The price of machinery may increase soon as the effect of the energy crisis catches up with the industry, the executive director of the Farm Tractor and Machinery Trade Association (FTMTA), Michael Farrelly has said.
Speaking on the Agriland Media Group broadcast series, Farmland, Farrelly said that although sales are performing well and order books are full for many machinery manufacturers right now, that is largely because many dealers had put in orders in advance.
Although Farrelly is unsure exactly when the effects of the input cost increases will be felt for the sector, he said that resulting price rises are unavoidable in an energy and fuel-heavy industry.
“When it comes to machinery, energy is used in everything. There’s rubber on the wheels, the process of vulcanisation for tyres uses huge amounts of it,” Farrelly said.
“In a factory, you’re transporting in your raw materials and you’re transporting out your finished product and that’s all fuel costs. Then, if you want to brand any machinery, you’re turning on ovens to bake paint.
“Traditionally, you might have a rise in the cost of a single component or material, but now, everything is going up.”
Manufacturers are trying to deal with rising costs of all raw materials and while Farrelly reiterated that sales remain stable for now, he added that it is difficult to predict what is going to happen in the sector long-term.
Demand for machinery
Speaking about a potential drop in demand, Farrelly said he is confident that it will not fall too dramatically, thanks to an increase in some commodity prices such as the current price being paid for milk.
“The increase in milk price has probably compensated for the increase in input prices, so I don’t think you’ll see the dairy farmer pulling back from what they planned to do.”
Agricultural contractors make up a significant portion of the market for the machinery industry and within the contractor’s business, a large number of their customers are in the dairy sector, Farrelly explained.
Due to the recent increases in milk prices, Farrelly anticipates that the market for contractors will remain relatively sturdy, as strong demand from the dairy industry continues.
You can watch the interview in full on Farmland by clicking here.