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Cautious optimism in hard times

Although Wairarapa farmers are having to tough it out in the face of widespread cash losses during the current financial year, a new nationwide survey suggests there is a sense of increasing optimism in the rural sector.

Federated Farmers Wairarapa meat and wool chair Richard Fairbrother told the Times-Age that depressed sheep prices, an economic downturn, and high on-farm costs and interest rates are just some difficulties farmers are facing in the region.

“Farmers are looking at their costs and having to tighten their belts,” he said.

Fairbrother noted the “very dry” January and February conditions mean farmers are looking for rain.

“Dams are getting low, while some are feeding supplementary grain and baleage to ewes, and that is an added cost,” he said.

Because Wairarapa’s hill country is heavily geared toward sheep farming – 70-80 per cent versus 20-30 per cent cattle farming – depressed sheep prices are having more of an effect locally than in other parts of the country.

“Everyone is digging in at the moment and hoping prices will rebound sooner rather than later,” Fairbrother said.

However, Federated Farmers national president Wayne Langford has noted that despite such concerns weighing heavily on farmers, the organisation’s latest confidence survey shows an improvement over last year’s, which hit record lows.

“It’s good to see the first improvement in farmer confidence for quite some time now,” Langford said, although he cautioned “it’s only a slight improvement, and it’s coming off a very low base”.

“Most farmers are still feeling that general economic conditions are bad, and most are still making a loss.”

“Where we are seeing a shift is in the number of farmers who expect things will improve in the next 12 months.”

Langford said there are several factors behind the recovery in confidence.

“Inflation is slowing, interest rates are high but have hopefully peaked, and commodity prices – at least for dairy – seem to have stabilised,” he said.

The election of a government that is committed to modifying red-tape regulation has also contributed to increased farmer confidence, he said.

“Times are tough, but there’s a sense of cautious optimism.”

Meanwhile, the recently released Mid-Season Update 2023-24 from Beef and Lamb New Zealand [BLNZ] has confirmed that “times are tough”, and farmers must “dig deep” to compensate for widespread cash losses in the sheep and beef sector.

The BLNZ report showed the forecast had “worsened significantly” since the October outlook due to the economic recovery remaining slow in China, and Australian exports of red meat being larger than originally forecast.

BLNZ forecasted New Zealand farm profits would be down 54 per cent to an average of $62,600 per farm.

“This is a 67 per cent fall in farm profit from the 2021-22 year to profit levels not seen since the ’80s, except for during the Global Financial Crisis,” BLNZ said.

However, the report does contain some positive trends, including that beef was holding up much better, thanks to demand from the United States.

Demand for lamb in Europe and the US has also been strong and is expected to continue this season.

“Certain farm classes, such as high country, hard hill country, and South Island hill country, are hardest hit with profitability due to their heavier reliance on sheep revenue,” BLNZ said.

“The East Coast region, still recovering from Cyclone Gabrielle and ongoing wet weather setbacks in 2023, is projected to have the lowest regional profitability.”

BLNZ chief executive Sam McIvor said that, due to stubbornly high input costs, many farmers have worked hard to cut costs.

“My conversations indicate they’re leaving no stone unturned to find additional savings,” he said.

“This is especially true for farmers with relatively high debt levels.

“They’re also looking to maximise income and taking stock to heavier weights and where feed allows, this is commonplace.”

McIvor observed that although interest rates are a significant issue, the sector could draw on its legacy of tenacity to weather the cyclical storm.

“I would expect bankers will be working to support farmers during this tough period, as the sector’s longer-term prospects are strong and it will recover,” he said.

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