AGRIBUSINESS
ANIMAL HEALTH
Farm software and recording companies joining forces.
Mineral boosts a smart way to lift lamb production. PAGE 19
PAGE 17
NEWS Local carpet maker’s Napier plant still remains offline. PAGE 8
TO ALL FARMERS, FOR ALL FARMERS AUGUST 1, 2023: ISSUE 781
www.ruralnews.co.nz
Tough times on farm SUDESH KISSUN sudeshk@ruralnews.co.nz
DAIRY FARMERS are taking on additional work off farm to keep up with rising interest costs and falling milk prices. However, Westpac senior agri economist Nathan Penny claims the dairy sector is well-placed to manage through this milk price cycle. He says
farm balance sheets remain strong, with many farmers having experienced downturns before so have the tools to weather the storm. Penny concedes that many farmers are doing it tough and this season’s milk price is likely to be below their breakeven point. He says a “back of the envelope” calculation, with total operating expenses of $6.80/kgMS and debt servicing costs of $1.50/kg, would put
farmers’ total outgoings at $8.30/kgMS. Last week, Westpac slashed its forecast milk price by $1.10 to $7.80/kgMS. Fonterra’s current forecast milk price range is $7.25 to $8.75/kgMS. Penny points out that breakeven estimates vary widely by farm, with some farms having larger deficits while others may still even be in surplus. “That said, farm balance sheets are generally strong. With that in mind,
plus the experience gained during previous downturns, we expect that farmers are well placed to manage through this milk price cycle.” Penny expects Fonterra to lower its forecast range in August. ANZ recently dropped its forecast milk price by 50c to $7.75/kgMS. The bank’s agri economist Susan Kilsby believes that prices will not materially increase before a large proportion of
A fond farewell!
A group of influential people from across the ag sector recently gathered in Wellington to farewell Gavin Forrest. A highly respected man who has spent more than 30 years as an advocate for the nation’s farmers. Forrest’s latest gig was as general policy manager for Federated Farmers. However, he also worked as a special advisor to several Ministers of Agriculture and as an advisor in MAF and MPI, as well as farming in his own right. Among those present at the function, appropriately held at a pub on the capital’s Featherston St, were former Ministers of Agriculture Sir David Carter and Nathan Guy, who Forrest worked with while at MPI. – See full story on page 5
the current season’s supply is traded. “What is clear is that consumer demand is being impacted by weaker economic conditions in many regions,” she says. “Most economies are still growing, albeit at a considerably slower pace than normal, which is taking a toll on dairy demand.” Kilsby expects the Chinese market to remain relatively weak for some time yet. However she believes that as milk supplies tighten, prices should improve later in the season. ASB is sticking to its forecast milk price of $7.25/kgMS and warns that a rapid recovery in Chinese demand looks unlikely, with the latest economic data continuing to underperform. One of the biggest impacts on dairy farm profitability is rising interest rates. Farmers, re-fixing their mortgages, are facing huge rises in financing costs. Federated Farmers dairy chair Richard McIntyre claims that some farmers are taking on additional work off farm to keep up with rising interest costs. He points out that while the price of some farm inputs such as nitrogen fertiliser, fuel, and palm kernel expeller (PKE) are starting to ease, there is still a lot of stress amongst farmers, particularly those with higher levels of debt. “Many have come off fixed interest rates and the significantly higher interest payments are really starting to bite,” he told Rural News. McIntyre warns that any drop in the milk price will exacerbate the problem.
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