 International Conference on Agricultural Engineering AGRICULTURAL MACHINES EVOLUTION IN A CHANGING WORLD

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AgEng2008 - AGRICULTURAL MACHINES EVOLUTION IN A CHANGING WORLD 2 INTRODUCTION We are in a changing world. And the changes, even in far distant areas, are more and more correlated (globalization effect). So we will focus today mainly on Europe (now extended to 27 member states), but we cannot lose contact with the rest of the world. What is relevant to observe is that a lot of apparently independent changes are causing economic, environmental and social trends with combined relevant effects on the evolution of agricultural machines.

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AgEng2008 - AGRICULTURAL MACHINES EVOLUTION IN A CHANGING WORLD 3 BASIC STATISTICS Demographics Agricultural labor force Cultivated land Organic land Farm size evolution Climate change and precipitations evolution Gross Domestic Product Agriculture value Commodity prices Agricultural income Bio-fuels Our world is rapidly changing. The continuous evolution of society, economy, technology and culture is under our eyes, and if we give a closer look to some statistic key indicators we can better understand the size and direction of change.

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AgEng2008 - AGRICULTURAL MACHINES EVOLUTION IN A CHANGING WORLD 4 Statistics: Population Source: Eurostat Europe has 7.5% of the world population and it is about two times the USA population; but it is much smaller than both India and China.

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AgEng2008 - AGRICULTURAL MACHINES EVOLUTION IN A CHANGING WORLD 5 Statistics: Demographics The effect of Europe net migration will no longer outweigh the natural decrease after 2025, when the population will start to decline gradually. The worldwide population of the least developed areas will pass from 5,4 billion to 7,9 billion in 2050 while the developed areas will remain stabilized around 1,2 billion. They would undergo a decline normally if one did not take in account the migration of the developing countries towards the developed countries

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AgEng2008 - AGRICULTURAL MACHINES EVOLUTION IN A CHANGING WORLD 6 Statistics: Demographics Evolution of EU-25 and USA population 1995-2050 While the European population is substantially not growing, China, India and the USA populations are growing around or more than 1% per year.

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AgEng2008 - AGRICULTURAL MACHINES EVOLUTION IN A CHANGING WORLD 7 Statistics: Demographics Source: Department of Economic and Social Affairs (DESA) - 2007 All European countries population evolution by age groups Europe has grown so far only due to the addition of new state members (from Europe-12 to Europe-27). The European lack of population growth is also pictured here where the main age group trends are shown.

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AgEng2008 - AGRICULTURAL MACHINES EVOLUTION IN A CHANGING WORLD 8 Source: United Nations Statistics: Rural Population The percentage of rural population is wide ranging and its decreasing everywere

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AgEng2008 - AGRICULTURAL MACHINES EVOLUTION IN A CHANGING WORLD 9 Statistics: Agricultural Labor Force Over the period 1995-2000, the agricultural labor input has declined by 2.0% p.a. in the EU15. This rate of change has speeded up since 2000 to -2.3% for the period up to 2005 (EU25: -2.5%) Source: Eurostat

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AgEng2008 - AGRICULTURAL MACHINES EVOLUTION IN A CHANGING WORLD 10 Statistics: Cultivated Land Over of the territory of the European Union is agricultural (42%) or wooded land Source: United Nations Environment Programme (UNEP) Source: Eurostat, 2005

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AgEng2008 - AGRICULTURAL MACHINES EVOLUTION IN A CHANGING WORLD 11 Statistics: Organic Land Evolution of the total number of organic producers and size of total organic area in the EU15, 1998-2002 Source: Eurostat, 2005 The total organic area in the EU15 increased from 2.3 million hectares in 1998 to 4.9 million hectares in 2002. The organic farming area reached 3.8% of the total Utilised Agricultural Area (UAA) of the EU15 in 2002, up from 1.8% in 1998 Worldwide (2006): approx. 31 million of hectares are grown organically

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AgEng2008 - AGRICULTURAL MACHINES EVOLUTION IN A CHANGING WORLD 12 Statistics: Farm size Number of agricultural holdings by size, of at least 1 ESU (Economic Size Unit) in 2005 Since 1986, 2 ESU have been worth ECU 2 400, which is approximately 3 hectares wheat-equivalent Source: Eurostat source: Eurostat Total number of Agricultural Holdings (in 1000)

