NZ tractor sales rise to four decade high in 2014 on buoyant rural economy
By Tina Morrison
Jan. 15 (BusinessDesk) - New Zealand tractor sales rose to their highest in almost four decades last year, reflecting a buoyant rural economy as farmers benefited from strong prices and good growing conditions.
New tractor registrations surged to 3,038 in calendar 2014, up 4.7 percent on 2013 and at the highest level since 3,129 in 1976, according to New Zealand Transport Agency data. Spending on farm buildings also rose, with the value of consents up 24 percent in the year though November to a six-year high of $322 million, according to Statistics New Zealand data.
Farmers stepped up their spending on big-ticket items like tractors and buildings last year, reflecting low interest rates, record prices and good growing conditions in the 2013/14 farming season. Spending is likely to fall this year as farmers face higher interest rates, lower prices and with drought conditions spreading through the East Coast.
"The 2013/14 farming season was pretty good. Profitability and the willingness to spend was pretty strong and that came through in tractor registrations," said Bank of New Zealand senior economist Doug Steel. "As we sit today though, things have turned a bit south. Dairy prices have fallen a long way through calendar 2014 and growing conditions are starting to deteriorate as the El Nino weather pattern takes hold and we have seen farmer confidence fall."
Farmers are also facing higher interest rates following the Reserve Bank's 100 basis points of hikes last year, he said.
"Those positive factors have turned around whether it be for the weather, prices or interest rate settings, so with confidence down, spending is likely to follow suit."
A weaker local currency this year may also push up the cost of imported tractors, Steel said.
He expects tractor registrations will decline this year for the first time since 2010.