Global prices for New Zealand products from the agricultural sector, as measured on the ANZ Commodity Price Index, have risen for eight consecutive months to hit a new record in May. Prices on the world index are up 18% this year, or 17% in local currency terms.
Some economists are predicting more rises are in store this year.
The gains have gone some way in the balance of payments to offset big losses on the foreign currency front from the overseas tourism and international education sectors.
Westpac senior agri-economist Nathan Penny says being a food producer has been positive during Covid-19 as people still need to eat in times of crisis.
NZ has also benefited because its key Asian markets handled Covid-19 well and got their economies back up and running quickly, ensuring resilient demand for our products that is pushing up prices.
Rabobank’s latest survey has net farmer confidence sitting in positive territory at +13%, up from +10% in the previous quarter. In March last year the Covid pandemic pushed confidence down to -44%.
Rabobank NZ’s CEO Todd Charteris reports rising commodity prices are the key reason for optimism cited by farmers with a positive outlook for the agricultural economy.
“Since the last survey in March, dairy farmers have been buoyed by continued strong Chinese demand for Oceania-origin dairy imports which has helped maintain pricing at elevated levels. In addition, we’ve seen Fonterra announce a strong opening season forecast for the 2021/22 season of $7.25 to $8.75kg/MS, with a midpoint of $8.”
Charteris said the incremental lift in farmer sentiment came despite rising farmer concerns over government policy.
“Of the one in five farmers with a pessimistic view of the agricultural economy, 82% cited government policy as a key reason for concern.
“There are several government policies which may be causing unease among farmers, however this spike is likely attributable to concerns linked to the recently-finalised advice from the Climate Change Commission which could have potentially significant implications for NZ land use and farming systems, including future reductions in total livestock numbers.”
Charteris said worker shortages also remain a significant concern for farmers.
Normally as prices rise, farmers react by planning to produce more. Will this be the case in the coming season?
There is little doubt the country needs every extra dollar that can be earned from export markets, since the international tourist sector remains on the ropes.
But even though Prime Minister Jacinda Ardern at the recent Fieldays event wowed the farmers, she may not have convinced them that the government is on their side, or will do much to help them in the drive to lift production.
Almost casually, the government or its agencies seems determined to make life difficult for those down on the farm.
For example Waka Kotahi’s harsh cuts to spending on rural roads appeared to be made so that money can be redirected to favoured projects such as the Auckland Harbour cycleway.
This means roads that keep farms supplied and enable crops and livestock to be transported for processing will be neglected so that affluent Aucklanders can cycle over the harbour on a summer’s day.
That was followed by the “feebate” which puts up the price of the farmer’s trusty ute so that Auckland’s upper crust can get a cheaper EV.
Then there was the University of Otago report on the long-term damage, human as well as economic, caused by the bungled response to the mycoplasma bovis crisis, which resulted in the culling of 171,000 cattle.
According to the report, a “badly planned and poorly executed” process led to farming families feeling bewildered, isolated and powerless. Local knowledge, expertise and pragmatism were ignored in favour of inefficient and insensitive bureaucratic processes.
While anti-dairying lobby groups attack the industry – their latest onslaught is over so-called nitrate “pollution” – the hard fact is that without the more than $20bn the dairy industry earns in foreign exchange the country would experience a sharp fall in living standards.
So, as farmers gear up for the new season, they will be searching for the most effective strategy to improve their bottom lines. They face rising costs, which will eat into returns. But new technologies are now being applied or tested to offer ways of increasing production at lower cost.
One of the brilliant new technologies is Halter, a smart-cow collar already being adopted on some Waikato farms. It is the idea of former Rocket Lab engineer Craig Piggott who is on a hiring drive to increase staff of his start-up from 60 to 115. The solar-powered smart collar is fitted to a dairy cow and paired with an app which enables farmers to shift remotely, virtually fence their cows and monitor their health, feed and behaviour. It reduces both time and labour requirements, increases production, aids animal welfare and sustainability standards.
Farmers using them say they can split herds into multiple smaller mobs, grouping them by feed intake requirements, so cows receive precisely the right amount of feed to stay in the best condition.
A Dunedin innovator, Iris Data Science, has developed its OmniEye system, which uses a CCTV camera mounted on a post near the exit race from a milking shed. It assigns each cow in the herd a locomotion score from 0 to 3, ranking lameness with 3 meaning it needs to be drafted for treatment immediately.
Farmers receive an alert to that effect at the very next milking. It’s estimated lameness could cost some farmers $50,000 as lame cows’ milk may need to be withheld while they are treated, or culled from the herd. This company is also working on developing deep learning pasture quality prediction software.
These, and several other advanced technologies, could put the NZ dairy industry in the vanguard globally of milk production at lowest cost.
As Point of Order sees it, the dairy industry still ranks as the vital component of NZ’s export economy, without which the country’s living standards would be under threat. It is something the anti-dairying lobby groups – and some ministers in the Ardern government – don’t seem to be able to grasp.