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AgEng2008 - AGRICULTURAL MACHINES EVOLUTION IN A CHANGING WORLD 13 Future impact on summer temperature (C) of climate change simulated within the scenario GIEC-B2. The small red squares correspond to a temperature increase between 3 and 4 C Source: CNRS Centre National de la Recherche Scientifique - France This climate simulation model (ARPEGE-Climat) for the years 2070-2100 is not a real forecast but it shows what could be possible if the radiation active gases concentration will increase according to the model hypothesis Statistics: Climate Change

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AgEng2008 - AGRICULTURAL MACHINES EVOLUTION IN A CHANGING WORLD 14 Difference between the winter precipitations in the period 2070-2099 and the ones in the period 1960-1989. Figures a and b are related to two simulations of the period 2070-2099 versus the period 1960-1989, made with the model ARPEGE-Climat, different only by the initial conditions assumptions. The scale is in mm/day. The trend on both simulations shows an increase in winter rainfalls over Europe and a decrease over the Mediterranean see and the Northen Africa. The figures c and d correspond to the figures a and b and show the same trends for the summer rainfalls. winter precipitationssummer precipitations Statistics: Precipitations Evolution Source: CNRS Centre National de la Recherche Scientifique - France

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AgEng2008 - AGRICULTURAL MACHINES EVOLUTION IN A CHANGING WORLD 15 Source: UCAR University Corporation for Atmospheric Research ESSL Earth and Sun Systems Laboratory Statistics: Climate Change

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AgEng2008 - AGRICULTURAL MACHINES EVOLUTION IN A CHANGING WORLD 16 Statistics: Gross Domestic Product

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AgEng2008 - AGRICULTURAL MACHINES EVOLUTION IN A CHANGING WORLD 17 Statistics: Agriculture value According to the EAA the output value at producer prices (the producer prices excludes subsidies less taxes on the products) of the agricultural industry is 292 billion in 2005 for the EU25

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AgEng2008 - AGRICULTURAL MACHINES EVOLUTION IN A CHANGING WORLD 18 Statistics: Commodity prices All the institutions are predicting significantly higher prices for the next 10 years than over the past decade. The projections are subject to many uncertainties: assumptions about productivity growth, risks of sanitary and phyto-sanitary crises, climate change, the weather, etc.

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AgEng2008 - AGRICULTURAL MACHINES EVOLUTION IN A CHANGING WORLD 19 Statistics: Europe Agricultural Income EU27 real agricultural income per worker rose by 5.4% in 2007, after increasing by 3.3% in 2006. This increase was the result of a growth in real agricultural income (+3.1%) and a reduction in agricultural labour input (-2.2%).

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AgEng2008 - AGRICULTURAL MACHINES EVOLUTION IN A CHANGING WORLD 20 Statistics: Biofuel The use of vegetable oils as engine fuels may seem insignificant today but the such oils may become, in the course of time, as important as petroleum and the coal tar products of the present time. Rudolph Diesel, 1912 Source: IFP Current biofuel technologies

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AgEng2008 - AGRICULTURAL MACHINES EVOLUTION IN A CHANGING WORLD 21 Statistics: Biofuel EU Directives targets: - Current: 2% of biofuel - by 2010: 5.75% of biofuel - by 2015: 8% of biofuel - by 2020 10% of petrol and diesel to be replaced by biofuels (20% of energy consumption coming from renewable sources) In 2005, 2.6 million hectares in Europe were occupied by energy crops used to produce biofuels: 2.4 million hectares of crops to produce biodiesel (95% rape, 5% sunflower) and 0.2 million hectares of crops to produce bioethanol (49% wheat, 51% sugar beets) In 2005, Europe consumed about 4.2 Mt of biofuels, equivalent to 1.2% of road transport fuel consumption. The European Union did not attain its target biofuel content of 2% - which represents 5.8 Mtoe of biofuels. By 2010 the target is 16.6 Mtoe, which would require about 82 Mt of farm biomass and a land area of about 13.8 Mha. To meet this demand for biofuel, it would be necessary to allocate a land area for rape alone larger than the cumulated area of all fallow land in Europe (approx. 8.2 Mha), knowing that not all of these lands are cultivable.

