by Wandile Sihlobo | Jan 5, 2025 | Agricultural Machinery
Agricultural analysts typically use three indicators to gauge the next season’s prospects when no other data provides valuable guidance. They look at the weather outlook and commodity prices, which influence farmers’ decisions about how much area they can plant. For example, higher prices are always an incentive, especially when the weather is favourable. Another indicator is tractor sales. Typically, higher tractor sales signal optimism and farmers’ readiness for the next season.
An email from the South African Agricultural Machinery Association, which presented the country’s tractor sales for November 2024, reminded me of these factors. The data showed that South Africa’s tractor sales were down 24% year-on-year, with 523 units sold. These weak sales are unsurprising and in line with the trend we observed for much of 2024 (see the chart).
To an occasional observer of these things, the figures would worry and perhaps even suggest that the season ahead faces much trouble.
However, the data has not been a concern for industry stakeholders and analysts for some time because unique factors are behind the weak sales.
First, South Africa’s agricultural sector has had higher machinery sales in the past three years (2020-2023), supported by improved farmers’ incomes due to ample harvest and higher commodity prices. Thus, there was bound to be some correction period, leading to moderation in sales.
Second, after a few good agricultural years, we struggled with a mid-summer drought in the 2023-24 season, changing the farmers’ fortunes and worsening sales performance. Farmers are under financial pressure because of the crop losses. For example, the 2023-24 mid-summer drought has led to a 23% decline in South Africa’s summer grains and oilseed production to 15,40 million tonnes.
Lastly, the relatively higher interest rates for much of 2024 added to the financial pressures in the sector, where farm debt is hovering over R200 billion.
The new season outlook?
My central point is that when one notices the news about these sales. There should be no reason to worry. These agricultural machinery sales data are not necessarily a guide for the season we have recently started but a reflection of the constraining factors in the previous season.
There is optimism about the new 2024-25 season, and the general mood in the South African agricultural sector is upbeat. Indeed, the rain has been late in some regions and scant in some. Still, there is reason to believe South Africa’s agriculture will recover in the 2024-25 production season.
South African farmers intend to plant 4,47 million hectares of summer grains and oilseeds in the 2024-25 season, up by 1% year-on-year. We will know next month if they managed to plant this area. We know with some certainty now that part of the crop may have been planted roughly a month later than the usual optimal planting window. Still, this is no reason to worry, as we have had late seasons yielding decent harvests.
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by Wandile Sihlobo | Sep 21, 2024 | Agricultural Machinery
South Africa’s tractor sales were down by 18% year-on-year in August 2024, with 574 units sold. The combine harvester sales are down by 79% year-on-year, with five units sold. These weak sales are unsurprising and in line with what we have been observing since the start of the year.
We have long anticipated that there would be some correction after a long period of strong tractors and combine harvesters sales in South Africa. The replacement rate of new machinery was bound to slow. The sales of the past few years were a function of both years of ample grains and oilseed harvest, coinciding with high commodity prices and boosting farmers’ incomes.
For example, we have previously stated that South Africa’s tractor sales for 2022 amounted to 9,181 units, up 17% year-on-year. This was the highest annual sales figure in the past 40 years. The combine harvesters also had an excellent performance of 373 units in 2022, up 38% year-on-year. This was the highest yearly sales figure since 1985.
In 2023, the tractor sales were down marginally from the previous year, while the combine harvester sales held the prior year’s momentum.
This year, the market correction and weakened farmers’ financial positions due to the poor crop impacted their machinery procurement decisions.
South Africa’s 2023/24 summer grains and oilseed harvest was hit by a harsh mid-summer drought, resulting in a 22% year-on-year decline to an expected harvest of 15,69 million tonnes. Furthermore, the higher interest rates have added pressure to farmers’ finances.
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by Wandile Sihlobo | Jul 8, 2024 | Agricultural Machinery
Since the start of this year, we signalled that South Africa’s agricultural machinery sales would likely be subdued. We based our view on several reasons, including the normalization of sales after a few years of strong activity, higher interest rates, and higher input costs. Indeed, as the year continued and the mid-summer drought started to bite, this was another reason for our hesitancy in agricultural equipment sales.
