Good harvests, low interest spur 27% rise in tractor sales

Good harvests, low interest spur 27% rise in tractor sales
Farmers are not being deterred from purchasing new machinery by rising input costs and the weaker rand/US dollar exchange rate, says Paul Makube, senior agricultural economist at FNB Agriculture. Photo: FW Archive
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Following two exceptional seasons of good rainfall across South Africa, the current lower interest rates have now prompted the replacement and replenishment of agricultural machinery and equipment.

This was according to Paul Makube, senior agricultural economist at FNB Agriculture, who said the availability of the relatively cheaper credit and the record-high grain and oilseed prices that boosted farmers’ revenues, underpinned the 33% year-on-year (y/y) increase in total machinery sales to 3 539 units during the first half of 2021.

According to sales statistics released by the South African Agricultural Machinery Association (SAAMA), June tractor sales of 633 units was an almost 43% increase on the 444 units sold in June last year, while combine harvester sales increase by 13 units to 30, compared with the 17 units sold in June last year.

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On a year-to-date basis, combine harvester sales stood at 154 units, almost 32% up on last year, while tractors sales were at 3 385 units, up 27% during the first six months of the year compared with the corresponding period last year.

Makube added that it was clear that rising input costs, due to increasing Brent Crude oil prices combined with the weaker rand/US dollar exchange rate, had not deterred farmers from purchasing new machinery.

“The surge in crude oil prices to above US$70/barrel [about R999/barrel] raised the cost of all its derivatives such as fuel, fertiliser, pesticides, and herbicides.”

Wandile Sihlobo, chief economist at Agbiz, said in a recent newsletter that with the 2020/2021 summer grains and oilseeds season drawing to a close, farmers’ focus would increasingly shift to the 2021/2022 production season, which would commence in October.

“The positive sentiment about the upcoming 2021/2022 production season is also an essential factor behind the higher levels of tractor sales.”

Sihlobo added that the Agbiz/IDC Agribusiness Confidence Index, which measured the business sentiment among agribusinesses and major farming entities, reached a record high of 75 points in the second quarter of this year, up from 64 in quarter one of 2021.

Karel Munnik, chairperson of SAAMA, said that with excellent summer crops being harvested overall, and good prospects for winter crops, optimism within the agricultural machinery industry continued to be at a high level.

“The current exceptional sales levels indicate that farmers are taking the opportunity to replace equipment. This is likely to continue in the short term. Current forecasts are that tractor sales for the 2021 calendar year will be between 15% and 20% up on last year.”

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