This was because the price of fuel, fertiliser and agrochemicals had increased along with a rise in the interest rates. 

LEES OOK: Hoë dieselprys ‘n gevaar vir voedselsekerheid

A senior agricultural economist at the Agricultural Business Chamber of South Africa (Agbiz), Wandile Sihlobo, says this all added financial pressure on farmers.

“We have been closely following South Africa's monthly tractors sales data, and the results remain encouraging. Since April 2020, the monthly sales have remained positive, registering an average of 26% year-on-year (y/y) growth over the past 31 months.

ALSO READ: Robust agricultural machinery sales may not continue in 2nd half of 2022

“We assumed that the two years of solid sales – 2020 and 2021 – would mean farmers would see a limited need to replace the tractors. But the data tells a different story, with tractor sales seeing an average of 20% y/y growth over the past ten months of 2022,” says Sihlobo.

He says the major surprise came when tractor sales data for October 2022 was released, which showed sales were up 48% y/y from October 2021, amounting to 1 268 units – the highest in 40 years.

“Several factors explain this solid activity. But at the core, is the reasonably healthy financial condition of some farmers, specifically the grains and oilseeds.

“This is the main subsector of agriculture that has experienced better conditions over the past three years. Grain and oilseed prices were higher even before the Russia-Ukraine war.

“The drought in South America and rising demand for grains and oilseeds in China were the key factors underpinning the surge in grain and oilseed prices pre-war. Had it not been for higher global agricultural prices, the local grains and oilseeds prices would have softened due to large harvests.

ALSO READ: Positive indications about SA's upcoming summer season

“Consequently, we had a couple of seasons of large grains and oilseeds, coinciding with higher prices, which boosted the farmers' incomes,” Sihlobo further explains.

However, growers in horticulture have experienced various challenges ranging from trade restrictions in critical markets – such as the EU trade friction in citrus and vegetables regional trade issues, to logistical challenges and supply chain disruptions, all of which have negatively impacted their profitability.

“The livestock industry has also had its fair share of challenges, including temporary blockage in essential markets such as China (in the case of wool), widespread animal disease (foot-and-mouth), and generally higher feed costs (maize and soybeans).  

“Overall, these robust tractor sales this year also signal an environment where farmers are optimistic about the future and investing in movable assets.

“Even indicators such as the Crop Estimates Committee's (CEC) farmer intentions-to-plant data show that South African farmers plan to increase the area plantings for summer grains and oilseeds by 0,2% y/y to 4,35 million hectares in the 2022/23 season.

“With favourable rains across the country, this area will likely materialise. Ultimately, while South Africa's agricultural sector faces various challenges, these solid tractor sales provide glimpses of optimism amongst farmers about the near-term prospects of the sector,” concludes Sihlobo.

OFM News