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AgEng2008 - AGRICULTURAL MACHINES EVOLUTION IN A CHANGING WORLD 22 GENERAL TRENDS Agricultural workforce decrease / average age increase Farm size increase more complex farm management Regulations evolution safety / health protection environment / pollution reduction Productivity / precision increase Bio-fuel / Bio-mass production increase Water shortages Organic cultivation expansion From all these data we can observe, inside the change, some clearly emerging trends:

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AgEng2008 - AGRICULTURAL MACHINES EVOLUTION IN A CHANGING WORLD 23 Population decrease / average age increase Agricultural workforce decrease (combined effect of European population slight reduction and decreasing agricultural percentage of the population). Average age of people working in agricultural areas is increasing and this drives a strong request for equipment ergonomic, ease of use, low-effort controls, highly automatic operation sequences, safe drive. Agricultural income positive trend, in conditions of workforce decrease, implies a significant productivity increase.

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AgEng2008 - AGRICULTURAL MACHINES EVOLUTION IN A CHANGING WORLD 24 Farm size increase The progressive increase of farm size implies a general complexity increase in the farm activity management (more crops, more machines, more workers). The enterprise risk also increases and more management skills and tools are required (business approach, accurate accounting, cultivation and crops planning, fleet management, maintenance programs, purchase of services, etc.). The farm economic development implies a continuous search for productivity and efficiency, which means more machines and more productive machines.

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AgEng2008 - AGRICULTURAL MACHINES EVOLUTION IN A CHANGING WORLD 25 Productivity / precision increase The demand for higher productivity on all farm operations is constant: efficient machines high speed operations bigger machines, higher power automatic operations ease of use comfort Precision in farm operations is also an increasing priority, because it usually increases the efficiency in the use of machines and materials (seeds, water, fertilizers, etc.).

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AgEng2008 - AGRICULTURAL MACHINES EVOLUTION IN A CHANGING WORLD 26 Bio-fuel / Bio-mass production increase The limited availability of fossil fuels and the rapidly increasing oil prices are driving a strong interest on bio-fuels Both in the USA and Europe the spontaneous extension of bio-fuel crops is supported by dedicated governments plans. The European target to have by 2020 10% of petrol and diesel to be replaced by bio-fuels is going in this direction and probably more specific support to the bio-fuels crops will come. The fight for low cost bio-fuel will drive even more the productivity of these cultivations and of the machines used for that, seen that the available land is limited. Bio-fuel will require wider fields for energy crops, and farmers will require bigger machines, with more hp, and bigger implements.

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AgEng2008 - AGRICULTURAL MACHINES EVOLUTION IN A CHANGING WORLD 27 Water shortages The climate changes are difficult to forecast, but there is a general consensus among scientists that the global warming is a real process and that significant modifications will happen in the next decades. The main consequences of global warming will be a change in precipitation pattern (probably some increase of precipitations in Northern Europe and a decrease of precipitations in Central and Southern Europe). Therefore the availability of water for irrigation will change significantly, driving changes in the mix of cultivations. The demand for water will also increase dramatically in the rest of world, with the increase of irrigated land needs.

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AgEng2008 - AGRICULTURAL MACHINES EVOLUTION IN A CHANGING WORLD 28 Organic cultivation expansion In Europe the land cultivated organically is roughly doubling every two years, leading to a significant business impact in the agricultural world. The choice of non-OGM crops, the very limited use of pesticides and herbicides and the use of accurate cultivation methods is driving a significant use of specialised machine work, but with needs of clean machines, with low emissions and high prevention of land and crop contamination (e.g. oil drops). This also leads to high value agricultural production, sustained by prices higher than average but with demand for high quality process.

