Wednesday, July 6, 2022

Drought cost will be billions

Drought declarations have extended across the bulk of the North Island as the government begins to count the cost in billions of dollars to farmers and to the economy.

From their trade mission in Latin America Prime Minister John Key and Primary Industries Minister Nathan Guy said the drought was now a wide-scale adverse event with serious economic ramifications.

South Auckland, Bay of Plenty, Waikato, Rotorua-Taupo and Hawke’s Bay joined Northland under drought declaration last week, with East Cape, Manawatu-Rangitikei, Taranaki and possibly some regions of the South Island expected to follow soon.

The area already declared is wider than in the 2007-08 drought, which was blamed for pushing New Zealand into recession ahead of the Global Financial Crisis.

“So we know it will have an economic impact, it’s just a matter of how much. No one is quite sure,” Guy said.

He said it was too early to give a definitive figure but he envisaged it was in the range of a billion dollars already.

Farmers had at least had a reasonable spring so some had quite a bit of feed in store but he was concerned about the pastoral care of farmers and the welfare of animals if the drought continued to bite.

NIWA had told him significant rain was at least a couple of weeks away.

"Of course, they told me that two weeks ago as well,” he said.

Farming leaders welcomed the government recognition and the limited range of assistance that comes with the declaration of a medium-scale adverse event.

“This extended period of hot and dry weather over the last couple of months has left dairy and sheep and beef farmers alike with parched paddocks and burnt and stunted feed crops,” Federated Farmers Waikato president James Houghton said.

“Most farmers have been either feeding out supplementary feeds or de-stocking, but the situation has become critical as supplies dwindle and farmers are being forced to sell valuable capital stock. 

“The moisture deficit is so high in many places that even if it started raining now it could be about four weeks before grass recovers enough for stock to graze on.”

Federated Farmers national president Bruce Wills said the days of farmer welfare were long gone.

The biggest benefit farmers gained from a drought declaration was psychological, signalling events had gone beyond their control and that it was okay to ask for help.

“An official declaration tells the banks just how bad things are and if farmers keep their banks fully informed, I am confident the banks will work with them in return,” Wills said.

“It also means that Inland Revenue has discretion on things like income equalisation, but you are not excused any tax obligations.”

Manawatu-Rangitikei president Andrew Hoggard urged radio hosts to pull up callers who accused farmers of being “whingers seeking handouts”.

“Comments like these hurt because farmers work hard to do the best they can for their families and their livestock.

“A Rural Assistance Payment (RAP) is only for farmers who have no income, no savings and literally no means to buy a loaf of bread.  Anyone qualifying for one will be on the absolute brink,” Hoggard said.

All of the relevant authorities have agreed Manawatu-Rangitikei now qualifies to join the drought-declared regions and after taking advice from the Ministry of Primary Industries, Guy is expected to make that call this week.

Taranaki authorities met in Hawera late last week to call on the government to declare a drought after a month without significant rainfall.

ANZ Bank, the largest rural lender, is providing a drought-assistance package for its farming customers in the declared regions.

It is designed to help farmers meet short-term cash requirements and re-establish farms to full performance when conditions improve.

BNZ has extended an immediate $100,000 overdraft at a concessional rate of 6%, as well as some emergency family assistance up to $10,000.

Other banks have announced similar relief measures.

ANZ economists have calculated the drought could trim 0.5% from gross domestic product by the end of the year.

However, they point out there is a short-term boost to rural economies from drought, as farmers send more animals to slaughter.

More than 100,000 extra cull cows have been killed this year compared with last year at the same time, an increase of 60%. Almost all of that increase has occurred in the North Island.

The lamb kill is also 1.2 million ahead of last year, also mainly in the North Island, which is 22% ahead.

However, dry autumn conditions will have an impact on cow and ewe mating weights and will drive down calving and lambing results next spring.

In those ways, along with many others, the effects of the 2013 drought will be felt by farmers for a long time.























Related stories: The heat is on in the northBank of NZ offers 6% overdrafts for drought-hit farmersHot summer taking tollNorthland drought tax reliefDrought declared in NorthlandDrought declaration sought for HBGovt extends North Island drought zoneFears drought costs have hit $1 billion

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