By Richard Rennie
Reading Time: 2 minutes
Tractor sales have slid to their lowest level in a farming generation, with tough farming years, bigger farms and more productive machines all pushing numbers down.
Infometrics CEO and economist Brad Olsen dug into New Zealand鈥檚 current and historic tractor sales going back 50 years to determine if there is a 鈥渢ractor index鈥 indicative of rural financial health.
鈥淵ou often hear about what sales may be, particularly in the lead-up to Mystery Creek Fieldays.
鈥淧eople talk about how tractor sales are seen as an index for economic health on farms. But our work showed they [tractors] may not be as much of an indicator as they once were.鈥
Olsen鈥檚 data shows year-to date-tractor sales to this April totalled 1925 units, the lowest 12-month level they have been since year-to-date August 2001.
The 12 months to April figure has been in a steady decline for the past three years, dropping by a third in that time.
However, sales volumes have hit lower troughs in the past.
NZ farmers peaked in their tractor purchasing at the start of Olsen鈥檚 data set, with 4544 machines sold in the year ended February 1974.
That preceded a definitive decline, bottoming out through the late 1980s to 鈥90s. Barely 700 machines were sold per annum as Rogernomics policies bit deep into farms鈥 survival.
It took until 2001 to recover back to 1985 sales volumes, to peak at 3000 units in the year to August 2005.
鈥淪ome of the latest decline is due to farmers having been through some tough times recently. People would have been holding onto their tractors as long as possible, repairing rather than replacing,鈥 Olsen said.
He anticipated the government鈥檚 20% depreciation allowance on new purchases in year one is still to feed through with a lift expected in September as post-Fieldays deals are settled and farm budgets firm up.Tractor and Machinery Association (TAMA) president Jaiden Drought is optimistic there is a solid uptick in tractor sales still to come after two tough years.
鈥淭here has been a bit of a lull, but they don鈥檛 last forever, and you can鈥檛 hold onto your tractor forever.
鈥淲e have certainly reached peak tractor if you go back that far [50 years]. But I think we are quite likely to give those 2022 figures a good nudge in coming months.鈥
Sales year-to-date September 2022 hit almost 3000.
Drought said the government鈥檚 20% depreciation allowance was generous and well received by farmers.
Farmers Weekly has calculated that on a $100,000 machine the extra allowance brings an additional $5000 tax benefit to the purchase.
Olsen maintained shifts in technology may be driving a slide in tractor sales, but Drought said he is not convinced.
鈥淲hen it comes to things like drones, here in NZ they are probably more likely to replace helicopters than tractors.鈥
He said the main cause for the historic slide is down to larger farms running bigger machines capable of doing more per hour. Meantime more farmers are employing contractors for seasonal jobs, and they too are capable of greater productivity per machine.
NZ鈥檚 tractor market has almost a dozen competing brands in it and is more aligned to the European market than the United States-Australian market, where Case-IH and John Deere dominate.
Drought said stock levels among dealers are high and coming months would be a good time to shop around all brands to secure an attractive deal.