FOCUS
Implements andequipment
Special
Augustus 2014
14
DOHIGHMAIZE PRICES
encourageproducers tobuy
agricultural equipment?
A
gricultural machinery sales are
dependent on many factors, with
“price” being the most significant
one. Themajority of SouthAfrican
agricultural machines are imported, making
the exchange rate an important aspect. The
weakening of the rand value contributes to
higher agricultural machinery prices, (and
vice versa).
According to AGFACTS and the Grain SA
database (2014), South African tractor
sales were at an all-time high in 2012. As
previously noted, there are a number of
factors that can be linked to these sales,
but this article aims at proving an analysis
on maize prices in relation to agricultural
equipment (tractors, harvesters, agricultural
machinery and inputs).
The argument is based on the assumption
that when the maize price is high, pro-
ducers are likely to make gains, hence
purchase more agricultural equipment.
The article will briefly focus on monthly
tractor sales, maize price versus tractor
sales, maize price versus harvester sales
and lastly maize price versus other agri-
culturalmachinery and inputs.
Monthly tractor sales
Assuming that maize prices have a strong
correlation to tractor sales,
Graph 1
pre-
sents a monthly trend for tractor sales
and tractor prices (percentage year-on-
year price change). The trend shows the
pick times when producers make tractor
purchases.
The graph shows a limited correlation
between tractor sales and the percentage
year-on-year price change. Evidently, in
2005, 2010 and 2011 tractor prices were
relatively cheaper, but the tractor sales did
notmake anypositivemovement.
Each year, the highest number of tractor
sales is in October (black arrows), with
February (green arrows) being the second
highest month. The October sales can be
attributed to planting season. Maize is
generally planted between mid-October
to mid-December, hence the peak sales in
October. Producers are encouraged to buy
new tractors before theplanting seasons.
Maize price versus tractor
sales
There is a strong correlation between the
annual tractor sales and the average annual
maize price (
Graph 2
). In 2009, maize prices
were high, hence an increased number of
tractor sales. However, in 2010maize prices
were significantly lower and it can be seen
that at the same time tractor sales also
dipped.
South African producers purchased most
tractors in the year 2012 and within the
same year the average annual maize price
reached an all-time high. Given this strong
correlation, it can be expected that 2014
will show lower tractor sales; owing to low
maizeprices due to the largemaize crop.
Maize price versus
harvester sales
The annual harvester sales also show a
positive relationship to the average annual
PETRU FOURIE
and
WANDILE SIHLOBO,
economists: Industry Services, Grain SA
Graph 1: Permonth tractor sales versus permonth year-on-year percentageprice change.
Source: AGFACTS (2014) andGrainSA (2014)
SAGrain/
Sasol Nitrophoto competition
