Why this is not the time for govt to be heaping regulatory costs on farmers and requiring a culling of the dairy herd

On-farm inflation is at its highest level in almost 40 years, according to Beef + Lamb NZ’s Economic Service, and costs are expected to increase.  Meanwhile Federated  Farmers  says farmers’ satisfaction with their banks is relatively stable but more are feeling under pressure and the costs of finance are rising.

“Inflation is putting many New Zealanders and businesses under pressure, and our food producers are no different,” Feds President and economic spokesperson Andrew Hoggard says.

While Consumer Price Index (CPI) data has the annual inflation rate at 6.9%, the latest on-farm inflation rate has hit 10.2%  – the highest it’s been since 1985-86 (13.2%).

B+LNZ is concerned increasing regulatory requirements from the Government, such as freshwater and biodiversity rules, will stretch farmers even further.

Dairy farmer confidence is improving but there are challenges in export markets

The dairy industry  has  recovered some  of  its  confidence, as  its  role  as the  backbone  of  NZ’s  export structure has  moved  into sharper  relief  in the  Covid-19  pandemic.

Rabobank’s  latest quarterly survey of  farmer confidence says  it  has improved from  minus 32%  to minus 23%, with  demand  for  NZ dairy products  holding up well  since the  previous survey  in September.

The  dairy  industry  over  past  seasons   has  been the  target  of  urban critics  for  so-called   “dirty dairying”, climate  change  warriors  who want a reduction in methane emissions,  and the  government, which is implementing  new  freshwater regulations. Internally the industry was  stricken  with  the  financial  woes   of   Fonterra.

Even  now  as the  industry absorbs the evidence  for greater  confidence,  it   is  not  without  strategic  concerns.    Most  of  these  are focused  on  its  Chinese markets  following  the  problems being encountered  by Australian exporters in the  wake  of retaliatory action by  the Chinese  government.

Decarbonisation is one option for Fonterra bosses to consider as they strive to make the co-op a national champion

Rabobank’s  latest   survey    of farmer   confidence found dairy farmers more upbeat about the fortunes of the agricultural economy  than meat and wool  producers.  Dairy farmer net confidence rose to -29% (-33% previously).

Improving demand is the key reason for optimism among  dairy farmers. That’s  largely  because global demand for dairy has held up well during the course of Covid-19 with many consumers opting for simple, familiar, stable food products such as dairy during the pandemic.  And   since the last survey,  Fonterra has  lifted  the lower bound of its farmgate milk price pay-out range for the 20/21 season.

Then there is  Fonterra’s  performance  under   the  stewardship of  Fonterra chief executive Miles  Hurrell,    who  has succeeded  in  turning  the  co-op’s fortunes  around   after  two   grim  years.

Now,  as  the  global  economy  stumbles  into  a  pandemic-induced  recession,  the  dairy  industry  more than  ever   has   become   the  main prop  in sustaining  NZ’s  export capacity.

The  question  is   whether   Fonterra  – as  the  major  player  in  the  industry  – can accelerate   the  progress  it  has  recorded  under  Hurrell’s  leadership.