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.
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by Wandile Sihlobo | Jan 27, 2024 | Agricultural Machinery
South Africa’s field crop harvest was excellent in the 2022/23 season. For example, the 2022/23 maize harvest amounted to 16,4 million, 6% higher than the 2021/22 season’s harvest and the second-largest harvest on record. Soybean harvest is at a record 2,8 million tonnes. South Africa’s sugar cane crop was 18,5 million tonnes in 2023/24, up 3% y/y. Other field crops and fruit harvests were also decent in 2023.
Still, this excellent performance did not translate into overall robust agricultural machinery sales as it has been in the past. South Africa’s agricultural machinery sales painted a mixed picture in 2023. Tractors amounted to 8 380 units, down by 9% from 2022.
The decline in tractor sales is unsurprising, as we expected the sales to cool off following a few years of excellent 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.
Meanwhile, the combine harvesters amounted to 505 units, up notably by 35% y/y. This follows an excellent performance of 373 units in 2022, up 38% y/y and the highest yearly sales figure since 1985. These strong combine harvester sales are primarily on the back of large grain and oilseed harvest.
There are several factors behind the slight decline in tractor sales. Chief amongst them is the lower replacement rate of older tractors, as the past three years saw increased new machinery sales. Moreover, the rising interest rates added pressure to farmers’ finances.
The relatively weaker rand exchange rates also negatively influenced the farmers’ machinery buying decisions.
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.
Over the medium term, the sales will likely remain subdued despite the promising agricultural season in 2023/24. The same factors underpinning the agricultural equipment market will likely prevail in the 2023/24 season.
Still, the agricultural conditions are excellent. The weather conditions have remained reasonably favourable across South Africa, thus benefiting the crops. At the start of the 2023/24 summer crop production season, farmers intended to plant 4,5 million hectares of land, which is up 2% from the previous season.
Given the optimistic feedback about crop growing conditions from the Grain South Africa survey, we feel compelled to believe that farmers met their expected planting area in most provinces. If there are any reductions in area, they will likely be in the white maize regions of the North West.
At the end of this month (30 January 2024), the Crop Estimates Committee will release its preliminary area planted estimate for summer grains 2024. This data will give us a better sense of the planted area and potential harvest size. The large combine harvester sales of 2023, will likely be put into good use in the 2023/24 season as the harvest could be ample as in the previous years.
Follow me on Twitter (@WandileSihlobo). E-mail: wandile@agbiz.co.za
by Wandile Sihlobo | Oct 9, 2023 | Agricultural Machinery
The relatively more robust agricultural machinery sales of the first half of this year were primarily a tail-end benefit of the past season when large harvests and higher commodity prices boosted grain and oilseed farmers’ finances.
The delivery delays of the orders raised the sales figures for the first half of the year. Over the medium term, the sales will likely remain subdued despite the current 2022/23 large grain and oilseed harvest, but somewhat above long-term average levels.
The recent months’ sales point to this path. For example, South Africa’s September 2023 tractor sales were down (-8% y/y), with 715 units sold.
Surprisingly, the combine harvester sales remained slightly firm, with 18 units sold, up 6% from September 2022. Still, this comes after a notable decline in the previous months, which again speaks to the moderation in machinery sales.
Although we have a large grain and oilseed harvest, with the 2022/23 maize harvest estimated at 16,4 million tonnes, the second largest on record, and soybeans at a record 2,8 million tonnes, we don’t expect a boost in machinery purchases.
Furthermore, the prices of these commodities have declined by roughly 15% y/y, specifically maize. Also worth highlighting is that the agricultural machinery sales have been robust in the past few years; therefore, the replacement rate will be reasonably low.
With the 2023/24 summer crop production season starting this month, the farmers’ focus is on input costs. Although various input cost prices, such as fertilizer and agrochemicals, have softened in recent months, the current price levels are still well above long-term levels, thus adding pressure on farmers’ finances in an environment where commodity prices have declined somewhat.
Moreover, the higher interest rates continue to pressure framers’ finances, thus adding to our downbeat view of South Africa’s agricultural machinery sales, although not as low as levels seen in 2017/18.
Follow me on Twitter (@WandileSihlobo). E-mail: wandile@agbiz.co.za