The recent figures continue to show that our expectations were correct. We see that after a slight monthly uptick in May following the NAMPO harvest sales induced optimism, South Africa’s agricultural machinery sales slowed notably in June 2024.
Tractor sales are down 48% year-on-year, with 487 units. The combine harvester sales are down 67% year-on-year, with 21 units. This is in line with muted sales we have observed since the start of the year, except for May’s slight monthly uptick.
To underscore our earlier point, the persistent decline in sales since the start of the year reflects the normalization of sales after a few years of robust activity. For example, South Africa’s tractor sales for 2022 amounted to 9,181 units, up 17% year-on-year. This was the highest annual sales figure in the past 40 years. The combine harvesters also had an excellent performance of 373 units in 2022, up 38% year-on-year. This was the highest yearly sales figure since 1985.
In 2023, the tractor sales were down marginally from the previous year, while the combine harvester sales held the prior year’s momentum. These past few years, solid machinery sales have been primarily supported by ample grain and oilseed harvests, when the prices of these commodities have also been favourable.
But this year, the impact of the mid-summer drought on summer grain and oilseed has been severe, further weakening the farmers’ financial position to procure machinery. South Africa’s 2023/24 summer grains and oilseed harvest is estimated at 16,0 million tonnes, down 20% year-on-year. Beyond the historic strong sales and poor grain and oilseed harvest, the higher interest rates have added pressure to farmers’ finances.
Moreover, although various input costs, such as fertilizer and agrochemicals, have softened since 2023, the prices remain generally well above pre-COVID levels, further straining farmers’ budgets.
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by Wandile Sihlobo | Jun 20, 2024 | Agricultural Machinery
We were pleasantly surprised by the upbeat mood amongst the agricultural stakeholders at the NAMPO 2024 in Bothaville. Given the mid-summer drought, which resulted in a 19% drop in South Africa’s expected summer grains and oilseed harvest, we anticipated a more sombre atmosphere.
However, the South African agricultural stakeholders were out in their numbers at the NAMPO 2024 festival, and the sentiment in Bothaville was as upbeat as the previous years of excellent harvest. We even imagined that South African agricultural machinery sales might start to tick up from the declining trend we had witnessed since the start of the year. Indeed, the tractor sales for May 2024 were the highest monthly figure we have seen since the beginning of the year, at 566 units, up 13% month-on-month. Meanwhile, combine harvester sales were down 4% month-on-month, with 25 units sold.
Still, this monthly uptick does not change the declining annual sales performance we have witnessed since the start of the year. For example, South Africa’s tractor sales were down 14% year-on-year in May 2024, and the combined harvester sales were down 62% year-on-year.
We believe this persistent annual decline in sales since the start of the year reflects the normalization of sales after a few years of robust activity. Moreover, higher interest rates have added pressure to farmers’ finances. Although various input costs, such as fertilizer and agrochemicals, have softened since 2023, the prices remain generally well above pre-COVID levels, further straining farmers’ budgets.
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by Wandile Sihlobo | May 13, 2024 | Agricultural Machinery
South Africa’s tractor sales were down 8% y/y in April 2024, with 500 units sold. The combined harvester sales were down 75% y/y in the same month, with 26 units sold. The persistent decline in sales since the start of the year reflects the normalization of sales after a few years of robust activity.
For example, South Africa’s tractor sales for 2022 amounted to 9,181 units, up 17% y/y. This was the highest annual sales figure in the past 40 years. The combine harvesters also had an excellent performance of 373 units in 2022, up 38% y/y.
This was the highest yearly sales figure since 1985. In 2023, the tractor sales were down marginally from the previous year, while the combine harvester sales held the last year’s momentum.
These past few years, the generally strong agricultural machinery sales were primarily supported by ample grains and oilseed harvests when prices were also favourable.
Against this backdrop, we believe agricultural machinery sales are on the normalization path this year. Moreover, the higher interest rates have added pressure to farmers’ finances. Also, although various input cost prices, such as fertilizer and agrochemicals, softened since 2023, the prices are still generally well above the pre-COVID levels, thus adding pressure on farmers’ finances.
