Agricultural machinery sales down; heatwaves, dry weather hurting crops

Excellent years of machinery sales coincides with a tough production season that strains farmers' finances

South Africa’s agricultural machinery sales fell notably in February. The tractor sales were down 34% year-on-year, with 516 units sold, and the combine harvester sales were down 54%, with 18 units sold. This significant sales decline broadly reflects the normalisation of sales after a few years of robust activity. 

For example, South Africa’s tractor sales for 2022 amounted to 9 181 units, up 17% year-on-year and the highest annual sales for the past 40 years. The combine harvesters also had an excellent performance of 373 units in 2022, up 38% year-on-year and the highest yearly sales figure since 1985. 

The sales for the year before were also exceptional. These generally strong agricultural machinery sales these past few years were primarily on the back of large grain and oilseed harvests. In 2023, the tractor sales were down marginally from the previous year, while the combine harvester sales held the last year’s momentum.

Agricultural machinery sales will probably begin a correction period this year. In the past, agricultural machinery sales would be read as one of the early indicators of the health of the farming sector; this time around, the sales should be read differently for the reasons stated above. 

The farmers planted a decent area of 4.4 million hectares in the 2023-24 summer crop season, up 1% year-on-year, which means that the lower sales do not necessarily indicate a decline in the area planted.   

Still, the improvement in the area planting does not signal a better outlook in terms of yield. The South African agricultural sector is not in good shape because of the persistent heatwave and dryness associated with the El Niño cycle. 

The Crop Estimates Committee at the end of February already showed a double-digit decline in various major grains and oilseed harvests. For example, total maize harvest was estimated at 14.3 million tonnes (down 13% year-on-year) and soybeans at 2.1 million tonnes, down 23% year-on-year.

Given that weather conditions have remained excessively hot and dry since the release of these figures at the end of February, crop conditions have deteriorated notably in various regions of the country. 

More reliable production figures for the 2023-24 summer grain will be released by the Crop Estimates Committee at the end of March, and that will provide us with a better guide into the 2024 outlook for the sector and the financial position of the farmers. 

The possible poor crop harvest this year and the factors highlighted above suggest that agricultural machinery sales will probably remain weak in the coming months and 2025.

Moreover, the relatively higher interest rates have put pressure on farmers’ finances over the past few months. 

Also worth noting is that although other input cost prices, such as fertiliser and agrochemicals, softened in 2023, the price levels were still well above long-term levels, adding further pressure on farmers’ finances during the planting period of the 2023-24 summer grain season.

Wandile Sihlobo is the chief economist at the Agricultural Business Chamber of South Africa and a senior fellow in Stellenbosch University’s department of agricultural economics. His latest book is A Country of Two Agricultures.