Battling the slowdown: Strong dollar puts farmers on 'wait and watch' mode

The strength of the dollar and an unchanged payout forecast from Fonterra mean Northland dairy farmer Graeme Hewlett is treading water.

Hewlett, who farms at Mata, says he is reluctant to spend on his business. "There's not a lot of money left over to invest in development on the farm."

Fonterra has warned that even the forecast of $4.05/kg of milk solids could be threatened if the dollar stayed strong and Hewlett said he wasn't hoping for an increase.

"There's no reason why they should lift it ... with the dollar where it is."

Federated Farmers president Charlie Pedersen says there is "a slight hiatus" in the farming sector's activity because of soft commodity prices.

Farmers are waiting to see what happens with the dollar.

But yesterday's GDP figures show the farming sector grew by a robust 0.9 per cent in the June quarter, and was up 3.7 per cent on the year before.

Pedersen believes farmers have a strong underlying confidence in their businesses which have done well in recent years. Productivity is good because of a period of reinvestment.

The increasing size of farms - due to rationalisation - will help them in tougher times, he says.

"The sector's pretty confident but it's just kind of waiting for the New Zealand exchange rate to kind of balance out the fact that we've been in a commodity trough.

"New Zealand is well-known for producing what the consumer really wants to eat overseas, and with good levels of food safety and the food all produced in a pretty natural sort of way."

He remains optimistic world trade talks could get back on track and said New Zealand was well-positioned to take advantage of any liberalisation in agriculture.