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AgEng2008 - AGRICULTURAL MACHINES EVOLUTION IN A CHANGING WORLD 29 Regulations evolution Another important trend in Europe, and in many other countries, is the rapid evolution of regulations. This is a direct consequence of the social and political evolution, with increased sensitivity to population and workers health and safety. Air pollution and gas and particles emissions are already strictly regulated and they will be more. EEC legislation on agricultural machines is quite complex and subject to significant evolution. - machines need to comply with a long list of EU directives - homologation is gradually replaced by self-certification

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AgEng2008 - AGRICULTURAL MACHINES EVOLUTION IN A CHANGING WORLD 30 Regulations evolution Typical examples where regulation has a significant impact on the product design Health and safety Roll over protection (ROPS), falling objects (FOPS) Hazardous substances Air purifying devices, to limit operator exposure to hazardous substances (tractors, sprayers) Protection of passenger Seat belts anchorages and location and mounting of passenger seat Social or horizontal Directives, intended to cover the risks in the work sites. Exposure of workers to the risks arising from physical agents (vibration) Compliance with these regulations is in charge of the employer but, obviously, becomes a task for the manufacturer. Road transport Drive by noise Vehicle width, axle weights and signalisation Increased road speed, braking performance EMC (electromagnetic emission) Engine emissions

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AgEng2008 - AGRICULTURAL MACHINES EVOLUTION IN A CHANGING WORLD 31 Engines Emissions Targets Since 2000, there has been a continuous reduction of particulate and NOx emission levels From Tier 4 onwards exhaust after-treatment devices will be required 2001 20112014 2006

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AgEng2008 - AGRICULTURAL MACHINES EVOLUTION IN A CHANGING WORLD 32 Engines Emissions targets: Europe and USA

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AgEng2008 - AGRICULTURAL MACHINES EVOLUTION IN A CHANGING WORLD 33 Engines Emissions targets: Other Countries

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AgEng2008 - AGRICULTURAL MACHINES EVOLUTION IN A CHANGING WORLD 34 GENERAL TRENDS DRIVE MACHINE EVOLUTION All the trends we have seen so far have a powerful drive into the evolution of agricultural machines. The combined effect of these drivers and the evolution of technologies will cause rapid changes and new offering in the machines scenario. The main evolution directions can be summarized as follows: Bigger equipment / higher power Emissionised engines / clean machines / use of bio-fuels Safe work environment Higher speed Serviceability / maintainability improvement Precision farming / Auto-guidance Automation / CVT transmissions / electronics / interaction with implements Specialized products / highly configurable products

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AgEng2008 - AGRICULTURAL MACHINES EVOLUTION IN A CHANGING WORLD 35 Bigger equipment / Higher power Larger fields, less manpower, demand for higher productivity will continue driving up equipment size and power. Larger implements will then require more pulling and controlling power. The endless power up trend will continue.

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AgEng2008 - AGRICULTURAL MACHINES EVOLUTION IN A CHANGING WORLD 36 Emissionised engines / Clean machines / Use of bio-fuels The future agricultural machines will be more and more respectful of the environment. The engine emissions regulations, already quite severe, will continue to follow the big push for further reduction, even in the emerging economies like India and China. The global push to save the environment and respect the nature will drive our machines to become always greener and cleaner. The use of bio-fuels and all sort of alternative fuels will increase significantly. Users and dealers must become familiar with the storage, handling and use of bio-fuels.

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AgEng2008 - AGRICULTURAL MACHINES EVOLUTION IN A CHANGING WORLD 37 The agricultural machine is often seen as a working environment, where the operator stays for many hours a day and where he does a lot of work operations. European and North American legislations are very focused on guaranteeing safety and healthy working conditions. This means not only safe equipment and low levels of noise, vibration, air pollution, but also ease of use and comfort. Instructions must be clear and exhaustive Controls must be easily reachable and immediate to understand and use. Signals and warnings have to cover all the significant potential risks. Safe work environment

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AgEng2008 - AGRICULTURAL MACHINES EVOLUTION IN A CHANGING WORLD 38 Higher speed Even if the European legislation is a little bit behind, the tractors speed desired by users is often higher than 40 km/h. 50 Km/h is becoming normal in many countries (recently including the USA) and 60 km/h or more is the next step. Improved braking systems and axle suspensions will be more and more required for a safe high speed drive. And the same applies to trailers and other towed machines. But speed is also required in many other machine operations, because it means productivity; so it will become a constant trend for complete vehicles and for specific operations.

