Tractor sales are up, but for how long?

As a general rule of thumb, the farm machinery industry believes that for every tractor sold, twice the value in other equipment also passes through the dealers gate

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Tractor sales are up, but for how long?

This is doubly so, because machinery purchase depends more upon the availability of funds rather than the retail price. If it is selling then that is because money is more readily available to buy it.

Irish tractor sales

Bearing this in mind, the registration figures for Ireland during 2021 would suggest that farming is doing rather well at the moment. August registration figures supplied by the Farm Tractor and Machinery Trade Association (FTMTA) tell us that sales were up 55% on 2020, which, in turn, were up 6% on 2019.

So far this year there has been a total of 2,084 tractors registered, 174 more than the total for 2020 with four months still to go – although the autumn is always quieter with the next season, and shiny 22 plates, not so far off.

It is not just Ireland, all the major global manufacturers have reported very strong performances for the year to date. One of the strongest performers is CNHI (Case New Holland Industrial) which enjoyed second quarter sales of $8,490m, 65% up on last year.

This is despite the industry, like every other, suffering supply problems with components and raw materials. It is perhaps because of the perceived shortage of machines that price realisation remained strong – companies are getting what they ask for.

Gathering storm clouds

For just how long the good times can last is the question on everybody’s mind. There are two underlying concerns. The first is the snowballing cost of materials and components, while the second is the confidence of farmers in their business over the next few years.

The primary material for all machines is steel and it is this commodity which has seen some of the steepest rises over the last two years.

In May 2021, the world price of hot rolled coil steel reached $930 a tonne, this was up from its lowest point of $540 in February last year. Since then it has fallen back; it traded at around $700 in July, but is now heading upwards again and has returned to around $925 this week.

 

Tractor prices at mercy of markets

Other than the increase in price, another marked characteristic of this year’s trading is volatility. Prices have ranged from $620 to $930 a tonne, a change which occurred in just three months

There are plenty of scary stories about escalating prices doing the rounds presently, yet it must be remembered that prices are always moving and the industry survived the last peak in 2018, when the price reached €700.

There are three main causes cited for these fluctuations.

The first is that the drop in demand last year wasn’t as dramatic as expected. Many mills were closed down in anticipation of the steel not being needed and they have yet to return to use.

The second is that China has embarked on a capital infrastructure spending spree and is absorbing large quantities for domestic use.

The third is the strength of the US dollar. Steel is traded on the global market in the Chinese currency yuan. Thus, any movement between the dollar and yuan will affect the price in western markets, which tend to operate in dollars.

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