SOUTH AFRICAN AGRICULTURAL MACHINERY
With global economies still suffering the devastating impact of the 2008 credit crisis and the South African economy moving into full recession during 2008/2009, the agricultural industry was no exception to this reality of a rapidly declining market and business trend. Contrary to the 2008 reporting period, when exceptional agricultural income was secured as result of high average commodity prices and bumper crops delivered, producer income for the 2009 period is estimated to have dropped considerably as result of high production cost and lower average commodity prices realized through 2009. Consequently the agricultural mechanization industry followed this declining trend of the agricultural business sector, reporting reduced sales of all major categories of agricultural equipment sold in the South African and reported export markets.
The agricultural industry fortunately experienced favourable climatic conditions through 2008/2009 across most of the main crop production territories which supported high average yields for summer crops and other production commodities, softening to some extent the full impact of lower commodity prices and high production cost. As maize and wheat production remains a significant driver to the success of the agricultural mechanization business in South Africa, it is important to emphasize the significance in productivity gains and improved sustainability of farming operations that have been achieved by producers over recent years. Recognizing the advancements achieved through the availability of new plant bio-genetics, factors such as the large scale investment in new and improved production practices, investment into new advanced equipment and technologies, as well as the professional management practices applied by producers, have been paramount to the success we experience today in the mechanization industry.
The corresponding information highlights the area’s currently under production for maize, wheat and sugar cane as well as the production and average yields for 2009.
It is of importance to highlight the December 2009 futures for maize and wheat compared to that of December 2008, showing the sharp decline in average pricing of both these two major trading commodities.
Following the 2008 boom in demand for agricultural machinery which resulted in significant longer supply lead times from factories, production response to orders for most equipment has improved satisfactorily since April 2009.
With the sudden and significant devaluation of the Rand against the major trading currencies during November 2008, we saw prices of tractors and other equipment increasing sharply, by as much as 45%. Since April 2009 the Rand and currencies of other prominent developing markets started to recover and slowly progressed to its current stronger trading levels. Prices of tractors and other agricultural equipment progressively reduced through this period to approximate pricing levels prior to the sharp weakening of the Rand.
Tractors, combines and other self propelled equipment capable of offering new technology features supporting improved performance and precision farming systems are becoming increasingly in demand to satisfy the production and productivity needs of customers. Driven by the demand for productivity and efficiency improvement at customer level, we observed a further growth towards larger kW tractors as recent sales statistics revealing the average tractor kW’s sold in the South African market to be at 76 kW, a shift of 15% over the past 8 years. The demand for basic specification tractors and equipment have increased in volume over the past 3 years and remain an important and significant segment of the mechanization business in the South African market.
Of significance for the tractor market in 2009, was the phase-in of the compulsory requirement for all tractors to be equipped with engines compliant to Tier 2 emission regulations, effective 20 February 09. As all mid and high specification tractors offered in the South African market already complied to this regulation for some years, tractors predominantly affected by this regulation are those offered with basic specifications and features targeted for the low specification segment of the market.
Tractor and Combine Sales
Graph of tractor sales - 1998 to 2009:
Graph of tractor and combine sales 1998 to 2009:
Impacted by the factors described above, 2009 industry sales of tractors and combines reflect a steady deterioration compared to last year. Year to date August sales for tractors has already declined by 21% and that of combines by 9%. 2009 Industry sales of tractors are estimated to be down by as much as 25% and that of combines by approximately 15%. It is however important to note that the strong performance of 2008 carried through into early 2009, supporting the momentum of the tractor and combine business up to March 2009, before the deterioration of sales started to reflect in the market.
New Products and Technology
Several suppliers of agricultural machinery to the South African market took advantage of the yearly NAMPO exhibition days to introduce an array of new products and technology to farmers. This access to the latest and most suitable products and technology available on the international market, positions the professional South African farmer ideally to further optimize his business and improve his competitiveness in both the domestic and international markets.
New products released to the market included both high tech tractors with autotrac and other automated functions, basic specification tractors offering new technology engines optimizing fuel consumption and performance, new high tech combines introducing row guidance and enhanced yield mapping systems, sophisticated trailed and self propelled sprayers with automated steer and spray functions, no-till planting and larger planting equipment. Precision farming systems supporting improved accuracy, productivity, efficiency and reduced production cost on applications such as autotrac, yield mapping, variable rate fertilizing, variable rate planting/seeding and automated spray functions are becoming a main focus of attraction and interest for the commercial farmer in South Africa.
