South African tractor sales grew by 2% y/y in May 2018
The South African tractor sales reached 501 units last month, well above our expectations of 444 units. This represents a 2% y/y uptick, which is relatively softer than April 2018 growth rate of 15% y/y, due to base effects. On average, 24 tractors were sold a day last month, compared to 23 tractors a day in May 2017. This was largely driven by increased activity in winter crop planting provinces of the country. The planting activity is now over in most provinces, which means tractor sales could soften in the near term.
The uptick in tractor sales was again unsurprising as May 2018 was a busy month with winter crop planting activity underway. Moreover, the fact that farmers intended to increase the winter wheat plantings by a percentage point from last year to 674 700 hectares, might have also contributed to the increase in a number of tractors sold last month. However, we believe that the sales could soften in June 2018 due to reduced activity in the fields and probably reach levels of 471 units.
The combine harvester sales were down by 33% y/y, with only 16 units sold in May 2018, which is the lowest sales figure for the corresponding month since 2015. The decline could be a temporally blip due to delayed harvest activity on the back of a late start of the season in most summer crop growing areas.
Looking ahead, we believe that tractor sale could soften during the winter season, but gain traction again around spring season ahead of 2018/19 summer crop planting period. Meanwhile, the combine harvester sales could increase in the next couple of months as summer crop harvest process commences in most parts of the country and yields expected to be relatively higher for most crops such as maize, soybeans and sunflower seed.