Farmers Face a Challenging Year

NEW ZEALAND - Farmers recovering from drought are likely to have a challenging year due to rising costs coupled with economic uncertainty, according to the Ministry of Agriculture and Forestry’s latest report.
calendar icon 19 December 2008
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MAF Deputy Director-General, Policy, Paul Stocks says the Pastoral Monitoring Report 2008, released today, showed that dairy, deer, and sheep and beef farmers had had a tough season and were preparing for rising costs in the year ahead.

“The pastoral sector was significantly affected by the drought last season. One of the biggest challenges for farmers in the coming year will be recovering from drought as well as managing the potential increased expenditure associated with rising prices for core products and services,” Mr Stocks said.

“Due to the economic downturn, price expectations for New Zealand’s agricultural commodities in export markets are generally lower than initially anticipated. However, the falling exchange rate in October and November 2008 may offset some of the weakening in international market prices.”

The report showed that profitability varied across the pastoral sector.

“Dairy revenues are expected to be down as payouts recede from the previous year’s record high, while sheep and beef farmers are in a finely balanced situation after the previous year’s drought. There is less stock on hand and supplementary feed supplies are low,” Mr Stocks said.

“Sheep and beef sectors had a tough season with drought and increased expenditure on-farm. The combined effects of land use change and drought led to a 4.3 million (11 percent) decline in sheep numbers in 2007/08. For the 2008/09 season, farmers were cautiously positive – they expected lamb, wool and beef prices to improve and the exchange rate to drop. However, continued increases in on-farm costs and less stock on hand are expected to offset some of these gains.

“At the time of publishing, dairy farmers were expecting profitability to decrease due to increased input costs. They also expected a likely drop in the dairy payout to offset the expected higher milksolids production.

“Deer farmers’ profitability for venison improved in 2007/08 despite falling velvet prices. In the year ahead, farmers expected that venison prices and revenue will continue to improve.”

The annual Pastoral Monitoring Report provides information about the production and financial status of dairy, deer, and sheep and beef farms as well as broader trends, issues and sector concerns.

The report is compiled from feedback from pastoral farmers each year and helps MAF to track the sector’s progress and growth. The models in the latest report were prepared between June and August 2008 and are based on farmer and industry expectations at that time.

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