Weather, crop yield and exchange rate uncertainty hurts tractor sales
Tractor sales fell by 16.4% year on year (y/y) in October to 567 units after dropping by 12.2% in 2015 to 5,673 units, according to the South African Agricultural Machinery Association (Saama).
Tractor sales have been hurt this year due to uncertainty about crop yields and exchange rates, whether the weather has transitioned from a dry el Niño global cycle to a wet la Niña cycle, land restitution issues, and farm workers’ shares in farms.
"Rain has fallen in some parts of the summer cropping regions and many farmers, particularly those in the east, have planted already. In other areas farmers are busy planting," Saama said.
"Overall, farmers are being quite cautious about making decisions to purchase agricultural equipment. It is likely that this trend will continue in the short term. Banks too are acting very conservatively in evaluating the financing of machinery purchases," it said.
Sales are down 14.0% y/y in the first 10 months of 2016. Current industry forecasts for the 2016 calendar year are that tractor sales will be between 15% and 20% down on last year.
The US Department of Agriculture estimates that the 2016/17 South African maize crop will be some 60% more than the 2015/16 maize crop as rainfall returns to a more normal pattern.
"Local [maize] prices are expected to still trade at import parity price levels in the near future, giving farmers enough initiative to plant more fields to [maize]. In addition, widespread rain has fallen in the [maize] producing areas of the country the past week, enabling farmers on the eastern side to start planting corn within the optimum planting window," the agency said.