Yep, farm prices are booming and the outlook is bright – but cockies might quibble with O’Connor about the causes

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.


Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

This site uses Akismet to reduce spam. Learn how your comment data is processed.