Machinery sales beat off drought

DROUGHT conditions throughout much of Australia have not stopped farmers from dipping into their pockets to purchase big-ticket tractors and combine harvesters.

WA was among the strongest States, with sales more than doubling in 2002 compared with the previous year.

Estimated WA investment in big tractors and combines, which is said to represent about 70 per cent of the total machinery and equipment expenditure of farmers, increased from $98 million in the 2001 calendar year to $241 million in 2002.

The Great Southern and south east region of WA had the largest rise, accounting for $97 million in sales – 177 per cent higher than the previous year. The Midlands, with sales of $94 million, was 147 per cent higher while the northern Wheatbelt, which takes in the area between Mullewa, Geraldton and down to Wongan Hills, jumped 104 per cent to $47 million. All other regions of WA normally provide just a trickle of sales and last year proved no exception.

The sales figures, compiled by Agriview Pty Ltd for the Tractor & Machinery Association of Australia, suggest that WA fared significantly more strongly than the rest of the nation.

This was despite the worst drought in more than a decade, which resulted in a sharp decline in the value of farm production.

However, tractor sales around Australia still increased 6.8 per cent during the year, baler sales rose 3.3 per cent and sales of combine harvesters lifted 40.5 per cent.

Total WA sales of combines, which typically cost more than $300,000 each, increased 155 per cent, while sales of the larger tractors with engine power of more than 150 kilowatt rose by around 85 per cent.

Agriview’s Alan Murray said it had been quite a surprising result given the drought conditions.

However, he said the figures had to be viewed in context as they came after two years of below-average sales.

“To me the figures indicate a couple of things,” Mr Murray said.

“One is that there are pretty cashed up farmers who enjoyed a good harvest at the end of 2001.

“Two, it appears that many farms are planning to plant some pretty big crops this year as soon as the rains break.”

The Tractor & Machinery Association of Australia, which represents the manufacturer and wholesaler farm machinery groups, has anecdotal evidence from its members that supports the reports findings.

Association executive director Vin Delahunty said the tractor sales figures provided a strong indication of how farmers were travelling.

He said around 30 per cent of farm expenditure was channelled toward machinery and equipment.

Mr Delahunty said the figures indicated strong confidence and capacity among farmers to finance significant investment in machinery.

“There is evidence that suggests that some of the growers are spending on a schedule and sticking to it,” he said.

“The interesting element in all of this is the Farm Management Deposit Scheme. This allows farms to invest money into term deposit accounts where it is set aside for future investments.”

The FMDS is a scheme introduced by the Federal Government that allows farmers to withhold declaration of money earned and set aside for the purchase of goods at a later date. The money is declared, for tax purposes, when it is spent.

So, in effect, poor income years can be propped up with the money set aside. This, in turn, has re-moved the bumps in expenditure from farmers.

“Anecdotally, the FMDS is what the suppliers are talking about as the reason why investments have been maintained,” Mr Delahunty said.

Bakers Hill farm equipment manufacturing firm Norrish Service Group has experienced business as usual.

Proprietor Neil Norrish said the business turned over between $50,000 and $75,000 a day selling anything from feed bins, fertiliser spreaders and rotary hoes. Last year the business, which employs about 25 staff, had sales of $4 million.

“Sales will end up being up from last year. The good guys are always updating no matter what,” Mr Norrish said.