Tractor sales for the year are expected to be 10% higher than due to good crops, good commodity prices and favourable rainfall in most parts of the country, says the South African Agricultural Machinery Association (SAAMA).
January’s tractor sales of 445 units were already 28% higher than the 348 units sold in January last year. Last month, there were five combine harvester sales – the same as in January 2020.
According to SAAMA, market sentiment continues to be positive. However, there are quite a few variables which may affect summer crops. This has brought about some caution in the industry.
AGFACTS CEO Jim Rankin says sales are also increasing because farmers are confidently investing in their future.
“We currently have a combination of good rains and good commodity prices, so farmers see the opportunity to buy equipment. And they are buying equipment to replace older equipment and have better quality equipment in the future.”
Rankin indicates that most of the tractor sales have been in summer and winter arable cropping areas. This is where largely grains, grapes and fruit are grown.
The increased sales of tractors have brought about employment concerns mechanisation in agriculture. Rankin, however, believes it is unlikely to affect farm employment levels adversely.
Will increased sales create the effect of a low repo rate or high interest rate?
Rankin tells Food For Mzansi, “Agriculture, per se, is currently contributing positively to the overall GDP. Decisions on the repo rate are made on the basis of, amongst many other factors, the overall health of the economy, not just one segment.”
Last year, local tractor sales remained subdued in February. According to Wandile Sihlobo, chief economist at Agbiz, the subdued tractor sales data was unsurprising as it is a continuation of the 2019 trend.
“That year, farmers’ incomes were constrained because of poor harvests on the back of drought and biosecurity issues, amongst other aspects. With that said, the drought which led to lower agricultural output in 2019 is not the full story.
“It’s worth remembering that in 2018 South Africa’s agricultural machinery sales were relatively robust, which implies that the rate of replacement in 2019 was going to be low.”
Sihlobo says there have been questions about whether agricultural policy has influenced farmers’ attitudes on investments. “To this end, we continue to monitor, through the Agbiz/IDC Agribusiness Confidence Index (ACI)2, the influence of policy discussions on agricultural investment.”
He further reveals that the sentiment in the farming sector had generally been subdued for the past six quarters (counting from the last quarter of 2019).
“This is the longest period the ACI has trended below the neutral 50-point mark points since 2010, which implies that agribusinesses are downbeat about business conditions in South Africa.”