Farmers optimistic despite tough times

Thursday 27 September 2007
Horticulture and cropping farmers optimistic despite tough times

The Ministry of Agriculture and Forestry’s (MAF) 2007 monitoring report into the status of the horticulture and arable sectors shows growers in some sectors expecting low or negative profits from the 2007 harvest season, with the recent high exchange rate reducing export returns.

The report also, however, illustrates grower optimism and resilience, and notes ongoing investment in the horticulture and arable sectors in order to improve returns in the medium term.

The report is based on model operations designed to typify average orchards, vineyards and farms, and uses information drawn from surveys of real growers and a wide cross-section of agri-business. It monitors the production and financial status of operations and also trends, issues, and sector concerns.

The report’s editor, Principal Adviser Irene Parminter, says poor returns are expected for the pipfruit and kiwifruit models in 2007, despite optimism earlier in the year when growers were surveyed.

The Marlborough wine grape growing model continues to make a profit, and good yields in the 2007 harvest improved the profit achieved in the Hawkes Bay wine grape growing model compared with the previous season.

The arable model achieved an increased operating surplus in 2006/07 but this is reflected in increased crop on hand, rather than cash in the bank.

For the kiwifruit and pipfruit models, the 2007 season continues a run of depressed financial outcomes since 2003, although outcomes were better in the 2006 harvest season than in 2005.

“These growers, especially those on small-scale properties, have increased their reliance on off-farm income and investments,” says Ms Parminter. “As well, many have moved to suspend principal repayments.”

The report finds the exchange rate has been the most significant influence on grower revenue in 2007, resulting in a reduction in export returns and increased competition from imported produce on the domestic market.

“The unprecedented appreciation of the New Zealand dollar during the main selling period for pipfruit and kiwifruit (March to July) has eroded export returns by up to 15 percent” Ms Parminter says.

Most crop sectors are maintaining operating costs under tight control, due to the low incomes achieved in 2006 and/or uncertainty about the level of returns that will be achieved in 2007.

“In the vegetable and arable sectors where fertiliser, electricity and fuel costs make up a significant proportion of total operating expenses, cost increases in these inputs are affecting financial outcomes.”

However the report also notes that growers are continuing to spend on repairs and maintenance, and to develop their orchards, vineyards and farms. In the kiwifruit sector this includes investments that will improve production levels, and in the pipfruit sector, growers continue to redevelop orchards to more preferred varieties. Expansion continues in the wine grape growing sector with a total of up to 4000 hectares expected to be planted in 2007 and 2008.

Horticultural and arable growers are largely optimistic for the future, with pipfruit and kiwifruit growers expecting lower exchange rates to improve returns, and arable farmers expecting global biofuel demand to lift crop prices.

The variation in profitability of the main horticultural crops has prompted some land use change. This is particularly evident in Marlborough with the conversion of less-profitable horticultural, arable and pastoral land uses to wine grape production.

“Widespread land use change is, however, unlikely in the other sectors covered in the report in the short-term.”

The full horticulture report can be viewed online on the MAF website at:
http://www.maf.govt.nz/mafnet/rural-nz/statistics-and-forecasts/farm-monitoring/2007/horticulture-and-arable/2007-horticulture-monitoring-report.pdf

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