Issues and Trends
Central North Island farmers are in recovery mode this year. This follows tight financial circumstances through the mid-1990s and difficult climatic conditions in 1998/99. Morale and confidence have improved steadily through this year, and farmers are now much more positive about the immediate future.
Virtually all farmers see tremendous potential for productivity improvements within their own properties, and as such many are looking at a range of technologies to improve production. This includes the introduction of high fertility sheep breeds put across the more traditional breeds. Finnish landrace and east friesian breeds are being used; finns more so in the northern part of the region, and east friesians in the southern areas. Most farmers are looking to stabilise these breeds out at a quarter cross in their breeding ewe flock. The combination of the higher fertility breeds, and better feeding in general has seen a significant lift in many lambing percentages throughout the region. Many farmers are now seeing docking percentages of 120-140% plus.
Farmers are also looking to cross specialist meat producing rams across the flock, particularly the older ewes. This involves a variety of breeds, but in particular texels and poled dorsets. This use of terminal sires, combined with better feeding, has seen a steady improvement in lamb weights and subsequent meat production.
A further practice that is rapidly gaining ground is hogget mating. Seven of the 20 properties monitored mated their hoggets in 1999/2000, with an overall lambing percentage of 20% across the whole ewe hogget flock. Again, the combination of the higher fertility sheep breeds and better feeding has seen farmers more inclined to mate hoggets, and it is felt that this practice will increase in popularity in coming years.
Leaving male calves entire is an increasing trend. Better fencing and better feeding are leading to increased profitability from running bulls. Many farmers are now setting up intensive beef finishing units within the farm. This practice is likely to expand rapidly in coming years, as it allows farmers to finish bulls before their second winter at weights equivalent to two-year steers.
Bovine Tb within this region, particularly the northern part, is generally on the decline. There has been a 73% reduction in the number of herds on movement control since 1995. Farmers have not voiced significant concerns over the increased levy or restriction on sales as suggested in the proposed Animal Health Board strategy. Some farmers are still concerned at the operation of safari parks and the potential source of Tb they represent. Most farmers seem to be on top of the problem and are more involved in pest control and pest management on their own properties, often in conjunction with Horizions MW.
With the low returns for wool, farmers are much more interested in meat production. With minimal returns from lambswool, increasing numbers of farmers are not shearing some lambs, particularly the first two or three cuts that will go to the works. Many are waiting to see what the McKinsey report will suggest, and hope that it is not "just another report".
Nitrogen fertiliser is being applied much more extensively over hill country throughout this region. Many farmers used it last autumn to boost grass growth coming out of the drought, and are again using it this year. Many are interested in the new fertiliser types such as PasturezealTM as a means of applying both nitrogen and phosphate.
Both farmers and consultants note that it is very difficult to get quality farm staff. While there appears to be a reasonable supply of managers, there is a definite shortage of skilled shepherds and general farm workers. This shortage is leading to an increase in wages and salaries being paid. The improvement in farm profitability has led to an increasing tendency to employ more labour, and a greater enthusiasm for the farm cadet scheme administered by the Agriculture ITO. Fewer sons and daughters are returning to family farms. Low pay, poor conditions, anti-social hours, and lack of career opportunities are seen as deterrents. Farming has a long way to go to counter these issues.
Shearing contractors also report problems attracting good shearers, due to much better pay overseas. Young people are not attracted to shearing. Top shearers would shear around 70,000 sheep a year, while the average is more around 30,000. At a return of $1 gross/sheep, out of which all expenses need to be paid, it is not hard to see why many shearers prefer to head overseas. Farmers are anticipating an increase in shearing rates into the new season.
Servicing industries have had a difficult time over the last 10 years, with many only just surviving on slim margins. There is an expectation that many will take the current higher farm profits as an opportunity to lift prices. Many farmers noted that the full impact of recent fuel price rises is yet to flow through to them.
With an increase in confidence in this sector, an increase in farm sales is likely. Farm values have fallen over the last five years but on very low sale volumes. Many sales have been amalgamations, increasing the trend to fewer, larger farms. People are much more discerning about locality and remote properties are more difficult to sell. Many feel that now that profitability has improved, smaller units of 2,700-3,000 su should sell up; while the price may not be great, at least they would be saleable.
There is some disquiet over government policies which farmers perceive as unfriendly to employers. The return to state monopoly accident insurance and the Employment Relations Bill are not popular changes in this sector.
Seasonally this year is being described as the best for 20 years, almost nationwide, with a milder than expected June to further assist pasture production and stock weight gains. Farmer morale and confidence are very high, after "eight years in the wilderness". Profitability levels for 1999/2000 have exceeded earlier farmer expectations, with the best farms achieving a 10% return or better on total farm capital.
In most areas (except parts of the Waikato) rain fell when it was needed through the summer. Many farmers admit they could have carried more stock. Store stock prices reached speculative levels. A lot of hay and silage was made, and the national average lamb weight is predicted to reach a record 16.5 kg.
