Machinery sales “turning the corner”

Despite the big dry, farm machinery dealerships around the country still recorded decent sales figures in 2018 with new tractor sales surpassing the "magic" 12,000 mark, according to the annual State of the Industry report.

The results were compiled by agricultural research expert, Agriview, and was released recently at the Tractor and Machinery Association of Australia (TMA)’s conference in Melbourne in July.

The combined sales value of new machinery in 2018 (which includes tractors, combine harvesters, balers, hay tools, self-propelled sprayers & self-propelled windrowers) totalled $2.135 billion, which was down 8.2 per cent on 2017’s result of $2.326 billion.

A total of 12,157 new tractors were sold in 2018 to a value of $1,277.4 million, which according to Agriview managing director, Alan Kirsten, was still a great result despite the drought that gripped the nation last year, especially in the Eastern states.

“One would normally expect that demand for new machinery would have been down considerably, and it was for some machinery lines but not all,” he said.

Across the other machinery lines, seasonal units such as combine harvesters didn’t fare as well, due to one of the smallest crops produced in a very long time.

One standout result, however, to the surprise of many, was the surge in baler sales - especially in the large square segment.

In 2018, large square baler sales reached record levels with 243 sales made, which was an increase of 16 per cent on the 209 sold in the previous year.

“It's the fifth year of 200 plus sales of large square balers and what caught a lot of people off guard was that a lot of those failed crops last year were baled because of the hay shortage,” Kirsten said.

“So all of a sudden we saw a spike in demand for large square balers, so companies that had stock were able to pick up extra business later in the year to help the farmers.

“Given that price of hay was about the same as a tonne of wheat, it was a no brainer for farmers to turn that crop into hay.

“I would expect it to be a strong year again with hay production as there has not been a whole lot of rain.”

Up until May this year, conditions were dire with no real signs of improvement; however sales picked up unexpectedly in June.

While still trailing behind last year’s figures, tractor sales bounced back to healthier figures in June, especially in Western Australia where there has been plenty of rain and demand for machinery remained strong.

“There was a lot of stock right around the country, and demand was low right up till May. All of a sudden we're able to start shifting a lot of that and June sales turned positive,” Kirsten said.

“Why is that? Was it because we had a continuation of the existing government despite what people were thinking was going to happen?

“We've also had some rain and interest rate cuts that might have lifted confidence.

“None of us know for sure but going forward, there seems to be a lot of confidence and a lot of traffic at the dealers that weren’t there six weeks ago.”

Kirsten said while no one can confirm that machinery sales will start trending upwards, the industry seemed to have turned a corner leaving the worst behind us.

“We're not going to go gangbusters but I don't think we're going backwards,” he said.

“The best I can view is that there seems to be a lot more confidence so we're in good shape at the moment.”

Due to tough conditions, the industry ended 2018 with low order banks and high inventory levels that affected a good number of dealers around the country who also faced high overhead costs.

“All that, combined with low margins will force many out of the industry, be it through acquisition and or merger or just closing the doors,” Kirsten said.

The total number of farm machinery businesses- which included single and group business outlets - dropped from 555 in 2009 to 385 in 2019.

“This will present the greatest challenge to the industry but will also present the greatest opportunity to find new ways to connect with our customers.”

This year’s TMA conference focused on the changing needs of customers and the importance of understanding your customers in order to serve them better.