Changing trends for SA agricultural machinery industry sales - Agri Online

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Changing trends for SA agricultural machinery industry sales

High-frequency data confirm that sales of agricultural machinery remained robust in the first three months of the year. Tractor sales were up by 5% y/y in March, with 641 units sold. At the same time, the combine harvester sales were up by 48% y/y, with 43 units sold.

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These figures build upon the solid momentum of the past two years. When farmers have a good year, allied industries benefit from farmers’ spending the financial gains or the produce of the farming businesses. Agricultural machinery is one such an industry.

Factors that came into play include farmers, specifically grain and oilseed producers, expanding their area planted in the past two years, favourable weather conditions and elevated commodity prices. In fact, had it not been for higher global agricultural prices, the local grain and oilseed prices would have softened due to large harvests.

Looking ahead, 2022 will likely change the trend and show moderate agricultural machinery sales compared to the past year, as the new machinery replacement rate will probably be weak. Moreover, the crop harvest, especially grains and oilseeds, which were the primary drivers of sales in the past few years, will mainly be lower than in the past two seasons. The second production estimates already show a 7% y/y decline with an expected harvest of 17,8 million tonnes of all summer crops in the 2021/22 season.

Additionally, the Russia-Ukraine war has led to a notable rise in other farming input costs, such as fertilisers, fuel and agrochemicals, which will strain the farmers’ finances.

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