High hopes with tractor sales at 40-year high

Tractor sales, which are a closely watched measure of investment and confidence in agriculture, hit a 1,268-unit high in October, the best monthly sales in 40 years.

According to the SA Agricultural Machinery Association, which represents agricultural machinery manufacturers, importers and builders, sales are up 48% year on year, with just more than 856 units sold in the matching period last year.

The sales surge suggests rising confidence in agriculture, a key foreign currency earner that contributes at least 3% to GDP and is responsible for nearly 900,000 jobs.

“With a favourable start to the summer rainfall season and better-than-expected winter crops, sentiment in the market remains good,” said association chair Tallie Giessing.

He said this trend in sales should continue at least into early 2023. “Thereafter, with the inevitable higher equipment prices and input costs, initial predictions are that sales will stabilise. Future commodity prices will also have an important influence on sales.”

Giessing said expectations are for calendar 2022 sales of about 9,000 tractors and 350 combine harvesters.

Wandile Sihlobo, head of agribusiness research at the Agricultural Business Chamber of SA, said the tractors sales are surprising.

“When this year started, I thought the farmers would reduce spending as fertiliser, agrochemicals and fuel prices increased aggressively along with a rise in interest rates, all of which added financial pressure on farmers,” he said.

“I also assumed that the two years of solid sales, 2020 and 2021, would mean farmers would see a limited need to replace the tractors. But the data has proven me wrong.”

He said several factors explain the improved activity. “But at the core, it’s the reasonably healthy financial condition of some farmers, specifically the grains and oilseeds.

“This is the only subsector of agriculture that has experienced better conditions over the past three years.”

Grain prices were higher even before the Ukraine war. Drought in South America and rising demand for grains and

EXPECTATIONS ARE FOR 2022 SALES OF ABOUT 9,000 TRACTORS

oilseeds in China were key factors underpinning the surge in these prices before the war.

“Had it not been for higher global agricultural prices, the local grain and oilseed prices would have softened due to large harvests. Consequently, we had a couple of seasons of large grains and oilseeds, coinciding with higher prices, which boosted the farmers’ incomes,” Sihlobo said.

Robust tractor sales signal an environment in which farmers are optimistic about the future and are investing in movable assets, he said.

Even indicators such as the Crop Estimates Committee’s intentions-to-plant data show that local farmers plan to increase area planted for summer grains and oilseeds by 0.2% year on year to 4.35-million hectares in the 2022/2023 season. With enough rain, this is likely to happen, Sihlobo said.

Financial and industrial analyst Anthony Clark, of research firm Small Talk Daily Research, said that there were hopes for another robust agricultural season despite field price inflation running year on year (depending on region) at 50%-70% as fuel, fertiliser and seed costs surge as a result of the war.

THERE ARE HOPES FOR ANOTHER ROBUST SEASON DESPITE FIELD PRICE INFLATION RUNNING AT 50%-70%