Despite the severe financial pressures that farmers are under, tractor sales since April 2020 have remained positive. According to Wandile Sihlobo, chief economist of the Agricultural Business Chamber of South Africa (Agbiz), this is a positive indicator of farmers’ confidence in the future of agriculture.
Sihlobo has been monitoring South Africa’s monthly tractors sales data closely and the results continue to surprise.
“Since April 2020, the monthly sales have remained positive, registering an average of 26% year-on-year growth over the past 31 months,” Sihlobo said.
Tractor sales saw an average of 20% growth over the past ten months of 2022. The latest tractor sales data for October were up 48% year-on-year from October 2021, amounting to 1 268 units, the highest in 40 years.
According to Sihlobo, this came as a major surprise as he expected farmers to not replace the tractors considering two years of solid sales in 2020 and 2021.
“Several factors explain this solid activity. But at the core, it’s the reasonably healthy financial condition of some farmers, specifically the grains and oilseeds. This is the main subsector of agriculture that has experienced better conditions over the past three years,” he said.
Growing tractor sales despite challenges
Meanwhile, grain prices were high way before the Russia-Ukraine war, Sihlobo said. The drought in South America and rising demand for grains and oilseeds in China were the key factors underpinning the surge in grains and oilseeds prices pre-war, he added.
Local grain and oilseed prices would have softened due to large harvests if it had not been for higher global agricultural prices, Sihlobo said. “Consequently, we had a couple of seasons of large grains and oilseeds, coinciding with higher prices, which boosted the farmers’ incomes.”
The horticulture sector has been overwhelmed with various challenges. From trade restrictions in critical markets to logistical challenges and supply chain disruptions. All of these have negatively impacted farmer sustainability and how farmers can generate profits over time.
“The livestock industry has also had its fair share of challenges, including temporary blockage in essential markets such as China (in the case of wool), widespread animal disease (foot-and-mouth), and generally higher feed costs (maize and soybeans).”
Despite these industry challenges, Sihlobo is of the view that these robust tractor sales also signal an environment where farmers are optimistic about the future and investing in movable assets.
According to the Crop Estimates Committee, South African farmers plan to increase the area plantings for summer grains and oilseeds by 0,2% year-on-year to 4,35 million hectares in the 2022/23 season.
“With favourable rains across the country, this area will likely materialise. So, we face many challenges in South Africa’s agriculture. But positive indicators like this give one hope for farmers’ confidence in the sector.”
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