'Perfect storm' for on-farm spending

Australian machinery sales soaring thanks to agriculture's 'perfect storm'

Machinery
Federal government incentives, low interest rates and the return of good seasonal conditions have led to an increase in on-farm spending. Picture: Melody Labinsky

Federal government incentives, low interest rates and the return of good seasonal conditions have led to an increase in on-farm spending. Picture: Melody Labinsky

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The increase has been brought about by federal government incentives, low interest rates and the return of good seasonal conditions.

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A 'perfect storm' of factors has collided to create a surge in on-farm spending across Australia.

According to the Commonwealth Bank, new asset finance lending volumes in the 2020-2021 financial year for the agricultural sector was 50 per cent higher than the year prior.

This growth was seen across a number of asset classes, with financing for tractors up 41pc and seeders up 72pc.

Tractor and Machinery Association of Australia executive director Gary Northover said the machinery sector was most definitely seeing an increase in sales.

He said there was no doubt farmers were taking advantage of the federal government's tax incentives and in some cases, not just buying the product they need but dipping into next year's plan to get the tax break.

"Since the pandemic broke and the government introduced its instant asset write-off scheme - that's coincided with the best grain conditions and certainly the best prices and it's a perfect storm," he said.

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Mr Northover said the sale of tractors was probably up 25 to 30pc on what has previously been regarded as a good year.

"In terms of tractor sales, the average running rate over the last five years has been about 12,000 tractors per year; we are on about a 16,000 tractor per year pace right now," he said.

"I was speaking to an implement manufacturer recently and his business was double the previous year.

"He thinks this year will be the same level, so it's been flowing right through the market."

Since the pandemic broke and the government introduced its instant asset write-off scheme - that's coincided with the best grain conditions and certainly the best prices and it's a perfect storm. - Gary Northover

In Western Australia, machinery manufacturers and dealerships like McIntosh & Son, which stock a variety of brands including New Holland, Miller and Morris, are at the end of a run of successful field days.

McIntosh Group CEO Dave Capper said the mood at the field days has been excellent.

Mr Capper said it has been a really strong start to the year and they have seen lots of inquiry and business in the lead up to harvest.

"Probably the key thing is that increase in demand has coincided with production shortages across a lot of franchises and brands," he said.

"We saw the writing on the wall 12 months ago and we, to the best of our ability, have forward ordered; we've done our best to ensure we have supply coming through."

Mr Capper said this forward planning also included parts and they were holding substantially more parts on shelves than they ever had before.

For NSW John Deere dealership network Hutcheon & Pearce, there has been a significant increase in sales since June 2020.

Hutcheon & Pearce group sales manager Andrew Sands said the uptick really started off the back of federal government programs, including the instant asset write-off scheme.

"The thing we've all been so surprised about is it hasn't really stopped and that's a combination of factors," he said.

"One is the incentives continuing and being extended by the government. The second is ongoing very low interest rates to purchase equipment through financing, and the third thing is seasonal farming conditions being so good.

"Put those three things together and you've got the perfect storm."

We're seeing record commodity prices, record property sales - I think it's just a great time to be in agriculture. - Peta Ward

Mr Sands said the dealership has never been in a better position when it comes to having equipment on the ground ready to sell.

"That came from forward planning 18 months ago; we've got plenty of inventory but we've got a lot of people coming in ordering from the factory, which is a 12 month wait for delivery," he said.

"What we're seeing at the moment is we're starting to see people think a lot more forward than we have in the past.

"This is because people are becoming more accepting of the fact that delivery times from factories are extending due to circumstances outside everybody's control."

Westpac Agribusiness Queensland regional general manager Peta Ward said they were seeing a significant spend in trucks, vehicles and motorbikes.

"I've been out and about quite a bit recently on many properties and we're certainly seeing a huge investment in upgrading water infrastructure, fencing, sheds, yards, even the houses are getting a renovation," she said.

"Of course we're also seeing the family farms that are here for the long term are looking at the neighbours or looking at buying more country.

"And recently bull sales, that's been a massive spend."

Many machinery dealerships have forward planned and are carrying plenty of new stock and spare parts.

Many machinery dealerships have forward planned and are carrying plenty of new stock and spare parts.

Ms Ward said workers' cottages were also getting upgraded as farmers were conscious of labour shortage issues and recognised the need to entice people onto properties.

She said it has been exciting to sit around the kitchen table and drive around properties looking at the future.

"We're seeing record commodity prices, record property sales - I think it's just a great time to be in agriculture," Ms Ward said.

"We just need to add rain - the final ingredient."

According to Mr Northover, there has to be a point of saturation in the machinery market.

He said the completion of the temporary expensing program in June next year might be the point at which that happens.

Ms Ward said agriculture was certainly in a cycle and history would tell whether this turned out to be a supercycle.

"It's certainly an exciting time; it really is just lovely to see everybody so positive about everything in agriculture," she said.

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The story 'Perfect storm' for on-farm spending first appeared on Farm Online.

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