Tractor sales set to match records on buoyant farming

New Zealand tractor sales are expected to match record highs for the modern farming era this year, as farming incomes are boosted by high milk prices and good growing conditions.

Sales of tractors of at least 40 horsepower, the most common measure for farm tractors, have reached 2,536 in the first nine months of this year and are expected to climb by year's end to match the 3,515 total for 2005, the highest level since the Tractor and Machinery Association began gathering the data in 1990. Some 60 percent of the nation's farm tractor sales are estimated to relate to the dairy industry.

Farmers had more cash this year to buy farm equipment such as tractors after Fonterra Cooperative Group [NZX: FCG] paid out a record $8.40 per kilogram of milk solids and the agriculture sector generally benefited from good growing conditions which meant farmers could boost production without having to divert funds into areas such as extra stock feed.

"The major reason is definitely the dairy payout," TAMA president Ian Massicks told BusinessDesk. "When you get an excellent payout to the dairy farmer like we have got this year, it means extra tractor sales.

"The weather has also been favourable so for the farmers it just means higher production and less inputs. He has been more successful so there is a bit more cash around."

TAMA expects Fonterra's forecast for a lower dairy payout next year may reduce 2015 tractor sales by about 15 percent from this year's highs. The 48 percent slump in global dairy prices this year has led Fonterra to lower its forecast farmer payout to $5.30/kgMS and many analysts expect the dairy cooperative to further reduce the forecast when it comes up for review next month.

"We can't see it being any better, if anything, it might be a slightly more reduction," said TAMA's Massicks.

Still, he said the decline from a record could still underpin steady sales.

"Even at the level it is for next year, it is still a reasonable payout," he said. "There is no doubting this year's has been an absolute exceptional payout. It's still going to be a very healthy tractor market next year."

Tractor sales were probably even higher in the 1970s and 1980s, as volumes surged on the back of a change to farm mechanisation, he said.

(BusinessDesk)