Financing of mechanisation equipment: On your marks, get set, buy.

ESTIE DE VILLIERS, ASSISTENT-REDAKTEUR, SA GRAAN/GRAIN

The replacement of capital goods is not a decision which a producer takes lightly. It is a big capital expenditure to undertake. Yet it appears that mechanisation sales did exceptionally well in the past year.

The June tractor sales of 710 units were almost 14% higher than the sales of 625 units reported in June last year. On a year-to-date basis, 2012 sales are 32% higher than 2011 sales. This is according to a press release by The South African Agricultural Machinery Association (SAAMA).

Dr Jim Rankin, secretary of SAMMA and editor of the AGFACTS Newsletter, mentioned that in SAAMA’s June press release they saidthat June combine harvester sales of 42 units were double the 21 unitssold in June last year. On a year-to-date basis, combine harvestersales are now 50% up from last year. (For more information on the sales of mechanisation equipment, also have a look at Petru Fourie’s article “Die landboumasjineriemark van nader bekyk” on page 70.)

According to SAAMA, the market for agricultural machinery remains buoyant. With maize harvesting now proceeding apace and with good maize prices, producers should now feel more assured about the overall
value of their crops. This enables them to make their buying decisions with greater confidence. Some producers will bring forward their buying decisions ahead of the inevitable equipment price increases as a result of the recent weakening of the rand. This will lead to higher sales to commercial producers in the short term.

For this edition of SA Graan/Grain we enquired from three financiers what it is that they consider regarding the financing of mechanisation equipment; so that producers who plan to buy or replace equipment “after the harvest”, have the necessary information to make an informed decision.