Dec 08, 2014

Agricultural Equipment Sales in Brazil down 16%

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

Falling commodity prices and increasing interest rates have led to a 16% reduction in agricultural equipment sales in Brazil in 2013. According to National Automobile Manufacturers Association (Anfaves), the domestic sales of agricultural equipment for the first eleven months of 2014 totaled 64,360 units, which was down 16.6% from an equal period in 2013.

During the month of November the domestic sales totaled 5,255 units or 21% less than during October when 6.655 units were sold. Exports of agricultural equipment also feel 10% during the first eleven months of 2014 to 12,989 units.

The end of the year is usually a slow period for agricultural equipment sales because farmers are busy planting and maintaining their crops. Sales are expected to pick up in January, February, and March especially for combines as farmers start to harvest what is expected to be another record large soybean crop.

The uncertain economic environment in Brazil has also led farmers to be cautious in their equipment purchases. Interest rates are rising in Brazil as the government tries to reign in inflationary pressures while at the same time the government is reducing expenditures due to a slowing economy. It is uncertain if the federal government will continue to offer low interest subsidized loans to farmers for the purpose of buying new equipment. These loan programs were offered in the past as a way to stimulate equipment purchases.

Argentina is a traditional market for Brazil’s ag equipment exports, but the economic situation in Argentina is even more uncertain than in Brazil. The Argentine inflation rate is approximately 40% and the federal government is facing a liquidity crisis due to a lack of foreign currency. The federal government also announced recently that farmers who have not sold all of their 2013/14 soybean production may be denied credit at the National Bank and their bank accounts may actually be closed.

In addition, the Argentine government took steps earlier in 2014 to limit imports from Brazil as a way to boost domestic production. As a result, there are less exports going to Argentina, both manufactured goods and food items, than in past years.