Data from the past few months show that most farmers have already purchased new equipment for the 2017/18 production season which starts this month in the summer rainfall areas. Therefore, it is not surprising that tractor sales fell by 5% month-on-month in September 2017, recorded at 552 units. We believe that this declining trend in tractor sales could prevail in the near term as the production season progresses.
Farmers in the eastern parts of the country have already started preparing the soil for the 2017/18 summer grain and oilseed production season. For maize, the planting window in the eastern parts of the country closes around mid-November. Meanwhile, the western areas only begin planting in mid-November, with the optimal planting window closing at the end of December. Apart from machinery sales, the South African Weather service suggests that the upcoming season could bring above normal rainfall between November 2017 and February 2018. This will benefit the crop and possibly lead to higher yields.
The combine harvester sales fell by 67% month-on-month and 71% year-on-year, with only 4 units sold in September 2017 (Chart 1). Although the decline was expected as it is a downtime with farmers preparing for the new summer crop season, the scale of it is surprising. This could be linked to the fact that the winter production areas are still far away from harvesting and the winter crop is not in good shape due to persistent dryness in the Western Cape province.
Looking ahead – We expect the tractor sales to remain soft in the near term as summer grain and oilseed production season progresses. The combine harvesters’ sales could remain weak over the near term and possibly gain slight momentum towards the end of the year when the winter crop harvest period commences.
As we set out in our note on 07 September 2017, an important factor to monitor in the long term is the cost of servicing the farm debt as that would have direct implications on the agricultural machinery sales.
Click below to read more