Sales of tractors and farm machinery are currently steady compared to 2018 but there are a few challenges facing the sector, says Tractor and Machinery Association president John Tulloch.
The association's year-to-date figures to the end of April showed a total of 1104 sales across all HP categories compared to 1111 in 2018: a drop of 0.6 per cent.
North Island sales decreased by 4.7 per cent with 713 sales compared to last year's 748 but South Island sales increased by 7.4 per cent with 390 compared with 363.
Tulloch said it was interesting to note that April national sales figures were down 11.7 per cent compared to April 2018, and this was partly due to a reduction in the smaller models (20 to 50 HP), used by small commercial operations and lifestyle block owners.
Sales in this segments dropped 10 per cent.
"When business confidence in the cities is flat as is currently, we expect to see a reduction in purchases of smaller HP models as fewer people choose to commit."
Last year was a record sales year for the association with more than 4600 units sold but Tulloch now predicted this year it would be between 4300 and 4500, mainly due to the sales drop off in the smaller models. Last year, about 1000 sales were in the lifestyle segment.
Overall confidence in the rural sector was strong, going against the trend of business indicators, and farmers were buying machinery, however there were a few developments that might impact future sales, he said.
The first was the tightening of credit conditions.
To help increase its cash reserves, the Reserve Bank has signalled a requirement to increase the equity to loan ratio.
This will affect the indebted rural sector, in particular dairy farmers who typically carry a lot of debt.
Some banks might pull out of lending to the rural sector, or increase interest rates.
Tulloch said another change was the forthcoming increase in shipping rates due to new emissions regulations taking effect.
By January 2020, most ships in the world will be subject to restrictions on sulphur emissions under a treaty called Marpol Annex VI.
New Zealand has not ratified Marpol Annex VI yet, but the majority of ships operating here are flagged to countries that have ratified and so are bound by new emissions rules.
"Basically, ships that previously used crude oil have to switch to a lower sulphur oil-based fuel, probably diesel, and this would push up shipping costs for tractor and machinery importers that would need to passed on to consumers."
Tulloch said the third challenge facing the sector was the increase in the minimum wage.
"Many people working in our sector actually receive more than the minimum wage but there will be a flow on effect. If the lower end of the wage scale increases then all wages need to be reviewed and this causes wage inflation."
"Four or five years ago, a service technician received about $28 an hour, now that's up to $35. But despite the wage increases, we still have problems with a lack of qualified staff.
"Like many other industries, the tractor and farm machinery sector has to get better at attracting, inducting and retaining young people while also retaining older, more experienced staff. The Tractor and Machinery Association absolutely has a role in this and we need to better promote the exciting career opportunities that exist in our sector."
Tulloch said solutions around staffing would be one of the main topics at the association's inaugural conference being held in Wellington in August.
The theme of the conference is "Gearing Up" and the programme has been designed to share information on how industry members – manufacturers, dealers and distributors - can future-proof their businesses.
Speakers will include Hon Damien O'Connor, Minister of Agriculture, economist Cameron Bagrie and Professor Ian Yule of Plant Tech. The conference will end with an industry awards dinner.