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Home / Northern Advocate / Business

Long slog ahead for farmers

By Mike Regan
Northern Advocate·
16 Mar, 2016 01:29 AM4 mins to read

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Some of the region's dairy farmers are facing stressful times as Fonterra's farmgate payout continues to slide.

Some of the region's dairy farmers are facing stressful times as Fonterra's farmgate payout continues to slide.

Times are tough for the region's dairy farmers and not looking to get easier anytime soon, says Kerikeri dairy farmer Terence Brocx, who is also a Fonterra shareholder councillor.

"Unlike previous downturns, the rate of recovery for this one is likely to be a lot slower," he says. "It's going to be a long hard slog for a lot of farmers."

Mr Brocx says struggling farmers fall into two categories - those who struggle with cost structures and those who have high debt.

However, he believes those with high debt who are prudent in their on-farm activities have more chance of getting through the downturn than those with high cost structures.

"Those farmers are likely to struggle even when the payout is good," he suggests.

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And issues such as an inaccurate weather forecast do not help either.

"Many farmers got in extra feed when they were warned about a potential drought for Northland this summer."

But the region has mainly received a good share of rain and feed has not been a problem.

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Mr Brocx has a lot of sympathy for farmers struggling to make ends meet and acknowledges there are people in the industry who are psychologically or emotionally stressed.

However, he says neighbours are rallying around and offering support where it is needed.

John Barnett, rural property specialist at Bayleys, says he has started to see some dairy farms come onto the market.

"However, some of these will have been planned for some time and haven't been just as a shock reaction to the recent payout announcement - we're always in discussion with farmers about values and sales."

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He's aware of 67 dairy farms on the Northland market at the moment, though says some have been up for sale for some time.

"What's been very positive is the number of dairy and beef farm buyers who are still actively looking to buy, which backs up what most commentators have been saying on the overall long-term picture for dairy and agriculture in general. The buyers are wide-ranging, they include non- farming investors, farmers from outside of the region, to local farmers wanting to expand their farms." However, he acknowledges Fonterra's payout forecast drop last week is putting even more pressure on some dairy farmers.

"A $3.90 payout is not a good number - but it wasn't that pretty at $4.15 either.

"There must be people who aren't going to make it. Timing is everything for those who have low equity or high debt."

On the positive side, he believes most farmers will cope.

"Farmers are very resilient people - they have had to put up with some volatility, in both the climate and the global market. It's a long-term game."

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Chris Neill at Dairy NZ says he doesn't see an upward trend in dairy farm sales as a result of Fonterra's lowered payout.

"I'm not aware of many farmers putting their properties on the market at this point.

"There are always farmers at this time of the year contemplating what they are going to be doing next season.

Mr Neill does acknowledge there are definite pressures on the dairy sector.

John Duder, manager of Wrightson Real Estate Whangarei, says he doesn't see the low payout driving a lot of properties on to the market "but that could be up to the banks.

"We've just come through a reasonably good spring and farmers are sitting on more pasture than normal for this time of year."

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However, he says there have been a "couple of farmers" who have told him they should be thinking about going to market.

As well as constantly assessing budgets, Mr Duder says some farmers are also dropping their dairy numbers but buying into beef cattle. He acknowledged that could put some pressure on the beef market long term "but on the short term it will be good for some farmers".

He says some farmers are also looking at regrowing areas of their properties in manuka to meet the growing demand for honey.

"People have to diversify, they don't want all their eggs in one market - it's happening already."

- If you have any business news, tips or ideas contact me at biz@northernadvocate.co.nz or (09) 470 2838.

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