Tractor sales plowing back lost ground
After almost a year of dawdling, the much anticipated rebound in tractor sales was seen in February.
The latest sales figures released by Pakistan Automotive Manufacturers Association (PAMA) for the 8MFY12 show that total tractor sales for the month of February stood at 8906 units.
The unit sales in February were up by 478 percent, compared to the monthly average of 1,862 units throughout 7MFY12.
This massive turnaround came after settlement of the GST dispute between government and the tractor manufacturers.
The query is: If the spike in sales is a one-time event or the demand frenzy would continue throughout 2012? And would the unit sales in 2012 be higher than the level achieved in 2010? While talking to BR Research a leading analyst said that "the most important variable in calculating the demand for tractors is the farmers income".
He added "factors affecting the income primarily include the major commodity prices (wheat, rice, cotton, etc) and farm input prices Urea, DAP, etc.
A look into the main commodity prices specially cotton and rice does not pose a very good picture for tractor sales.
Right now cotton prices are almost 50 percent lower than the average level of CY11 and the level is expected to remain low as the demand for textiles from the West is expected to remain sluggish.
In addition the Urea and DAP prices have risen by 25 percent and 7 percent, respectively, compared to the average level of CY11, again dampening farmers incomes.
However, there are some things to cheer about.
While talking to BR Research a leading analyst said that "Urea prices are expected to come down as government has resumed gas supply to a major fertiliser company".
In addition, the recent upwards revision of the wheat support prices from Rs.950 to Rs.1,050 per 40 kg would also give some relief to the farmers.
However, by and large the consensus view is that tractor sales will improve in CY12 compared to CY11, but would still remain lower than the 70,000 mark of 2010.
The latest sales figures released by Pakistan Automotive Manufacturers Association (PAMA) for the 8MFY12 show that total tractor sales for the month of February stood at 8906 units.
The unit sales in February were up by 478 percent, compared to the monthly average of 1,862 units throughout 7MFY12.
This massive turnaround came after settlement of the GST dispute between government and the tractor manufacturers.
The query is: If the spike in sales is a one-time event or the demand frenzy would continue throughout 2012? And would the unit sales in 2012 be higher than the level achieved in 2010? While talking to BR Research a leading analyst said that "the most important variable in calculating the demand for tractors is the farmers income".
He added "factors affecting the income primarily include the major commodity prices (wheat, rice, cotton, etc) and farm input prices Urea, DAP, etc.
A look into the main commodity prices specially cotton and rice does not pose a very good picture for tractor sales.
Right now cotton prices are almost 50 percent lower than the average level of CY11 and the level is expected to remain low as the demand for textiles from the West is expected to remain sluggish.
In addition the Urea and DAP prices have risen by 25 percent and 7 percent, respectively, compared to the average level of CY11, again dampening farmers incomes.
However, there are some things to cheer about.
While talking to BR Research a leading analyst said that "Urea prices are expected to come down as government has resumed gas supply to a major fertiliser company".
In addition, the recent upwards revision of the wheat support prices from Rs.950 to Rs.1,050 per 40 kg would also give some relief to the farmers.
However, by and large the consensus view is that tractor sales will improve in CY12 compared to CY11, but would still remain lower than the 70,000 mark of 2010.
Addtime:Monday, 19 March 2012 17:50 print