Agricultural Environment
As global economies continue their slow but relentless recovery during 2010 from
the devastating impact of the 2008 credit crisis, the South African economy
finally started to show some positive signs of improvement, recovering from the
dramatic impact of the 2008/2009 recession.
The agricultural industry in general experienced depressed market
conditions as result of the continued recessionary economic climate, high
production costs, low commodity prices as well as adverse climatic conditions
impacting negatively on the quantity and quality delivery of agricultural
production across production regions.
Consequently the average producer income is estimated to have
deteriorated further from the already burdened 2009 farm income levels. This declining economic trend
experienced in the agricultural business sector, obviously has had a major
effect on the agricultural mechanization industry to date, reporting reduced
unit sales and business revenue for of all major categories of agricultural
equipment sold in the South African market through 2010.
Most of the main summer crop production regions fortunately experienced
favourable climatic conditions which supported high average yields for summer
crops and other production commodities, softening to some extent the full impact
of lower commodity prices, high production cost and lower grain quality. The main sugar production
regions suffered a lower than average rainfall, resulting in a significant
decline of yields. The sharp
increase in the pricing of sugar, however, compensated somehow for the loss in
tonnage, to boost producer income.
The Western and Eastern Cape production regions for small grains and
fruits continue to suffer the impact of the prolonged drought experienced over
large parts of this region.
Government business in support of small and medium scale farmers on the other
hand has gained significant momentum during this year, moving forward to secure
successful and sustainable development for this important segment of the
agricultural farming business.
With maize, wheat and some other agricultural production commodities remaining a
significant driver to the success of the agricultural mechanization business in
South Africa, it is also important to note the significance of productivity
gains and improved sustainability of farming operations that have been achieved
by producers over recent years.
Factors of importance that contributed to much of the successes we
experience today in the mechanization industry are the technology advancements
achieved by the availability of new plant bio-genetics, large scale investment
in new and improved production practices, investment into new advanced equipment
and precision farming technologies, as well as the professional management
practices applied by producers.
The following information highlights the area’s currently under production for
maize, wheat and sugar cane as well as the production and average yields for
2010.
|
Crop
|
Area Planted, ‘000 ha
|
Production, ‘000 ton
|
Yield, t/ha
|
|
Maize
|
2 742
|
13 043
|
4.76
|
|
Other Summer Crops
|
897
|
1 437
|
1.60
|
|
Wheat
|
558
|
1 637
|
2.93
|
|
Other Winter Crops
|
117
|
260
|
2.23
|
|
Sugar Cane
|
292
|
18 655
|
63.94
|
Of importance as well, is to highlight the comparative December 2010 futures
pricing for the past 3 years of maize and wheat, showing the sharp decline in
average pricing of both these two major trading commodities, and the recent
recovery, notably for wheat.
|
Crop
|
December 2010
R/t
|
December 2009
R/t
|
December 2008
R/t
|
Change, %
2010 on 2008
|
|
White Maize
|
1 380
|
1 480
|
1 940
|
-28.9
|
|
Yellow Maize
|
1 390
|
1 430
|
1 921
|
-27.6
|
|
Wheat
|
2 760
|
2 160
|
3 300
|
-16.4
|
Agricultural Machinery
Overall demand for agricultural equipment followed the declining trend already
experienced through 2009, while supply lead times from factories for most
equipment, improved satisfactorily through 2010.
Of importance this year, has been the notable increase in equipment
demand for tender business as well as the export business. Both these two components of
the agricultural equipment business have been instrumental in supporting the
level of equipment business maintained through 2010.
With the relatively stable currency position over the past months and the
continued appreciation of the Rand against the major trading currencies, we
noted a further reduction of prices of tractors and other equipment through the
year. This position is clearly
reflected by the September 2010 AGFACTS year-on-year price index of tractors,
now at 94.3.
Tractors, combines and other self propelled equipment capable of offering new
technology features supporting improved performance and precision farming
systems continue to be in demand to satisfy the production and productivity
needs of customers. Driven by
the demand for productivity and efficiency improvement at customer level, a
further movement towards larger kW tractors was observed as recent sales
statistics now reflect the average tractor kW’s sold in the South African market
to be 87 kW, a shift of 20% over the past eight years. However, the demand for basic
specification tractors and equipment at affordable pricing remain strong as
sales volumes continue to show an increased trend over recent years. The low cost, basic
specification tractors and equipment remain an important and significant segment
of the mechanization business in the South African market as well as export
markets into Africa.
