A total of 9,181 new tractors were sold in South Africa last year, almost 17% more than in 2021 and the most in 40 years. Combine sales were also buoyant, with 373 sold in 2022, the most since 1985.
“Market fundamentals, in terms of summer and winter crop prospects, look encouraging,” South African Farm Machinery Association (Sama) said. He also noted that prices for agricultural commodities were “holding back.”
This is a rare sign of confidence. Farmers are investing in their businesses — tractors and combines aren’t cheap — despite mounting problems. This includes uncertainties around land reform, rising input costs, attacks and killings on farms, ongoing blackouts, water supply challenges, and a deteriorating road network that is crucial for carrying the products to silos, feedlots and markets.
But the weather gods pay no attention to ANC failures, and the La Nina weather system has blessed grain-growing and other South African regions with abundant rain. From that well-watered soil, tractor sales spring up.
“Although we expect a slight contraction in South Africa’s agricultural gross value added by 2022, the year was generally favorable for agriculture. Interlinked industries, such as the agricultural machinery industry, benefited from generally good activities in several sector commodities where farmers were better off financially,” said Wandile Sihlobo, Chief Economist at the South African Chamber of Agricultural Business (Agbiz). .
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“The ample crop harvest of the 2021/22 production season [and the 2020/21 and 2019/20 seasons]combined with generally higher prices for basic commodities, specifically grains and oilseeds, helped increase farmers’ incomes and, after that, their ability to afford new farm machinery.”
Among other factors, this highlights the capital-intensive nature of agriculture in South Africa, which remains a serious barrier to entry for new and emerging farmers.
Compared to just a few years ago, tractors and combines have become increasingly expensive and high-tech. Many new models are equipped with, or designed to accommodate, “precision farming” tools that allow farmers to use GPS data to pinpoint where to plow and the exact amounts of fertilizers and other inputs needed for a given patch.
This increases yields and profits, and many commercial farms would not be viable without such technology. This, in turn, improves food security, which is closely related to yields.
Looking ahead, tractor sales may have reached a peak.
“With such large tractor sales in 2022 and strong activity in the previous two years, we are inclined to believe that 2023 farm equipment sales will likely be lower than the previous season. The potential replacement rate for older machinery is likely to be lower this year, as sales of new machinery have increased in the last three years,” Sihlobo said.
While there are clouds of uncertainty on the horizon, Sihlobo further noted that “we believe the crop will be in reasonably good condition.”
That bodes well for farmers and even if 2022’s performance isn’t repeated, it can’t be bad news for tractor sellers either. DM/WB
