Why were South Africa's tractor sales so poor in 2024?

Three distinct factors underpin weak sales.

Agricultural analysts typically use three indicators to gauge the next season's prospects when no other data provides valuable guidance. They look at the weather outlook and commodity prices, which influence farmers' decisions about how much area they can plant. For example, higher prices are always an incentive, especially when the weather is favourable. Another indicator is tractor sales. Typically, higher tractor sales signal optimism and farmers' preparedness for the next season.

An email from the South African Agricultural Machinery Association, which presented the country's tractor sales for November 2024, reminded me of these factors. The data showed that South Africa's tractor sales were down 24% year-on-year, with 523 units sold. These weak sales are unsurprising and in line with the trend we observed for much of 2024 (see the chart).

To an occasional observer of these things, the figures would worry and perhaps even suggest that the season ahead faces much trouble.

However, the data has not been a concern for industry stakeholders and analysts for some time because unique factors are behind the weak sales.

First, South Africa's agricultural sector has had higher machinery sales in the past three years (2020-2023), supported by improved farmers' incomes due to ample harvest and higher commodity prices. Thus, there was bound to be some correction period, leading to moderation in sales.

Second, after a few good agricultural years, we struggled with a mid-summer drought in the 2023-24 season, changing the farmers' fortunes and worsening sales performance. Farmers are under financial pressure because of the crop losses. For example, the 2023-24 mid-summer drought has led to a 23% decline in South Africa's summer grains and oilseed production to 15,40 million tonnes.

Lastly, the relatively higher interest rates for much of 2024 added to the financial pressures in the sector, where farm debt is hovering over R200 billion.

The new season outlook?

My central point is that when one notices the news about these sales. There should be no reason to worry. These agricultural machinery sales data are not necessarily a guide for the season we have recently started but a reflection of the constraining factors in the previous season.

There is optimism about the new 2024-25 season, and the general mood in the South African agricultural sector is upbeat. Indeed, the rain has been late in some regions and scant in some. Still, there is reason to believe South Africa's agriculture will recover in the 2024-25 production season.

South African farmers intend to plant 4,47 million hectares of summer grains and oilseeds in the 2024-25 season, up by 1% year-on-year. We will know next month if they managed to plant this area. We know with some certainty now that part of the crop may have been planted roughly a month later than the usual optimal planting window.

Still, this is no reason to worry, as we have had late seasons yielding decent harvests.