There is a trend towards carrying more finishing stock in preference to breeding stock. This in turn creates opportunities for the dairy industry to supply bull calves to the sheep and beef sector.
Farmers are increasingly using new mixes of sheep breeds, with east fresian and finn being popular. Composite rams are also being used more. A stabilised quarterbred east fresian or finn sheep flock is increasingly used.
More fly strike and fungal disease problems are causing concern, as is the labour required in controlling outbreaks. The 1999/2000 season saw significant facial eczema aftermath impacts, and in Southland Salmonella bradenburg impacts were severe on affected properties.
More farmers are using egg counting kits to establish internal worm burdens. Farmers are concerned about drench resistance.
A good lambing in 2000 is expected as sheep were in good condition when going to the ram, and a mild winter is anticipated.
The spread of clover weevil is causing concern in northern areas. Farmers who have it on their properties are having to use more nitrogen fertiliser.
The establishment of the varroa mite could have significant medium term impacts on clover viability in the sward.
The survey of farmers showed that the average number of kilometres travelled annually is a very high 33,000.
Monitored farms show a sharp improvement in profitability over recent years.
The mix of farms used in the survey has changed, meaning direct comparisons are not possible, but the trend is for significantly increased cash farm surpluses.
The main reasons are the excellent growing season and the weak New Zealand dollar, rather than a big upward movement in overseas market returns.
Beef prices were up approximately 50 cents/kg in 1999/2000 compared to the previous year.
Merino farmers and those on moist hill country in Hawkes Bay and the Wairarapa had the best years of the farm models. Many achieved a greater than 10% return on total farm capital.
Anticipating the much better farm gate production and returns, farmers spent more on repairs and maintenance and fertiliser, and reduced their bank overdrafts. More capital items such as ATVs and cars were purchased.
The gap between the best and the worst farms' financial performance continues to widen. The top 10-15% of farmers are leading the rest and are generally keen to expand their farming operations, often by leasing additional land. Successful farmers are proactive in seeking advice and knowledge in their quest to increase the quality and quantity of farm outputs.
Farm input costs of fertiliser, capital puchases, shearing and local services are expected to increase, particularly if there is an imported component. Many farmers feel that wage rates will have to increase to attract farm staff.
Most farmers should budget on having to pay significantly more tax next year based on provisional assessments of this year's income.
Despite the improvement in profitability, farmers and valuers thought that higher stock values and the lack of purchases for forestry will keep land price increases in check. New farm entrants look at the total cost of going farming, not just the price of land and buildings.
Many large farms under good management are providing work satisfaction and a good livelihood for farming family owners.
Farmers are annoyed at government changes to ACC and the reinstatement of the Employment Relations Bill, which they see as a backward step.
Concern is being expressed within the industry that the Employment Relations Bill may lead to more frequent strikes at export meat plants, resulting in a permanent loss of major overseas contracts for chilled meat products.
Meat companies have high operating costs and small profit margins. Any policy or action by government that increases company costs is of concern to farmers. The seasonal nature of meat processing and the additional costs this imposes is something which needs further investigation to establish the viability of spreading the season.
The McKinsey report recommendations for the wool industry are significant, especially McKinsey's suggestion that the recommendations be accepted in total as a package or not at all.
Farmers currently appreciate that the current low NZ dollar is greatly assisting export receipts. Curiously, in contrast to bankers and economic commentators, they do not think the New Zealand dollar will appreciate much in the medium term.
Faxes, mobile phones, farming software, and the Internet all mean that farmers are able to more efficiently run their businesses.
Issues such as roading, telecommunication services, and access to other services all feature in discussions, but not as prominently now that farm profitability is restored.
Farmers are anxious that government addresses the time and costs of doing business, including compliance and RMA costs and delays.
Many farmers believe that inadequate and misdirected research is being undertaken. They see farming as the one bright spot in an otherwise lacklustre economy, and believe New Zealand should build on its strengths and competitive advantage in the primary production sector.
Farmers are concerned about the recent lapses in biosecurity and the additional risks these impose. The long term viability of organic farming is questioned, both from an on-farm and marketing
Farmers are surprised that scientists cannot provide any evidence that organic foods are nutritionally different. They say that "New Zealand, by European organic standards, is very nearly organic anyway". Many feel that MAF should be countering the "green" lobby with sound science.
Global warming impacts are of concern, and farmers are not sure why the New Zealand Government has not ratified the Kyoto Protocol.
The acute lack of young people willing to enter farming is of concern. Farm training institutes are struggling, and agricultural student numbers at universities are well down. This is considered to be short-sighted of young people, as there are, and will be, more excellent well-paid career opportunities managing large farms.
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Farm Monitoring Programme Manager
Monitoring and Evaluation
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NEW ZEALAND
Phone: +64 4 894 0623
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