Bullish Farmers Need to Pull in Horns
By Mark Fraser
After a couple of bullish seasons South Island dairy farmers are now needing to pull in their horns, and all the rural
business indicators show that they are doing just that.
Tractor sales have slowed, car purchases by farmers have fallen, cow prices have softened, and real estate agents report
that there has been a big increase in the number of farms listed for sale. All this will have a flow-on effect in
provincial cities and rural towns.
The reasons, of course, are the reduced payout announced by Fonterra combined with a prolonged dry period, which will
make profitability marginal on some farms. Smaller units with higher fixed costs will find it hard to break even, as
will high producing farms using expensive feed sourced off farm. This is especially true if they have high debt.
Banks, some of which could be over-lent to farmers, are likely to pull back take a tougher line. Already I have had
calls from farmers whose monthly bills are exceeding their monthly income.
At this stage of the farm business cycle and the season, all farmers need to take stock of their financial situation.
Time put into reassessing income and adjusting budgets is time very well spent. You may need to make some tough calls.
So, if you see yourself getting into trouble, the essential steps to take are:
- Cut right back on expenditure
- Avoid hire purchase
- Look seriously at rearranging your debt structure
- Get independent advice from a financial specialist
- Take action
Prompt progress on these steps will get you back in control of your financial affairs and feeling much better about
your business.