After a brutal season for production on the farm, economists think Cyclone Gabrielle will cause further inflation, resulting in a bumpy ride for the rural sector for the foreseeable future.
Economics consultancy Infometrics said the cyclone’s impact posed a challenge for several regional North Island economies over an extended period.
“We anticipate a considerable period of disruption for parts of the North Island given the devastating effects of Cyclone Gabrielle,” Infometrics economists Gareth Kiernan and Brad Olsen said.
“Increasingly limited communications, and disrupted transport infrastructure, will also limit economic activity in the short-term.”
Wairarapa Federated Farmers president David Hayes said trade issues for farmers were much more intense in Hawke’s Bay, but farmers in Wairarapa were also feeling the pinch.
“Farmers in Hawke’s Bay are struggling to figure out where to send their livestock for processing, and orchardists are struggling to get their apples to cool stores.
“Exporters are going to be affected; there’s no doubt about that,” Hayes said.
He also noted it had been predicted that the prices of items associated with recovery – such as fence posts – would also be on the rise as demand skyrocketed.
In December last year, Rabobank reported farmer confidence had already reached a record low.
Completed in late November, the net confidence reading plummeted to -71 per cent from a previous -31 per cent.
Rabobank said the net confidence reading was the lowest in the 20-year history of the survey and far exceeded the previous low of -45 per cent recorded amid the dairy downturn in 2015.
Infometrics described economic activity across the North Island last year as “patchy”, with some areas running into capacity constraints.
Olsen and Kiernan said Infometric’s analysis suggested that a number of regional economies were already constrained at the end of 2022, but the cyclone would make the situation harder.
“There were strong levels of economic activity taking place, but limitations on how much more could be done given the pressure to find workers and resources amid rising costs.”
Now, the North Island, including Wairarapa, is in for a “considerable period of disruption” after Cyclone Gabrielle’s devastation.
“With several affected areas being major centres of food products, the destruction of crops, farms, and primary production equipment will hamper output.”
Olsen and Kiernan said resourcing the recovery from Cyclone Gabrielle would be difficult given the constraints that were already clear across the economy.
They said workers and materials would need to be diverted from other areas and other tasks to enable the recovery.
There will need to be a significant capital investment to rebuild transport networks and re-establish primary sector operations.
Meanwhile, businesses’ cash flow will be under pressure, given the double whammy of mounting costs to get back into operation and limited revenues due to the destruction of their producing assets.
Hayes said workshops would be organised in Wairarapa to help farmers get through the tough weather and economic conditions.
With more heavy rain expected today and predictions of more bad weather leading into winter, now is the time to apply for grants from MPI, he advised.