SAAMA golf day
The 2009 SAAMA Golf day was held on 3 September at the prestigious Serengeti Golf Estate located off the R21 in close to the Oliver Tambo International air port. The golf day was well advertised amongst members and received substantial sponsorships from suppliers to the industry, dealers and SAAMA members. This together with excellent attendance of golfers on the day secured a very successful event in a relaxing and enjoyable atmosphere. The 2010 golf event is already booked to take place on 16 September 2010 at the same venue.
Overall, SAAMA members reported a successful 2009 NAMPO Exhibition week which took place at Bothaville from 12 May 2009 to 15 May 2009. As per prior agreement reached between the Harvest Day Committee of Grain SA and SAAMA, the 2009 NAMPO Exhibition was staged on the format of a static display of products on the stands supported by moving demonstrations, computer aided simulations, audio visual presentation of products and features and the services available to customers. This inter-active type displays and audio visual presentations were well received by customers attending the exhibition.
Mutual agreement was reached between Grain SA and SAAMA to permanently adopt and evolve this concept for NAMPO 2010 exhibition and beyond. No general or interactive field demonstrations of product will be required from SAAMA members in future.
With an active recruiting campaign followed over the past two years targeting potential new players in the industry, several new members joined SAAMA during 2009. We regret to report that members of which some have had an historic and long standing relationship with SAAMA, elected to resign during 2009. As a result SAAMA membership declined in 2009 to 20 members.
An important milestone was reached for the tractor industry in South Africa on 20 February 2009 with the compulsory Tier II engine emission requirement becoming effective on this date. Tractors not complying with the Tier II emission regulation are no longer permitted to be imported or manufactured in South Africa since this date. We are pleased to report that all SAAMA members who imports tractors into the South African customs union, have been working closely with the SABS through the 3 year phase out period, and already reached compliance well ahead of this important date.
Regular follow-up meetings will continue with the SABS to address future homologation requirements, compliance of products and new importers into the markets as well as general service delivery to the industry.
SAAMA was again marketed well during the course of the year. Various articles on relevant agricultural subjects were published in prominent agricultural and non agricultural publications, the exposure to trading delegations visiting during the NAMPO exhibition and our monthly press releases to the media. Interviews regarding a variety of subjects relating to the mechanization industry have been broadcasted on radio and national television.
SAAMA continued to review, collate and distribute up to date industry information of primary importance and relevance to its members.
The Agristats reporting system for retail sales of tractors, combines and self propelled sprayers serves the industry well. The applicable service fees have been successfully re-negotiated with service provider RGT, to improve the overall cost alignment for members.
Agristats continue to serve members and the industry with distinction by providing monthly up to date information of primary importance. The implement reporting process is under review to streamline information gathering, reporting frequency and member requirements.
SAAMA Finances – 2008/2009
The Association is reporting a net excess in income over expenditure for the financial year and continue to maintain a positive financial position.
As we still bear the impact of the rapid slow down of the general economy through 2008/2009, we cannot at this point in time expect 2010 to reflect business opportunities of significance that will result in an overall sales growth of the agricultural mechanization business in South Africa over the next period. Due to the high production cost of the 2008/2009 grain crop and substantially lower trading level of producer prices through 2009, producer profitability has dropped considerably which will obviously continue to bear negatively on potential agricultural equipment sales moving into 2010.
Coming from a record sales year in 2008 and facing a rapidly deteriorating business environment in 2009 due to the worst global economic crises since 1932, all expectations were however exceeded by the level of agricultural equipment business conducted through 2009. Though we notice the impact on year to date tractor sales to reflect a 21% drop in volume, combine sales were less affected while the demand for new technology products such as productive fuel efficient tractors, self propelled sprayers, precision farming systems and no-till equipment remained in demand. The agricultural machinery industry remains committed to serve the South African farming industry with the best products, services and technology available.
I want to thank the executive committee, Secretary Dr Jim Rankin and all SAAMA members for the support, guidance and cooperation through this year. Having had to deal with various sensitive and controversial issues as an organization during this year, it was extremely gratifying to experience the unity, support, positive advice and willingness from the aforementioned role players.
I thank the Lord for all the blessings during a positive and good year.
SAAMA Chairman – 2009/2010
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