The South African agricultural machinery market remains vibrant, driven by a robust recovery in agricultural production and a stable domestic currency, for now. This vibrancy is reflected in the latest tractor sales, which reached 493 units in May 2017 – a 24% monthly uptick and 17% higher than the corresponding period last year. Although grain and oilseed prices are at significantly lower levels due to large supplies, higher yields per hectare could still compensate for lower prices in some areas. As a result, farmers appear to be making buying decisions, partly based on these expectations.

After plunging by 23% m/m in April, tractor sales rebounded by 24% m/m in May as the stable and relatively stronger Rand against the US Dollar, coupled with expected large summer grain and oilseed harvest boosted farmers’ confidence to invest in equipment (see Chart 1).

The 2017 summer grain and oilseeds production are set to reach 18.03 million tonnes, which is a 92% annual increase. The key contributors are maize and soybean, which are set to reach record levels of 15.63 million tonnes and 1.23 million tonnes, respectively.

Meanwhile, the combine harvester sales declined by 20% m/m and 8% y/y, with 24 units sold (see Chart 1). With that said, this was still the second highest sales figure since May 2016, also boosted by expected increase in activity in the farms on the back of a bigger crop.

Looking ahead – We expect the agricultural machinery sales to remain stable in the near term due to the aforementioned developments. With that said, the high costs of servicing the farm debt remain a key risk that could negatively affect the agricultural machinery purchases in the foreseeable future1.

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1 In 2015 the total real farm debt was at R142 billion, which is a record level in a database starting from 1980.

ENQUIRIES:
Wandile Sihlobo
(wandile@agbiz.co.za)

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