Farmers are riding a boom with the latest ASB index for primary sector exports surpassing its 2011 level. Lamb prices cracked the $9/kg mark and beef prices are at, or close to, record levels. There is the prospect too that Fonterra’s payout could reach $7.50kg/MS, one of its best ever.
Agriculture Minister Damien O’Connor has not been slow to put his government in line for the credit in reaching these high levels—or to argue a Labour-led government is better for farmers than National.
At least that was the implication in an answer he gave in Parliament last week.
“So farmers and growers are getting better prices for their work under this government than the last National one”.
O’Connor is one of the more effective ministers in the Ardern Cabinet but he might have been stretching it a bit in implying the high prices are due to the government.
When Labour’s Kiritapu Allan asked him what action the government is taking to help this sector, he responded:
“We’re doing a lot more than the previous government ever bothered to do. Firstly, we’re giving certainty to farmers with our recent agreement on agricultural emissions. Our just released skills work plan, developed with the sector, will attract workers—the workers that we require for the future. Our joint efforts with DairyNZ and Beef and Lamb to eradicate M. bovis are progressing really, really well, and, of course, with our $229m Budget package to support farmers on the ground, through things like catchment management groups, updating Overseer, and boosting extension services, it’s all spectacularly good news”.
Not all farmers might agree with him, particularly those in his own electorate who gathered in Greymouth on a recent weekend to protest at actions of the government.
But here at Point of Order, there’s no intention of nit-picking: instead it’s welcome news all round, when the farm sector is prospering.
Significantly the ASB expects NZ commodity prices to continue to push higher over the remainder of 2019 and early 2020.
In meat markets, it is anticipated prices will remain very high for that extended period, as the impact of African swine fever is likely to persist over 2020 and potentially into 2021. It is also expected fruit and seafood prices are likely to remain near record highs.
Recent rises in the Global Dairy Trade auctions, taking the overall rise to 8% since September, point to global demand outpacing production growth and have prompted some economists to lift their forecasts of what Fonterra could pay its suppliers this season. The consensus appears to be Fonterra might reach the top of the $6.55/$7.55 revised range it recently indicated, up from the seasonal start of $6.25/$7.25.
Farmers familiar with past boom and subsequent busts may be wary of ideas that the milk price might be moving to a higher plateau than in the past.
But the evidence points to production growth levelling off among key dairy exporters. Even in NZ the fall-off in dairy conversions, and the focus of many farmers on improving environmental outcomes, suggest the kind of production growth experienced in the past decade will not be repeated.
Astute dairy producers will be ensuring their primary focus—if in fact Fonterra gets close to the top of its forecast range—will be to reduce debt.
What would send morale in the industry surging is two or more seasons of continuing high prices—and indications Fonterra itself is back as a national champion, instead of a loss-making outfit.