High sales of machinery set to slow, says Agbiz
THE EXCELLENT momentum of agricultural machinery sales might slow in the coming months, the Agricultural Business Chamber (Agbiz) warned yesterday.
The chamber’s chief economist, Wandile Sihlobo, said it was of the view that the expected large harvest in the 2020/21 production season might not lead to another year of higher agricultural machinery sales.
“Typically, a relatively good sales year, such as 2020, is likely to be followed by a somewhat lower sales period. The replacement rate of machinery with new ones would usually be down from the previous years. Moreover, another factor to keep a close eye on is the exchange rate, although the current firmer levels support the sales. Any changes into a weaker domestic currency will likely lead to higher prices for imported agricultural machinery and discourage sales,” said Sihlobo.
Sales of agricultural machinery in South Africa have largely remained on a positive trajectory since May last year.
The figures released by the South African Agricultural Machinery Association (Saama) last week showed that sales of tractors and harvesters were up 23 percent year-on-year and 115 percent year-on-year last month, with 540 and 40 units sold, respectively.
Sihlobo attributed the higher sales to the improvement in farmers’ finances. He said this was on the back of the large harvest in 2019/20, prospects for yet another good agricultural season in 2020/21, and higher commodities prices.
The relatively stronger exchange rate had also been a positive buffer for imported agricultural machinery, he said.
Last week, Karel Munnik, Saamsa’s chairperson, said the excellent combine harvester sales last month reflected the need to harvest the record and near-record summer crops.
Overall, he said that agricultural machinery sales started picking up in the third quarter of last year and had been on an upward trajectory since then, but that it was likely that this trend would slow later this year. Nevertheless, estimates for the 2021 calendar year were encouraging, with tractor sales likely to be up to 15 percent higher than they were last year, he said.
The South African Crop Estimates Committee forecasts maize production at 16.1 million tons – up 5 percent year-on-year and the second-largest harvest on record.
Soybean production was forecast at 1.8 million tons, up 44 percent yearon-year, which was a record harvest, while sunflower seed production was forecast at 696 290 tons, down 12 percent year-on-year.
The expected decline in the sunflower seed harvest was due to the reduction in area plantings as farmers switched some areas to maize.
Generally, the expected large grain harvest was also mirrored in other sub-sectors of agriculture and underpinned by favourable weather conditions.