Dairy farmers should give only passing consideration to predictions of what will happen in the industry in the next two years and instead shift their focus 10 years out, says a leading rural banker.
"I think today we hear far too much from industry commentators about the next two years and
not enough about the next 10 years," said Ian Farrelly, general manager of the ASB's rural banking.
BNZ chief economist Tony Alexander startled many dairy farmers in February when he said the high exchange rate for the New Zealand dollar could drive down Fonterra's payout for milksolids as low as $2.50 a kilogram for the 2005-2006 season.
If the payout dropped that low it would be an "unsustainable shock" to farmers with high levels of borrowings, he said.
Alexander predicted a range of $3 to $3.50 a kilogram next season, compared with the company's forecast of $4.15 a kilogram this season.
Fonterra has since gone to special lengths to emphasise that its payout is determined by more than just exchange rates.
Fonterra chairman Henry van der Heyden has promised that payouts would not drop below $3 a kilogram for milksolids.
Farrelly told a bank field day at Orari, about 30km north of Timaru, that dairy farmers should be mindful of but not worry too much about the payout in the relative short term, or the views of economists.
Instead, they should look at where they wanted to position their business in 10 years.
"If you reflect on the sort of growth rates that a lot of you will get, it has come from making bold but conscious long-term decisions," said Farrelly.
- NZPA