Tractor and Combine Harvester Sales
Graph of Tractor sales – 2000M01 to 2010M09:
Graph of Combine Harvester sales 2000M01 to 2010M09:
Impacted by the factors described above, 2010 RSA industry sales of tractors and
combines reflect a steady deterioration compared to last year. The rolling twelve-month total
to September for tractor sales has declined by 23% and that for combines by 39%. Industry sales of tractors in
2010 are estimated to be down by as much as 15% and that of combines by
approximately 40%. It is,
however, important to note that the strong performance of the tender and export
markets contributed approximately up to 15% of the overall tractor business,
securing some sustainability in the current down cycle of 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 continue to introduce new
products and technology to farmers, appropriate for the South African and export
markets. Access to the latest
and most suitable products and technology available on the international market,
certainly positions the professional South African farmer ideally to further
optimize and enhance his operations and business, allowing farmers to remain
profitable in a challenging environment and improve 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 highly professional commercial farmer
in South Africa.
NAMPO
In spite of reduced attendance and interest received across the exhibition
stands of SAAMA members during the 2010 Nampo exhibition week, the overall
experience has been positive.
The new exhibition format of static displays 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 are now well
established and accepted by both the Nampo exhibition committee and SAAMA. This inter-active type displays
and audio visual presentations were again well received by customers attending
the exhibition, allowing customers to receive and assess detailed information
about the new products and technologies available on the market.
National Regulator for Compulsory Specifications
Of importance for the tractor market in South Africa, is to maintain clear
communication lines with the National Regulator for Compulsory Specifications
(NRCS) as to effectively support current legislation regarding the compulsory
requirements for agricultural tractors and the timely consultation for future
compulsory requirements.
Mutually beneficial discussions were conducted in 2010 following the successful
implementation of the Tier II emission requirements for agricultural tractors,
effective 20 February 2009.
As all mid and high specification tractors offered in the South African market
already complied to this emission 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. We are pleased to report that
all SAAMA members who import tractors into the South African customs union, have
been working closely with the NRCS 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.
Marketing
SAAMA was again marketed well during the course of the year. Various articles of relevance
to the agricultural mechanization industry were published in prominent
agricultural publications, the exposure to trading delegations visiting during
the NAMPO exhibition and the monthly SAAMA press releases to the printing and
broadcasting media. Interviews
regarding a variety of subjects relating to the mechanization industry have been
broadcasted on radio and national television.
Information
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 Response Group Trendline, to improve the overall cost alignment
for members.
Both Agristats and AGFACTS continue to serve members and the industry with
distinction by providing monthly up to date industry information of primary
importance. The implement
reporting process is under review to streamline information gathering, reporting
frequency and member requirements.
Members
With an active recruiting campaign followed over the past two years targeting
potential new players in the industry, several new members joined SAAMA during
2010. We regret to report that
members of which some have had an historic and long standing relationship with
SAAMA, elected to resign during 2009/10.
SAAMA membership currently reports 24 members.
SAAMA Golf Day
The 2010 SAAMA Golf day was held on the 16th September 2010 at the
prestigious Serengeti Golf Estate located just off the R21 freeway close to the
Oliver Tambo International airport.
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
2011 golf event is already booked to take place on 8 September 2011 at the same
venue.
SAAMA Finances 2009/2010
The Association is reporting a net excess in income over expenditure for the
financial year and continue to maintain a positive financial position.
Future Prospects
With the gradual recovery of the global as well as the domestic economies
notable, we do not expect 2011 to reflect any significance in the recovery of
new business opportunities that will stimulate overall sales growth of the
agricultural mechanization business in South Africa. However with the consumer
inflation level well under control at the bottom targeted levels of the SA
Reserve Bank, we can expect improved consumer demand thru 2011 that will
certainly increase the requirement for food at both retail and production level. As inflation is also expected
to remain in control at production level through most of the 2011 period,
producer profitability is hopefully to benefit from this as demand increases and
commodity prices show improvement.
General
In summary, the rapidly deteriorating business environment already experienced
in early 2009 continued its devastating impact trough 2010, resulting in a
further significant drop of agricultural equipment sales activity and revenue
for the year to date. This
trend is evident as reflected by the year on year tractor sales showing an 18%
drop in unit sales, and the year on year combine sales showing a significant
drop of 40% in unit sales.
Moderate demand remained for new technology products such as larger productive
fuel efficient tractors, self propelled sprayers, precision farming systems and
no-till equipment, while the increased level of Government tender business
prevented further deterioration of the market .
The agricultural machinery industry remains truly committed to serve the South
African farming industry as well as the Africa export markets 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.
Leon Pretorius
SAAMA Chairman – 2009/2010
