I wasn’t planning on blogging today, but since I’m currently sitting at the car wash and the queue is long, I might as well use this time to say a few words about South Africa’s latest agricultural machinery sales data.
The figures for June 2019 showed a drastic decline for both tractors and combine harvester sales from levels seen in the same month last year. The tractor sales fell by 35% year-on-year in June 2019, with 373 units sold. And the combine harvester sales were at 20 units in June 2019, down by 20% year-on-year. Now, if these numbers are taken without context, they could provide a misleading picture of dire business conditions in the agricultural industry.
For starters, I admit that this has not been a good year for South Africa’s agricultural machinery market. Tractor and combine harvester sales have been subdued since January. Nevertheless, this is unsurprising owing to a combination of factors.
First, there were robust sales in 2018, which implies that the rate of replacement will likely be down this year. To illustrate this point; South Africa’s total tractor sales for 2018 amounted to 6 680 units, up by 4% from the previous year. In terms of combine harvester sales, the year 2018 presented good performance, with 200 units sold, up by 2% from 2017.
Second, the reduction in summer grains and oilseeds plantings due to unfavourable weather conditions have also contributed to the poor agricultural machinery sales this year as it weighs on farmers’ finances. Lastly, the relatively weaker domestic currency to the U.S. dollar might have also influenced the farmers purchasing decisions.
Overall, I expect a generally subdued performance in the South African agricultural machinery sales market this year. With that said, one factor that might be worth monitoring towards the end of the year is the weather conditions. This will influence the planting activity for the 2019/20 summer crop season. If the weather is good, and there is an increase in area plantings, then tractor sales might gain some steam. We will see as time goes.
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