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Dry season for agri investments

Johannesburg - Investment in South Africa's agricultural sector is expected to remain depressed for the duration of the year, said industry experts.

Tractor sales in the country were down 23.3% in June 2009 compared to the same month last year at 424 units, according to data from the South African Agricultural Machinery Association (Saama) released on Monday.

June combine harvester sales reported a 36% drop to 25 units during the same period.

"Our customers are under pressure because of higher input costs," said Saama chairperson Leon Pretorius. He added that potential investors are also cautious to commit to long-term debt, and banks' stricter credit criteria are depressing demand.

Maize farmers typically invest in equipment just before the key planting between mid-June and mid-January.

Saama sees agricultural equipment sales down in the region of 25% to 30% for the remainder of the year.

Investment demand may also be affected by South African maize farmers - who make up a sizeable proportion of the primary sector - cutting back on crops.

South Africa has been a net maize exporter, mainly to other African countries, over the past few years.

Johann Theron, head of agricultural commodities, trading and hedging at Rand Merchant Bank, said that this could change. The recent upward bias in the rand may make South African exports uncompetitive on international markets.

Theron added that persistent weakness in global soft commodity prices and high input costs may worsen the situation and prompt farmers to plant less in the upcoming season - which may have a further negative effect on investment in the sector.

- Fin24.com

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