Still, the South African agricultural sector is not in good shape because of the harsh El Niño impact on summer grains and oilseed production. The Crop Estimates Committee, at the end of April 2024, placed South Africa’s 2023/24 total grain and oilseeds production at 16,0 million tonnes, which is 20% lower than last season’s harvest. This year’s overall decline in production prospects is primarily due to poor yields, not the area reduction, as farmers tilled more land than in the 2022/23 season.
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by Wandile Sihlobo | Apr 23, 2024 | Agricultural Machinery
For a while, I have stated on these pages that South Africa’s agricultural machinery sales will likely be weak this year. The recent data continue to support this view. For example, in March 2024, tractor sales were down 26% year-on-year, with 498 units sold. The combine harvester sales were down 33% year-on-year, with 26 units sold.
This moderation of the South African agricultural machinery sales should not worry us much. It primarily reflects the normalization of sales after a few years of robust activity.
To remind us of such excellent years, consider the 2022 South African tractor sales; they amounted to 9,181 units, up 17% year-on-year. This was not an issue of a base effect. The previous year’s sales were also solid. This was the highest annual sales figure in the past 40 years.
Farmers also went all out for combine harvesters, purchasing about 373 units in 2022, up 38% from the previous year. As with the tractors, the 2021 combine harvesters sales were also excellent. The annual jump in sales in 2022 only reflected improved optimism amongst farmers. Notably, this was the highest yearly combine harvester sales figure since 1985.
The following year, 2023, maintained a somewhat excellent sales activity. The 2023 South African tractor sales were down only marginally from the previous year, while the combine harvester sales held the last year’s momentum.
But what was driving the sales in 2021 through to 2023?
These generally strong agricultural machinery sales these past few years were primarily based on ample grains and oilseed harvests when prices were also favourable. South Africa experienced a few years of La Nina rainfall, supporting grain and oilseed production. In times of elevated prices because of global factors, the improvement in yields benefited South African farmers. Some of the windfall was spent on machinery and upgrades of farm implements.
Path forward
The music can’t go on forever. Thus, we now think that agricultural machinery sales are on the normalization path this year.
Also worth noting is that while in the past, agricultural machinery sales would be read as one of the early indicators of the health of the farming sector, this time around, the sales should be read differently for the reasons we stated above. Admittedly, the sector faces challenges due to the recent dry spell linked to the El Niño cycle that led to major grains and oilseed crop losses.
The Crop Estimates Committee, at the end of March 2024, placed South Africa’s 2023/24 total grain and oilseeds production at 15,8 million tonnes, which is 21% lower than last season’s harvest.
But, on the point of sales, this year’s overall decline in production prospects is primarily due to poor yields, not the area reduction, as farmers tilled more land than in the 2022/23 season.
We are yet another busy time of the year, with the winter crop planting season set to start at the end of this month. Still, the weak agricultural machinery sales data should not necessarily indicate what is to come when the Crop Estimates Committee releases the farmers’ intentions to plant data on April 25.
In addition to the general normalization of agricultural machinery sales, we think the relatively higher interest rates have added pressure to farmers’ finances. Also worth noting is that while other input cost prices, such as fertilizer and agrochemicals, softened since 2023, the prices are still generally well above the pre-COVID levels, thus adding pressure on farmers’ finances.
Furthermore, the poor summer crop harvest of the 2023/24 production season will also be a constraining factor in the months ahead, as farmers’ finances will be under pressure.
Follow me on Twitter (@WandileSihlobo). E-mail: wandile@agbiz.co.za
by Wandile Sihlobo | Apr 16, 2024 | Agricultural Machinery
We continue to see relatively weak sales in South Africa’s agricultural machinery market. In March 2024, the tractor sales were down 26% y/y, with 498 units sold. The combine harvester sales were down 33% y/y, with 26 units sold.
As we stated in our previous notes, the decline in sales since the start of the year probably reflects the normalization of sales after a few years of robust activity.
For example, South Africa’s tractor sales for 2022 amounted to 9,181 units, up 17% y/y. This was the highest annual sales figure in the past 40 years. The combine harvesters also had an excellent performance of 373 units in 2022, up 38% y/y.
This was the highest yearly sales figure since 1985. In 2023, the tractor sales were down marginally from the previous year, while the combine harvester sales held the last year’s momentum. These generally strong agricultural machinery sales these past few years were primarily based on ample grains and oilseed harvests when prices were also favourable.
