I have written a bit about how excellent the year 2021 was for South Africa’s agriculture, especially the grains and oilseeds industry. Notably, the large grains and oilseeds harvest coincided with generally higher commodity prices, which improved farmers’ finances.
Perhaps not emphasized enough in this blog is how the improved farmers’ finances in 2021 due to the ample crop harvest also benefited the interlinked industries. Think of the agricultural equipment industry, where farmers bought new tractors and combine harvesters. This industry benefited. Last week, the South African Agricultural Machinery Association, an association of agricultural machinery manufacturers and traders, released December sales data, which enabled us to have a full-year view of the sales.
South Africa’s tractor sales for 2021 amounted to 7 680 units, up by 26% from the previous year. The combine harvester sales amounted to 268 units in the same period, up by 46% from 2020. Notably, 2020 was also an excellent year in South Africa’s agricultural machinery sales, so surpassing it means 2021 was indeed an exceptional year. In 2020, the tractor sales amounted to 5 738 units, up by 9% from 2019. The combine harvester sales increased 29% from 2019, with 184 units sold in 2020.
The ample crop harvest of the 2020/21 production season (and the 2019/20 season), combined with generally higher commodity prices, specifically grains and oilseeds, helped boost farmers’ incomes and, after that, their ability to procure the new and much needed agricultural machinery. But the story didn’t end there; the optimism at the start of the 2021/22 production season, supported by favourable weather conditions, also encouraged farmers to buy new agricultural machinery. Farmers planned to increase the area plantings at the start of the 2021/22 production season by 3% from the 2020/21 production season to 4,3 million tonnes.
However, as I noted in the previous blog post, the excessive rains across the country since October 2021 have delayed plantings in some regions. Some areas that planted on time have experienced crop losses because of the flooding. The true impact of the rain on planting and yields will be clear on 27 January 2022 in terms of plantings data and at the end of February in the case of production estimates. Still, all available indications point to a possibly poorer season than 2020/21, which was the backbone of the robust tractor and combine harvester sales.
So, looking ahead, the good period of higher agricultural equipment sales is most likely over, at least for the near term. In addition to the possible lower harvest, one should also appreciate that the possible machinery replacement rate was, in any case, likely to be lower in 2022 as the past two years saw increased sales of the new machinery.
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