Argentina agricultural machinery sales increase dramatically
Despite the damaging floods that affected most productive rural areas of the country, Argentine agriculture continues to grow strongly, and the trend is reflected in the sale of new agricultural equipment.
There is considerable data that shows this. For example, in the first half of the year, the sale of combine harvesters, tractors, seeding drills and implements reached a turnover of $ 14,015 million pesos, an increase of 91.4% compared to the first half of 2016, according to the data from Indec. 10,456 units were sold so far this year. This is the semester with the largest number of sales since 2009, highlighted by the Ministry of Agribusiness of the Nation.
On the other hand, the production of machinery also grew by 38.9% in the first eight months of the year (5,765 farm machines were built), compared to the same period last year, according to a report from the Sectoral Economic Research consultancy (IES).
In invoicing, the implements and harvesters presented variations of 95.4% and 94%, respectively. Meanwhile, the tractors registered a rise of 91.7% and the seeding drills 74.9%, with respect to the first semester of 2016, detailed the Indec. In units, on the other hand, from January to August, sales of tractors reached 6569 and those of combine harvesters 1220, that is to say, there was a growth of 67.3% and 96.9%, respectively, against the same period of time. 2016, as reported by IES.
The reasons for the rebuilding of the market are the positive government policies that promote agricultural production in general, such as the reduction of withholdings, the unification of the exchange rate and the elimination of restrictions to export.
Measures that also increased the entry of imported used machines, with rises of 326%, 277% and 151% in the sale of implements, tractors and harvesters, respectively, during the first semester, according to figures released by the Indec.
Other factors that caused the increased sales
Another factor in the increase in sales is the expansion of the financing lines of banks, which offer affordable rates and terms. Added to this is the rise in the prices of contractor services, which leads producers to buy their own agricultural machinery.
The recovery of the market has thus motorized the growth of hundreds of SMEs linked to the commercialization and production of agricultural machines. One of the beneficiaries of this boost is Achilli and Di Battista, a firm of Armstrong, Santa Fe, which has been producing and marketing seed drills since 1978.
A review of the current situation
“After a poor 2015 that did not meet expectations, last year and, especially this year, people are very satisfied with their sales, due to the cessation of retentions on wheat and corn creating a strong demand for machinery.
New credits: there is now very convenient and competitive options “, highlights Jorge Molini, responsible for the sales area of Achilli and Di Battista, which has a plant that produces 120 units per year and employs 60 people.
Months before the end of 2016, the company had already sold its total production capacity, and this year everything indicates that the same will happen again. “The next challenge is to expand the capacity of the industrial plant to keep us at the forefront of technology and penetrate more into the demanding market of the province of Buenos Aires,” says Molini.
The trend is also reflected in the concessionaires, such as Álvarez Maquinarias, a family business in Laboulaye, a town in southern Córdoba, with vast experience in the field, which is now an official dealer of New Holland tractors and harvesters. The market of the Cordoba firm includes, mainly, the south of that province, the area of Villa Mercedes, in San Luis, and the northwest of the province of Buenos Aires.
So far this year, the company sold 44 tractors and eight harvesters, that is, 30% more than in 2016. “The Government’s gestures have given confidence and security to the entire commercial chain, both those who give credit how to those who decide to take them The sector was delayed 10 years, and today we are catching up, working with the latest technology, this is the best moment in the industry in the last 15 years “, highlights Germán Álvarez, manager of Álvarez Maquinaria .
Likewise, the market boom stimulated competition among the protagonists. “The rules are, in general, for all the same, each one is competitive appealing to their strategies, the competition is always positive, and together with the reforms we expect for the sector, it will collaborate to accommodate international prices,” says Álvarez. , while stressing that in Argentina the tractors cost twice as much as abroad. His plans? Work hard to strengthen in the area and continue to expand, says the businessman.
By price (tractors average of about US $ 100,000) as well as by versatility, in the second quarter of this year, the tractors had the highest market share, reaching 35.9% of total sales, with a billing of $ 2976 million. On the other hand, the harvesters reached 28.4% ($ 2349 million), the implements, 22.8% ($ 1886 million turnover), and the seeders participated with $ 1065 million pesos, with 12.9 % remaining, expands the Indec.
More efficiencies needed
While the momentum in the sales of machinery and agricultural implements is concrete, the fixed costs erode, increasingly, the profitability of the business. “Considering what we sold and the costs we have to face, the improvement is not so great. It moved more, but it is a market that is still in the waiting. Costs have also risen for producers and profitability is increasingly limited. There is a clear gap between what is spent and what is earned. For a small or medium producer, it is very difficult to acquire machinery. The numbers are very fine, “says Lucas Luchino, owner of Luchino Maquinarias, in Río Cuarto, Córdoba, which sells Claas harvesters and choppers, Allochis maize heads and spare parts Don Roque and Vassalli.
So far this year, the firm sold 34 machines, a number that Luchino is satisfied with: “The business is fair in terms of profitability, especially in collections, which is where there are major problems. the risk is great, it sells a lot, but it is charged little by little, a machine is charged in three or four harvests, we are the last link where the payment reacts, “adds the seller, who has no doubt that the year comes, and after the result of the mid-term elections, the market will rebound futher.
“The policy towards the agriculture has changed for the better, but has its many ups and downs”, initiates Víctor Juri, owner of a factory of production and sale of drilling machines, fertilizers and hoppers in Carmen de Areco, in the province of Buenos Aires. “Sales improved, but from a very low level. Good measures were taken for SMEs.
Today banks are better suited to lend money to the producers says Juri, 66, with more than 40 years of experience in the agriculture. “We see that the Government is concerned about improving SMEs, but the tax levels are still too high.
Although Juri is concerned about the current situation, like other referents in the field, he hopes that the boom in the agricultural machinery market that is taking place will not only be sustained but will also reach downstream helping other industries.
The main customers
In recent years with much of the farmland being leased the position of the rural contractor has gained greater prominence and its purchasing power of agricultural machinery reaches 60% of the equipment sold in the country, according to the Rosario Stock Exchange. In this way, contractors are responsible for generating income to the industry of around $ 8,400 million per yar.
According to the Ministry of Agribusiness of the Nation, the contractors are in charge of 90% of the harvest of the grains that are grown in the country and 70% of the work of sowing and the application of agrochemicals. The area worked by the contractors in sowing and harvesting represents 80% of the total surface area; The remaining 20% is left to the producers who own their own machines and equipment.
Source: La Cronista
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About Geoffrey McRae
Geoffrey McRae is the founder of GTSA – Marketing. He is a New Zealander with a strong Agro-business and Real Estate background spanning over 30 years. Prior to coming to South America, he was one of Australasia’s most successful Real Estate negotiators reaching the highest level in the industry. He has a reputation as a brave and a formidable negotiator and creative ‘deal maker’. His reputation for discretion, experience, and expertise have involved him in representing some of the world’s highest profile investors. I hope you enjoy reading our news site. Please share it on your social media below.