Against this backdrop, we think the agricultural machinery sales are now on the normalization path this year.
Also worth noting is that while in the past, agricultural machinery sales would be read as one of the early indicators of the health of the farming sector, this time around, the sales should be read differently for the reasons we stated above.
Still, the South African agricultural sector is not in good shape because of the persistent heatwave and dryness associated with the El Niño cycle.
The Crop Estimates Committee, at the end of March 2024, placed South Africa’s 2023/24 total grain and oilseeds production at 15,8 million tonnes, which is 21% lower than last season’s harvest. This year’s overall decline in production prospects is primarily due to poor yields, not the area reduction, as farmers tilled more land than in the 2022/23 season.
We are yet another busy time of the year, with the winter crop planting season set to start at the end of this month. Still, the weak agricultural machinery sales data should not necessarily indicate what is to come when the Crop Estimates Committee releases the farmers’ intentions to plant data on 25 April.
In addition to the general normalization of agricultural machinery sales, we think the relatively higher interest rates have added pressure to farmers’ finances.
Also worth noting is that while other input cost prices, such as fertilizer and agrochemicals, softened since 2023, the prices are still generally well above the pre-COVID levels, thus adding pressure on farmers’ finances.
Furthermore, the poor summer crop harvest of the 2023/24 production season will also be a constraining factor in the months ahead, as farmers’ finances will be under pressure.
Follow me on Twitter (@WandileSihlobo). E-mail: wandile@agbiz.co.za
by Wandile Sihlobo | Mar 10, 2024 | Agricultural Machinery
South Africa’s agricultural machinery sales fell notably in February 2024. The tractor sales were down 34% y/y, with 516 units sold, and the combine harvester sales were down 54%, with 18 units sold. This significant sales decline broadly reflects the normalization of sales after a few years of robust activity.
For example, South Africa’s tractor sales for 2022 amounted to 9,181 units, up 17% y/y and the highest annual sales for the past 40 years. The combine harvesters also had an excellent performance of 373 units in 2022, up 38% y/y and the highest yearly sales figure since 1985.
The sales for the year before were also exceptional. These generally strong agricultural machinery sales these past few years were primarily on the back of large grain and oilseed harvests. In 2023, the tractor sales were down marginally from the previous year, while the combine harvester sales held the last year’s momentum.
Thus, we think the agricultural machinery sales will begin a correction period this year. Thus, while in the past, agricultural machinery sales would be read as one of the early indicators of the health of the farming sector, this time around, the sales should be read differently for the reasons we stated above.
The farmers planted a decent area of 4,4 million hectares in the 2023/24 summer crop season, up 1% y/y, which means that the lower sales do not necessarily indicate a decline in the area planted.
Still, the improvement in the area planting does not signal a better outlook in terms of output. South African agricultural sector is not in good shape because of the persistent heatwave and dryness associated with the El Niño cycle.
The Crop Estimates Committee at the end of February already showed a double-digit decline in various major grains and oilseed harvests. For example, total maize harvest was estimated at 14,3 million tonnes (down 13% y/y) and soybeans at 2,1 million tonnes, down 23% y/y.
Given that weather conditions have remained excessively hot and dry since the release of these figures at the end of February, crop conditions have deteriorated notably in various regions of the country.
Therefore, more reliable production figures for the 2023/24 summer grain will be released by the Crop Estimates Committee at the end of March, and that will provide us with a better guide into the 2024 outlook for the sector and the financial position of the farmers.
The possible poor crop harvest this year and the factors highlighted above suggest that agricultural machinery sales will likely remain weak in the coming months and 2025.
Moreover, the relatively higher interest rates have pressured South African farmers’ finances over the past few months.
Also worth noting is that while other input cost prices, such as fertilizer and agrochemicals, have softened in 2023, the price levels were still well above long-term levels, thus adding pressure on farmers’ finances during the planting period of the 2023/24 summer grain season.
In essence, the South African agricultural machinery market will likely be under pressure this year; the rebalancing after excellent years of sales coincides with a tough production season that strains farmers’ finances.
Follow me on Twitter (@WandileSihlobo). E-mail: wandile@agbiz.co.za
