Farmers' income tipped for modest rise

Increased costs mean the average rise in income for farms and orchards will be modest at just under $6400 in the year to next March, the Ministry of Agriculture and Forestry predicts.

So the country's 80,000 farms and orchards would remained wary of flashing their chequebooks about, despite greater confidence thanks to a weaker dollar, MAF's monitoring and evaluation manager Peter Gardiner said yesterday.

"We expect a cautious approach to spending from farmers over the next 12 months."

Hayley Moynihan, senior analyst at rural lender Rabobank, agreed that farmers would remain cost-conscious.

"We certainly see the farmers looking more closely at costs as well."

Gardiner stressed that the effect of the projected rise in income would vary from sector to sector.

The ministry's Situation and Outlook (SONZAF) projections are based on interest and exchange rate assumptions from the Treasury's Budget forecasts.

They show all agriculture and horticulture sectors gaining gross revenue in the current March year for an overall total of $18.3 billion, up 8.7 per cent.

Dairy is tipped to be up 8 per cent at $6.1 billion, beef up 12 per cent at $2.3 billion and fruit up 20 per cent at $1.48 billion.

The rural sector's confidence had turned around since the start of the year because of the falling dollar and there were greater expectations of profitability.

SONZAF predicted exports in agriculture, horticulture and forestry would surge by $2.2 billion or 14 per cent to $17.9 billion next year and would top $20 billion by 2010.

But the cost to agriculture and horticulture of doing business - including price rises for items such as fuel, fertiliser and transport - are also projected to rise 8.8 per cent or $825 million in the year to next March.

Gardiner warned that energy costs - which account for about a fifth of farm production costs - were likely to remain high.

Supplementary feed costs would be pushed up by the cold weather this winter.

Gross agriculture and horticulture revenue would dip in 2008 as dairy and meat prices retreat before growing again.

MAF picked that dairy payout would average $4.10/kg of milksolids this season, compared with Fonterra's $4.05/kg estimate.

The average could dip to $3.96/kg in 2008 before heading well above $4 again in the next two years.

Dairy would keep expanding over the next five years but at a slower rate - the sector faced the need to further address environmental issues.

MAF also predicted that the average export forestry prices would fall.