Agriview market analyst Alan Kirsten told the recent Tractor and Machinery Association (TMA) conference, in Melbourne, 2016 saw the best sales in more than 30 years.
“We’ve had six consecutive years of more than 10,000 units – now we haven’t seen that since the mid-eighties, so that’s great,” Mr Kirsten said.
“It’s all about cash - agriculture is in a great space and production is at record levels.
“We have still had huge amounts of production and costs are relatively stable.”
The cash rate had fallen, which was the best indicator of the cost of money.
With a cash rate at 1.52 per cent, which had been steadily falling since 2011-12, Mr Kirsten said machinery sales topped $1.8 billion, last financial year.
“Our sales continue to go up, as the cost of money remains relatively stable,” he said.
Even though the banks did not always follow the cash rate, deals were being offered to encourage the purchase and leasing of machinery.
“With money being very cheap today, by comparison to previous times, people are moving into new machinery.
“It’s cheaper to do it today, than for a very, very long time.
“The cost of money, the financial considerations, the accelerated depreciation that exists – all those are starting to drive a renewal of machinery, far quicker than it ever has before.”
With money being very cheap today, by comparison to previous times, people are moving into new machinery.
Last year also saw the best combine harvest sales since 2012, while baler sales were last that high in 2008.
“Last year was an exceptionally good year, as it was for most parts of agricultural production,” Mr Kirsten said.
“Combine sales are up 54pc, baler sales are down six pc, but that’s off season and we will have the majority of the season to run.
“The 2017 market condition is very strong, we are heading for around the 12,500 tractor market, so that’s a good result for us.”
Kirsten said the continued availability of cheap finance was a primary driver for the tractor market.
“Finance rates of close to zero per cent have made buying machinery attractive,” Kirsten said.
But he said sales were now likely to ease, even though commodity reports for exports “remained quite bullish.”
He told the conference sales of 60HP plus tractors had reached a peak last finanancial year, and were likely to drop away to 6,850 units in 2018-19.
Combine harvester sales were also expected to peak at around 1000 units, next financial year, before dropping away.
“In terms of renewal, it has reached a peak,” Mr Kirsten said.
“The concern I have is that we have put in a massive amount of machinery in the past five or six years, 65,000 new machines have gone in.
“That’s a lot of renewal out there, so you would imagine history would repeat itself.
“But there is some correction coming and we are getting back to the trend levels of 800-900 combines, which is more the long term, recent average. It has to, that’s the way I’ve always looked at it.”
Agriview had records back to the 1970’s, he said.
“We have all machinery sales data and have been serving the industry since 1990,” Mr Kirsten said.
“We not only know the make, model and specification, but also location by postcode where it’s sold.”