Why things are looking up for farmers

Optimism in the primary sector is being reflected in the strong level of interest being expressed in pastoral and horticultural land. Photo / Supplied

Farmers may rightly feel under siege in recent months, from the weather as much as from media coverage about the environmental impacts of farming, the rise of alternative proteins, and the tough toll the job can have on mental health.

But looking through the weather's challenges and negative headlines, the farming sector has a highly positive story to tell as the farming year approaches its seasonal end.

Without exception every part of New Zealand's farming sector has enjoyed a positive profitable year in terms of returns, delivering record incomes to provinces from Kaitaia to Bluff.

Latest data from Beef + Lamb New Zealand (B+LNZ) will provide welcome end of season news for dry stock farmers, many who battled with tough times through the mid-2000s where farm incomes dropped to their lowest point since World War II.

In its latest economic service forecast B+LNZ has revised farm profit before tax up to $126,300 for its general "all classes" sheep and beef farm for 2017-18. That is a lift of 39% on last year.

B+LNZ head economist Andrew Burtt said the positive news reflected strong returns for both sheep and beef coinciding.

Sheep revenue is expected to be up 22%, with lamb values revised well up on the start of the year, pushing 661c a kg or about $120 a head thanks to a shortage of stock heading into the tail end of the season.

Despite export volumes being almost exactly the same as last year, the lift in value will push the sheep meat sector over the $3 billion mark for the first time in history.

Beef is also facing total returns with the magic "3" in front of it, expected to earn the country $3.2 billion this year, with a lift in value offsetting a 5% drop in export volumes.

Despite global beef production increasing, a growing Chinese appetite for beef is helping underpin the strong prices, while continuing growth in the United States economy has kept New Zealand's sales of beef there buoyant.

"This is a really positive thing when we consider where the NZ dollar is, compared to 15 years ago. It indicates market demand is strong, and our key markets are in very good health."

While there are murmurings on concerns over any trade war between US and China, Andrew Burtt qualifies that it is largely words so far.

He also points to a level of reliance upon New Zealand product in a market like the US, where feed lot beef requires New Zealand's leaner grass fed beef to be blended into it.

"And as a supplier New Zealand is still regarded as a very safe, reliable and consistent provider for a market that is still experiencing strong growth."

A shortage in venison numbers and a concerted effort by DeerNZ to develop new off-season market niches has meant that sector is also experiencing record high schedule returns on meat.

"Building year-round venison demand and more consistent prices throughout the year have long been industry goals," says Deer Industry NZ marketing manager Innes Moffat.

Demand is running comfortably ahead of available supply as farmers work to rebuild their herds after an industry slide through the 2000s.

Meantime across the fence in the dairy sector a tumultuous couple of years have steadied out this season, with Fonterra revising up its expected milk solids payout to $6.55/kg milk solids.

Such a solid figure puts dairy farmers, many who have had to take on additional debt in the past two years to cover the poor payouts, on a more confident footing.

DairyNZ economist Matthew Newman is also cautiously optimistic about the coming season, with expectations the dairy payout will be close to this year's figure, and production this year is likely to only be down by about 1%.

"The good news has also been that as an industry we have managed to keep farm working costs low. For 2016-17 they averaged $3.75/kg milk solids. While likely to be up slightly this season, they are still significantly down on where they were at their height of $4.33/kg milk solids, back in 2013-14."

Overall the dairy sector is expected to generate $16 billion in earnings this year, up on the $13.4 billion a year ago.

Horticultural returns are also looking highly positive across all crop types, with Zespri anticipating at $2 billion-plus crop for the first time this year. Apple growers are also 10% up in volume with highly positive sales prospects across all overseas markets.

Industry leaders' greatest concern in recent months has been more around finding pickers for harvesting and processing fruit, rather than where that fruit will be sold.

Bayleys national country manager Duncan Ross said the optimism in the primary sector is being reflected in the strong level of interest being expressed in pastoral and horticultural land. He said that interest was coming from both existing farmers and from outside investors looking for strong returns in markets with sustainable prospects.

"There have been some tough years across all sectors, and it is rare they all align as they do. But it suggests there is a maturing of our primary sector, focusing on providing increasingly wealthy markets with high quality, safe and sustainably sourced food – it is a great time to be part of the primary sector."