He also provides more information about the latest developments in the agricultural sector. 

See PODCAST below

This week Sihlobo shares with us agriculture machinery sales for February 2022.

“The data released by the South African Agricultural Machinery Association show that agricultural machinery sales have remained on a positive path in the first two months of 2022.

“The tractor sales were up by 20% year-on-year (y/y) in February 2022, with 789 units sold. At the same time, the combined harvester sales were up 36% y/y, with 19 units sold. This builds upon the solid momentum of the past two years.

“Essentially, when farmers have a good year, allied industries benefit from farmers' spending the financial gains or from the produce of the farming businesses. Agricultural machinery is one such industry that benefited from farmers' spending in 2020 and 2021.

“The farmers, specifically grain and oilseed producers, expanded their area planted in these past two years,” says Sihlobo.

He adds that weather conditions were favourable, resulting in a large harvest for two consecutive seasons.

“This was also when commodity prices remained elevated, supported by global events such as dryness in South America and rising demand for grains and oilseeds in China. Had it not been for higher global agricultural prices, the local grain and oilseed prices would have softened due to large harvests.

“The financial gains of these years went to improvement in agricultural equipment, among other activities on the farms. For example, South Africa's tractor sales for 2021 amounted to 7 680 units, up by 26% from the previous year.

“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, tractor sales were up by 9% from 2019. Combined harvester sales increased by 29% from 2019.”

Sihlobo, however, says that Agbiz is of the opinion that the remainder of 2022 will likely change the trend and show moderate agricultural machinery sales as the new machinery's replacement rate will probably be lower than the previous years.

“Moreover, the crop harvest, especially grains and oilseeds, which were the primary drivers of sales in the past few years, will mainly be lower than the past two seasons. The first production estimates already show a 9% y/y decline with an expected harvest of 17,5 million tonnes of all summer crops in the 2021/22 season.

“Additionally, the Russia-Ukraine war has led to a notable rise in other farming input costs such as fertilisers, fuel and agrochemicals, which will add strain to the farmers' finances,” concludes Sihlobo.

OFM News