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AgEng2008 - AGRICULTURAL MACHINES EVOLUTION IN A CHANGING WORLD 39 The social progress, the evolution of comfort perception and quality of life and the ageing of population will all lead a demand for better machine serviceability. Customers want to service their machines less times and in an easy and safe way. They want to access to all the relevant parts of the equipment without risk or fatigue and easily check the need for maintenance, in this supported by clear on-board diagnosis. Maintenance has to be easily planned and all the service operations must be very simplified. Serviceability / maintainability improvement

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AgEng2008 - AGRICULTURAL MACHINES EVOLUTION IN A CHANGING WORLD 40 The adoption of precision farming techniques is one of the most effective ways to increase the yield and productivity of the agricultural land. Satellite maps, ground and crop analysis, yield history, culture optimization planning are now possible with the help of services and equipment available in the market place. And the use of these tools is proving to be very effective in farm operations improvement. Auto-guidance systems will more and more drive with precision the machines on the ideal paths, to minimize errors and redundancies in field operations, pulling increasingly sophisticated large implements. Precision farming / Auto-guidance

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AgEng2008 - AGRICULTURAL MACHINES EVOLUTION IN A CHANGING WORLD 41 Automation / CVT transmissions / electronics / interaction with implements The demand for productivity, ease of use and field operations improvements will drive even more the already exploding rate of electronic and automatic devices on agricultural machines. Continuous Variable Transmissions will grow at a very high rate and electronics will become the technology mostly spread around in our machines. Electronic bus technology, based on existing standards (CAN-bus, ISO-bus) and on new ones, will transform the machines in complex integrated systems, more and more intelligent and with extended capabilities to communicate each other and with implements and attachments.

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AgEng2008 - AGRICULTURAL MACHINES EVOLUTION IN A CHANGING WORLD 42 Look at this combine Engine, Engine Cooling, Fan, Drum/Rotor, Sieves, Self-Leveling, Concave, Unloading, chopper Control Header Height & Float Control Lateral Float Control Reel position & Speed Control Electrical Shift Transmission 4WD & Diff. Lock Instrumentation & Man-Machine interface Laser & GPS Auto Guidance Rear Camera Optimal speed - Cruise Control Precision Farming Flight Recorder Data Logger Climate Control Automatic Crop Settings Adaptive Machine Settings

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AgEng2008 - AGRICULTURAL MACHINES EVOLUTION IN A CHANGING WORLD 43 Or at this tractor driveline 50 K.P.H. Dump Solenoid Conn EDC Valves & Wiring Rockshaft Potentiometer Harness route to EDC Valves & Rockshaft Pot 4WD Sensor Fuel Tank Level Sensor Branch Creeper Sensing Switches Secure Harness to Pipework Diff Lock Sense 50 K.P.H. Solenoid Conn Creeper Solenoid (If fitted) Diff Lock Solenoid 4WD Solenoid PTO Brake Solenoid Trans Oil Press Sensor PTO Solenoid

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AgEng2008 - AGRICULTURAL MACHINES EVOLUTION IN A CHANGING WORLD 44 And the driver will no more be required The rapid evolution of the machine capabilities will exceed the human expertise in the agricultural domain and the machines will act autonomously, fully robotized. Examples will be: machine to machine optimal settings - copying coordination of machine / machine activity fleet management (coordinating the operation between all machines on the field for time and efficiency gain) Up to the full drone machine, working without any operator on board and fully capable of self-regulating and adapting to the field work, taking instructions from remote computers and operators.

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AgEng2008 - AGRICULTURAL MACHINES EVOLUTION IN A CHANGING WORLD 45 Specialized products / highly configurable products In addition to the technology evolution, the agricultural machines will also become more specialized, to optimize their use in the various conditions and cultivations. This will follow a two-fold path: true machine specialization, with specific devices and features for a particular set of operations high configurability of generic machines, through options and dealer installed accessories, to adapt them to special work and conditions.

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AgEng2008 - AGRICULTURAL MACHINES EVOLUTION IN A CHANGING WORLD 46 Engineers Are Key Game Players Mechanical and agricultural engineers are key game players in this evolving natural, social and technological scenario. Our best efforts should be devoted to: - understand general change trends and anticipate farmers and social needs - continue pursuing innovation, not only on technology - identify new or specific needs of groups of people in agriculture - identify new product functions - develop new ways to provide functions. Knowledge, skills and innovation attitude are needed qualities, to surf the wave of change and shape the future of our agricultural world.