Aug 15, 2013

Ag Equipment Sales in Brazil on Pace to Set a New Record

Author: Michael Cordonnier/Soybean & Corn Advisor, Inc.

The agricultural equipment manufactures in Brazil have revised upward their projection for the number of tractors and combines that will be sold in 2013. The National Association of Vehicle Manufactures (Anfavea) now estimates that a total of 97,000 tractors and combines will be sold in 2013, which would be 24,100 (33%) more than the estimate at the start of 2013. If realized, it would surpass the old record established in 1976. Of the 97,000 units, 83,000 will be sold domestically and 14,000 will be exported.

Equipment sales surged during the first half of 2013 due to a reduction in the interest rates on equipment loans and strong commodity prices resulting from the reduced crop production in the U.S. during the summer of 2012.

In August of 2012, the Brazilian government started the Program of Sustained Investments (PSI) that lowered interest rates on equipment loans from 5.5% to 2.5% and that rate was scheduled to expire in December of 2012. Due to the popularity of the program and urging from farm organizations, the program was extended into 2013 with slight upward adjustments in the interest rates. In January the interest rates increased to 3.0% and they are now 3.5% and they will remain there until the end of the year.

The results for some manufactures surpassed even their already high expectations. The equipment manufacturer Montana, which is headquartered in the state of Parana, had expected a 20% increase in sales so they expanded three of their five production facilities in Parana and Santa Catarina. Sales have surpassed their expectations and the company now expects sales in 2013 to increase 30%.

The one bit of negative news for the industry is that exports of Brazilian equipment are expected to decline in 2013 to 14,000 units, which would be a drop of 17% compared to the 16,900 exported in 2012. Argentina is one of the traditional purchasers of Brazilian equipment, but sales to Argentina are expected to decline significantly in 2013 due to the Argentine government restricting the imports of Brazilian made goods including agricultural equipment. The government said the restrictions were put in place in order to help stimulate domestic manufacturing.

The equipment manufactures feel that 2013 will a peak year for the industry. The number of people employed in the industry increased 1,000 in 2013 to nearly 21,000 and industry officials feel the number may decline slightly next year.