This has not been a good year for South Africa’s farming sector and related industries. The effects of poor summer crop harvest which in turn influence farmers’ financial position have spilt over to the agricultural machinery market which has been subdued all year.
The figures for August 2019 presents no joy, although having increased from the previous month. Tractors’ sales were down by 10% compared to August 2018, with about 437 units sold, as shown in Figure 1 below.
Of course, we can’t blame the poor tractors’ sales performance solely on the bad weather. This is a year that follows 2018 where sales were relatively robust, which implies that the rate of replacement will likely be down in 2019. To illustrate this point; South Africa’s total tractor sales for 2018 amounted to 6 680 units, up by 4% from the previous year.
Being in South Africa where agricultural policy has dominated the headlines in the past few months, questions have rightly been asked by some people about farmers’ attitudes on investments. To this end, I continue to monitor, through the Agbiz/IDC Agribusiness Confidence Index, the influence of policy discussions on agricultural investment. Admittedly, sentiment in the farming sector has generally been subdued since the second quarter of 2018. But what I found rather comforting is that fixed investments in the sector did not decline notably in 2018.
However, the subdued confidence levels in the second quarter of 2019 suggest some urgency in moving the policy levers to ensure that, at least matters that are in the South African policymakers’ reach are well addressed for the interest of sustainable growth of the agricultural and agribusiness sector.
Overall, while South Africa’s tractors’ sales have been generally subdued throughout the year – see Figure 1 – there could potentially be a turning point around October 2019 when the 2019/20 summer grains and oilseed production season starts. The weather outlook is generally positive which signals a potential recovery in production and activity on the fields. I’ve expanded on this point in my Business Day column on 04 September 2019 (you can read it here).
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