Sunday, March 3, 2024

The world won’t end

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Don’t panic. It’s not the end of the world yet. I know coronavirus has much of the world in a tizzy while farmers here are wondering how they are going to get through the drought while trying to get out of the headlights of the oncoming juggernaut of environmental compliance. Remember, things are rarely as bad as you fear they will be.
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Yeah, I know, I’m sitting on my backside in an office writing this and not up at 3am milking or standing in a paddock looking at brown grass and dust worrying about where I’m going to get some feed now.

But I do listen. And I keep hearing people saying New Zealand’s farmers are the best and most efficient in the world and way ahead of others in terms of their environmental performance and that markets are starting to take notice of that.

And these are people who have been to meetings, farms and primary industries overseas so it’s not just a case of some Kiwis talking themselves up without really knowing if there’s any substance to the claims.

But yes, that’s all very well for the longer term because it takes time to spread the word, confirm our reputation is warranted and build markets. The one negative thing that keeps coming back is the number of people who don’t know our story and our poor performance in telling it.

Anyway, that’s bye the bye.

The immediate concerns are, quite rightly, coronavirus and the drought or, in Southland’s case, the wet.

We’ve heard an awful lot about the massive disruption the virus has sparked and seen terrifying pictures of people being carted off on stretchers, China building a hospital a week, and poor rich people stuck on luxury cruise liners.

But we’ve also heard any disruption to New Zealand’s food sales in China are a result of supply chain hiccups rather than a fall in demand. That’s good news.

And now Fonterra chief executive Miles Hurrell is on record saying there has been no significant impact on its operations, it is confident in its forecast $7 to $7.60 farmgate milk price and has no reason to revise its share earnings guidance of 15-25c a share.

He does expect some market volatility but Fonterra has already contracted most of its 2020 milk supply.

So, even though other milk price forecasts have been pulled back they are all still healthy. After the Global Diary Trade price index fell for the second time in February Westpac cuts its price 20c to $7.20, ASB by 10c to $7.40 and NZX by 3c to $7.15.

However, given Fonterra’s continued price range and Hurrell’s confidence farmers will be expected nothing less than $7.30.

And though GDT prices have slipped the amount sold is up 11% on the corresponding time last year.

The drought and the virus do highlight the nub of the issue for farmers.

We are in volatile times and who knows what might happen next but the first priority at farm level is immediate survival.

That comes down to cash.

Once again we have to look at the banks. We all know they are getting shy when farmers come calling.

And when things like drought hit and farmers lose production while using up winter feed in summer there’s going to be a cashflow pinch.

And here farmers are at the mercy and whim of not just those in the banks here but also their foreign masters.

We know the long-term future is good and there are customers who want our products. 

But when farmers hit a cashflow crunch they need to know someone has got their back. Processing companies can help to some extent but they need a bit more clout than even Fonterra can provide.

And that means the Government. This year is another example of why we need a local rural bank to make sure the country’s biggest export sector remains viable and isn’t threatened by short-term volatility. After all, farmers are being asked to do their bit for the environment and climate change on behalf of the nation so shouldn’t the nation ensure they have financial backing when they need it?

As I said at the start. Don’t panic. Many people have predicted the end of the world but not one of them has got it right.

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