Food security lies in new equipment
FARMERS should increase focus on buying new equipment to survive the volatility of the agricultural market.
IMPLEMENTS: Farming equipment essential for a successful venture. PHOTO: RUSSELL ROBERTS
The agricultural industry is a capital-intensive sector which demands farmers to have implements and tractors to support their produce.
Although food prices have eased to 225 points from their February 2011 high of 238 on the UN Food and Agriculture Organisation's global food price index, South African farmers need to complete capital expansion projects in the next several months to prevail during the market volatility predicted by the FAO's State of Food Insecurity in the World report.
Marthinus Loock, senior manager of Agri Business at Standard Bank, said the increase in tractor sales this year indicated that farmers were capitalising on what has been an extremely favourable situation triggered by a combination of the strong rand, a low interest environment, and improved commodity prices.
Although farmers receive depreciation allowances from tax, they still have to replace their equipment.
"If your tractors and implements are getting old, you get breakage at crucial times," Loock said.
"In terms of the next season, the price is a lot higher than last year which provides an opportunity for farmers to plant profitably.
"While market volatility is a constant in agriculture, the next several years promise to be more challenging. Farmers should acquire the equipment they need now, before things tighten up.
"Prospects for commodity prices, especially maize, look good. Indications are that local grain stocks have been reduced significantly by higher exports, allowing farmers to increase production.
"More importantly, the rand in the past few weeks has already weakened against the dollar. It could then prove more difficult to buy agricultural equipment as return on such an investment will be pushed out considerably.
"At the same time, food prices will remain high. With factors such as increasing population pressure, extreme weather conditions and increasing input costs; it is pivotal to incorporate new technology into your production system to benefit from lower production costs."