Drought dries up spending

Bay of Plenty dairy farmers have closed their wallets after losing an estimated $74 million as a result of last summer's drought.

Tauranga Chamber of Commerce chief executive Max Mason said the impact of the lost revenue was being felt across the region's economy, especially by businesses that rely on the agricultural sector.

"The small and large firms who supply the industry are often forgotten and the drought will have impacted on their livelihoods and survival. Also, our growing national business confidence falters because every time yet another big event affects our economy, there is less positivity."

Te Puke company Bradstreet Contractor's income was down $450,000 this year and its workload had halved because of the drought. Owner Peter Bradstreet said this had a big impact on the business but he had learned "to go with the flow".

Another business owner, Kerry Masters of The Equipment Centre, said farmers were not buying or maintaining machinery unless it was absolutely needed.

"I'm only called in when they can't wait any longer, most of the work is towed in on a truck and I've just billed out $16,000 for a new gear box on a tractor."

His revenue had dropped $50,000 this winter, he said.

Figures from Dairy NZ show an 11 per cent drop in Bay milk production compared to the previous season which equates to an average loss of $95,000 to $135,000 per farm. Farmers were also having to borrow more money.

Nationally, they racked up $2.5 billion of debt with banks from January to April this year. The Ministry for Primary Industries' pastoral farm monitoring report says rural debt was $50 billion in December 2012 with dairy farmers owing $33 billion. BNZ economist Doug Steel said cash flows in the diary industry had been restricted.

"But [Fonterra's $7/kg of milk solids forecast] from Fonterra is certainly a big plus looking further afield into 12 to 18 months so in some sense it will relieve some concerns."

Te Puke Economic development group managing director Mark Boyle said trades and services work had slowed but the district's economy was already sluggish due to Psa.

Bay of Plenty Federated Farmers provincial president Rick Powdrell said many farmers were running their overdrafts at higher levels to cover costs.

Feed costs had increased by 20 per cent to $25,000 to $45,000 per farm.

Dairy NZ regional team manager Craig McBeth said the sector was used to peaks and troughs.

"It's pretty tough in a season not to make any money or lose money, but next season the payout is looking stronger."