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30 October 2002
Unseasonably cool, dry weather, combined with a strengthening dollar and fall in international prices will take its toll on farmers this year.
The latest Ministry of Agriculture and Forestry forecasts for the year ending June 2003 indicate that a fall in international prices and a strengthening New Zealand dollar will result in lower gross farm revenues.
To compensate, farmers and orchardists plan to spend less on capital items, such as tractors, and development.
This year’s colder than usual spring is depressing pasture growth. As a result, milk solids and meat production could be down between two and five percent for the year.
Horticultural grape, stonefruit and apple crops have been hit hard by frosts especially in Hawke’s Bay, while in Canterbury fruit was damaged by hail over the weekend. The apple crop, for instance, could be down 20 percent nationally and the grape harvest down by 15 percent.
Farmers are concerned that drought conditions could develop this summer as an El Nino weather pattern strengthens. Irrigation has begun early and there are good flows in rivers used for irrigation. Canterbury alone now has 400,000 hectares irrigated.
Dairy farmers are bracing themselves for a substantially lower ($3.70 versus $5.30) milk solid payout. This has slowed the rate of dairy conversions and cow prices have fallen, in some cases by 45 percent.
Land prices so far have not fallen dramatically. The national dairy farm model shows a 24 percent drop in gross revenue for 2002/03.
Deer farmers also expect a much lower schedule price with the price for a top-grade AP 60kg stag expected to drop from $8.05/kg in 2001/02 to $5.50/kg in 2002/03 (a fall of nearly 32 percent). This will significantly impact on deer farm incomes.
Sheep and beef farmers are expected to fare relatively better, with a 10 percent drop in gross revenue. This reflects price drops of 10 percent for lambs and 12 percent for cattle, offset by higher wool prices.
The outlook for grain crops looks good. The price outlook is high due to droughts raging in Australia and the USA. Arable farmers have enjoyed a dry spring allowing for cultivation but crops need some warmth now.
Small seed production has expanded, which should mean more grazing is available once seed has been harvested.
Many farmers have re-estimated their provisional tax payments downwards. These payments are due in the current financial year.
For more information, please contact:
MAF Senior Policy Analyst, Chris Ward, Tel. 04-474-4168