The chief economist at the Agricultural Business Chamber of South Africa (Agbiz), Wandile Sihlobo, explains sales of tractors fell 5% year-on-year (y/y).

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However, even though sales fell in November, it is still well above the long-term monthly average of 565 units. According to Sihlobo, this reflects an environment where farmers were financially secure and confident about the seasons ahead, thus increasing investment in movable assets.

“Essentially, when farmers have a good year, allied industries benefit from spending the financial gains or the produce of the farming businesses. Agricultural machinery is one such industry that benefited from farmers' spending in 2020, 2021 and the greater part of 2022.

“During the same period, the combined harvest sales amounted to 23 units, significantly up from 8 units sold in November 2021.

“The farmers, specifically grain and oilseed producers, expanded their area planted in the past two years and maintained a decent area in 2022.

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“Weather conditions were favourable, specifically in the past two seasons, 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 Indonesia 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, and that would have weighed down the profitability,” says Sihlobo.

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He further explains that these past few years' financial gains went to agricultural equipment improvement, among other farm activities. In 2022, the abovementioned factors have continued to support oilseed and grain prices, along with the Russia-Ukraine war, which disrupted the supplies.

Importantly, Sihlobo shares the reasonably higher input costs and rising interest rates in 2022 did not reduce farmers’ spending on machinery as initially anticipated.