Friday, July 1, 2022

High arable returns yet to be banked

Figures from the latest arable industry marketing initiative (AIMI) highlight the impact unfavourable weather had on this season’s harvest yields.

The report shows New Zealand cereal grain yields were down an average 4% across all six cereal crops despite more hectares harvested this season.

Unsold stocks of feed wheat are up 18% on last year, a sign farmers are holding onto feed stocks in the hope of achieving prices that will better reflect the cost of inflation.

Mill wheat and barley stocks on the other hand are limited, with unsold stocks down 21% and 23% respectively on last season.

This is reflected in pricing with Canterbury mill wheat selling as high as $650 a tonne, with the average of $600/t, up 43% from $420 at the same time last year.

Mill wheat prices are expected to push higher yet in line with both domestic and global supply remaining tight. 

Grower margins have been hit by soaring input costs with fertilisers hitting the bottom line the hardest, in some cases up more than 100% between time of planting and harvest.

Fuel and agrichemical cost increases follow closely on the heels of fertiliser with expectations the true cost of inflation in prices has not yet been reached.

AIMI figures show sowing intentions of most cereal crops remain similar to last season, meaning it is unlikely there will be any significant stock rebuild of limited grains such as mill wheat and barley into next season.

Meantime Mid Canterbury Federated Farmers arable chair Darrell Hydes says morale among farmers is very low with the poor harvest and skyrocketing costs.

“Although free (uncontracted) grain prices are very strong most of us have a high proportion of our crops sold on forward contracts so our returns are at last year’s prices while our costs have doubled or trebled in many cases.

“It will be a tough year for many arable farmers.”

Hydes says the prices for proprietary seed contracts have been static for many years and the profitability of what had traditionally been some of the best paying crops have been slowly eroding.

“The recent cost increases have turned this erosion into a landslide and many of these crops are not viable at current prices.

“We also get a very small share of the final price of these seeds – $2-$3 a kilogram for seed that retails for $10-15/kg and we cover all the production, seed cleaning and certification costs.”

Federated Farmers and several groups of individual growers have been meeting with seed companies to try and get the message across that if they don’t up their game now, they will have very few growers left in a year or two.

The bread wheat grower return equates to just 10 cents per loaf whether the consumer is paying for a $1 loaf or a $5 loaf. 

The arable food industry council (AFIC) is working to identify the value-add market, to get industry and growers out of the commodity mindset and the commodity market, the biggest problem being the NZ arable industry is a domestic focused industry and has not been investing for the future.

On a positive note, Hydes says conditions for sowing autumn crops have been good with plenty of moisture and warm soil temperatures.

“I always enjoy this time of the year with the pressure of harvest over and the positive anticipation of preparing ground and sowing new crops.”

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