Farmers forecast ups and downs for primary sectors

November 5, 2010

Farmers forecast ups and downs for primary sectors

The Ministry of Agriculture and Forestry’s annual Farm Monitoring Overview, which was released today, shows the fluctuating fortunes of the various pastoral and horticultural sectors is likely to continue into 2010/11.

The report, which collates data and farmer forecasts from the various monitor farm programmes, shows farms went into the 2010 winter with lower than desired pasture covers and stock condition, thanks to widespread drought.

The very wet winter in some areas resulted in a struggle to maintain stock liveweights.

Prior to the storms in Southland and the Central North Island in October 2010, the current spring lambing had been expected to match the record-setting 2009 lambing percentages.

However, an early MAF estimate suggests the national lamb kill will be down 1.2 million this year against last year, and the average Southland sheep and beef farmer will make a loss of between $30,000 and $40,000 this year, directly as a result of the storm.

On the profitability front, wool income is expected to rise 5 percent to $44 300 due to an expected lift in wool weights and wool price. Early indications are bearing this out.

However, as with all sectors, exchange rate volatility will continue to make future profitability uncertain.

In the beef sector, the up-and-down forecast is repeated, with cattle revenue expected to fall 3 percent on 2009/10, while grazing income is expected to increase a further 16 percent.

Dairy farmers are expecting to scale back development and expansion plans and concentrate on generating cash and reducing core debt. There is now a healthy recognition that cash flows and equity vital to the long-term sustainability of the industry.

As well as quelling the appetite for expansion by debt, the global credit crisis has had a positive impact, through a drop in interest rates, which represented a significant saving for farmers on floating rates. The majority of farms have a portion of their debt on fixed rates, so the impact will continue to flow through as these loans come off fixed rates.

Dairy farmers are well aware of the need to improve environmentally sustainability. The current focus is effluent systems, with many systems in need of an upgrade. However, a number of farmers are delaying any decisions because of limited finances and uncertainty around regional council expectations.

Deer farmers’ projections are for a modest rebuilding of deer numbers in 2010/11 and beyond rather than the boom and bust fashion of previous price cycles.

Kiwifruit and arable growers are cautiously optimistic about the year ahead as the world continues to recover from the global economic crisis. Generally, these growers are budgeting for steady to increased profitability in their businesses in 2010/11 (2010 year for pipfruit) although the outlook is more uncertain for the viticulture and pipfruit sectors.

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