With this being my last blog for August, the summer seems to have passed by so quickly with not a lot to show for it weather wise. Most of the wheat crops still remain in the fields. In a normal year combine harvesters, tractors and trailers would already be busy in the fields getting the grain to the grain intakes. I hope that, when harvest time does come, yields will be reasonable. It doesn’t do our industry any good when our farmer customers are struggling to make decent returns. How well or not our customers are doing will reflect in the monthly tractor sales figures and, of late, they have been steadily heading south.
The FTMTA have just produced their new tractor registration figures for July and they show a 13% decline on the same period last year. You can read the FTMTA’s more detailed report in this edition of Service Dealer Ireland. It remains to be seen if there will be an improvement in the coming months.
This downward trend is not just occurring in Ireland. It is also happening in the UK and in Europe. The European Agricultural Machinery Association (CEMA) have also published their business climate figures for July and it shows that Europe is still in negative territory. The tractor market in particular showed a further significant downturn compared to the previous month, the exception being France and Spain.
What is the driving force pushing these figures down? There are a lot of factors that are coming into play. The main one being that farm incomes have significantly fallen in 2023, due to high production costs and a decline in commodity crop prices. This has led to fewer new tractors being purchased. High interest rates are also having an effect on demand.
Commodity prices such as steel and aluminium have increased significantly which have had a knock-on effect on agricultural machinery production costs. This, in turn, has led to higher machinery prices. A step too far perhaps for some farmers who are already struggling to make ends meet.
World events have also had an impact on demand. The pandemic and Russia’s invasion into Ukraine affected sales and is still having an influence but, thankfully, the situation is not as bad as it was a year ago.
Spare parts supplier, Genfitt, which was acquired by Kramp last year, produce an annual survey on the state of the agricultural industry. Called the Genfitt Knowledge Report, their 2023 report, which is compiled from independent industry stakeholders, showed that 60% of responding farmers (3,700 of them) spent under €10,000 on machinery, 30% spent between €10,000 and €50,000 while 10% spent over €50,000. You can see the full report by clicking here.
So what is the future outlook? I hope that we are at the bottom of the market cycle. I am optimistic that things will get better and demand for farm machinery will soon improve. Many analysts predict a recovery in 2025. Farm input costs, such as fertiliser and fuel, are steadily coming down, which is good news. An improvement in commodity crop prices will be a step in the right direction.
