Ayanda Mdluli
The tractor industry has benefited from record high agricultural commodity prices, according to industry experts.
Laura Campbell, an analyst at Econometrix, said yesterday that the industry had been boosted by pre-emptive buying and market confidence as farmers perceived that a weaker rand would push up tractor prices in the near future.
The weakening of the rand late last year led to higher prices of maize. This enhanced the agricultural industry’s outlook for profitability.
“Not only are international maize and grain prices far stronger than most other commodity prices, but domestic rand prices have been boosted by the depreciation of the rand,” she said.
Lane Reynolds, the chairman of the SA Agricultural Machinery Association, said that last month’s sales of 488 tractors were 28 percent higher than sales reported in December 2010.
Maize prices have increased to record highs since the beginning of this year, climbing to more than R2 700 a ton for white maize and exceeding R2 600 a ton for yellow maize.
The SA Grain Information Service said maize deliveries to local silos for the current marketing season increased to 9.609 million tons in the week to January 6, compared with 9.601 million tons at the end of December last year.
Reynolds noted: “On a 2011 calendar year basis tractor sales of 7 379 units were 43 percent up on 2010 sales. December combine harvester sales of 4 units were sharply down on the 14 units sold in December last year. However, on a 2011 calendar year basis, combine harvester sales of 260 units were 38 percent up on 2010 sales.”
He explained that the sales were not cyclical, and that agricultural machinery sales depended on many factors.
“Incidentally, there is a move from the traditional medium-size tractors to large KW tractors due to (the need for) efficiency,” he said.
The industry was expected to normalise in 2012 when sales would stabilise unless commodity prices began to climb in line with international prices.
Reynolds expected crop prices to remain high until harvesting of the 2011/12 summer crops began.
“Initial intentions to plant estimates indicate that 10 percent more maize will be planted this season. This may change with the indifferent start to the summer rainfall season in some areas,” he added.
The industry predicted sales of between 6 500 and 7 000 tractors for 2012. This was between 5 percent and 10 percent lower than 2011 sales.