The first half of 2021 has got off to a superb start for sales of farm equipment.
Tractor and Machinery Association of New Zealand (TAMA) president Kyle Baxter said there had been substantial sales increases across all tractor horsepower segments and equipment compared with the same time last year.
Mr Baxter said the big increases reflected a continuing catch up in on-farm vehicle investment as farmers looked again to the future.
“It’s fantastic to see the confidence continue across all of the sectors, and in turn this confidence flowing into wider economy.
“This significant increase isn’t an accidental one, nor a blip, it requires sustained customer and supplier confidence over a 12-month period in that the required product is ordered and arrives into the country to meet current demand.”
The overall increase in actual units delivered across New Zealand was 35%. This represents an additional 450 tractor sales compared to the same period of 2020. Sales in the under lifestyle 50hp sector increased over 40% while sales numbers in the 60-80HP segment, which are predominately delivered into the horticulture sector, increased around 50%.
“Not to be left out of the rising market, sales in 100-140HP segment are up more than 30%. Tractor deliveries into the larger end of the market, focused on 180-250HP cropping and contracting tractors, increased by more than 50%.”
Whilst the market remained strong and looked set to remain so for the rest of 2021, there were several challenges impacting the market, Mr Baxter said.
“We are hearing from our members that ongoing production stoppages in global factories due to Covid lockdowns and community outbreaks continue to affect manufacturing timeframes. Europe continues to be a rapidly changing space by the day, as one country announces a ‘return to normal’ date, another country announces new control measures to help stem the spread of the virus.”
Global logistics dominated many of the discussions TAMA members were having with their suppliers and customers. With no relief in the short to medium term horizon, the increased shipping times looked set to continue well into 2022.
“Almost every point of the logistics supply chain is affected. Delays of an extra 90 days in receiving a container load of equipment from Europe are not uncommon. Reduced air cargo space, due to fewer flights globally, is also adding to the cost of air freighting spare parts and causing delays in getting urgent spare parts into the country.
“The cost of shipping a container here has increased drastically. This, coupled with importers of agricultural equipment generally only able to ship one to four machines per container due to their size, is driving up the freight cost of each item shipped.”
Mr Baxter said while strong commodity pricing was fantastic for the New Zealand agriculture industry in terms of the export value of ag-related produce, there was a sting in the tail.
Raw materials sourced to build the equipment were also under immense upward price pressures. Many manufacturers had already signaled or passed on manufacturing price increases directly related to the increased price of the raw materials.
“Our members are particularly concerned about the strong inflationary surge of raw materials, which is affecting many components used in the build of equipment.”
The price of steel has more than doubled in one year (from 550 euros per ton to 1,250 euros per ton). Steel can represents 30 to 40% of the average production cost of farm machinery.
There have also been substantial increases in the prices of aluminum (+22%), copper (+63%), rubber (+67%) and foundry products (+90%) over the past nine months across the Asia, USA & Europe, where much of the New Zealand farm equipment is sourced from.
Labour shortages remain another major concern for the tractor and machinery industry, he said.
“The lack of skilled labour is paramount in the minds of all our members. We’re all training young people and taking on apprentices but the industry needs more skilled people than we currently have available.
“Like many others in the primary industry, we need to be able to access overseas workers to help with the immediate shortfall for the upcoming season. We will be working on behalf of our members to ensure these issues are highlighted and to implement the possible courses of action to address the shortfall.”