Crisis: but no one is listening

16-08-2010 | Alan Emerson

Farmers' take-home pay is down to a paltry $88 a week but no one seems to realise the flow-on consequences for the entire country.

The latest Ministry of Agriculture and Forestry report on the profitability of sheep and beef provides sober reading.

Farm incomes are down, confidence has plummeted and there appears little light on the horizon.

While internationally prices are good, the return to the farmer is pitiful.

According to MAF the average lamb price this year is $8.43 down on last year and we weren't making much back then.

Further, farm surplus for reinvestment fell 37% to a mere $19,300 and cash surplus fell to $6900 and you can't survive for long on that.

Farmers were budgeting for a cash surplus in the coming year of just $4400, a paltry $88 a week.

As an industry we can't survive on that basis but what interested me was the lack of any real coverage in the non-farming news media.

The story just didn't rate.

Mind you, it didn't rate with the Government or the Reserve Bank either, with the Official Cash Rate increase to provide just one more hit to a punch drunk rural sector.

The issue is that the story is greater than just farm incomes being down again.

If farmers earn less they obviously spend less and that has an effect on all of New Zealand and a major effect on the provinces.

Also, because of profitability or lack of, it farms change to other production, be it forestry or dairy support and the labour component is further reduced. That exacerbates the already high unemployment statistics, especially in provincial NZ.

As I see it we don't have a problem, we have a crisis.

As I wrote last week our crisis in the meat industry is caused by drastic over-capacity.

It would be logical to suggest with reduced profitability the over-capacity problem is going to get much worse.

With forestry the figures are extremely good compared with meat and wool.

In coastal Wairarapa the return for carbon is far greater than what can be achieved with any other land use. It is inevitable in my opinion that trees will be planted.

Further, according to Federated Farmers 20% of sheep and beef farms could be replaced with forest if the ambitions of foreign owned carbon foresters and the Government are realised.

The Feds' figures are frightening - talking about losing 2800 farms, 11.4 million stock and a billion dollars annually from our $5 billion industry.

The effect that will have on the country is huge but, effectively, what the Government is doing is telling us there is a greater future in carbon farming than in sheep and beef.

In addition the recent Feds farm confidence survey showed just 2.9% of farmers expected the economy to improve, a mere three out of 100.

So what's happening?

Beef + Lamb NZ and the MIA are having talks.

There is absolutely nothing from the Government, Feds are making the right noises but for some reason they're achieving little traction in the general press.

We are talking about an industry in real crisis with resultant downstream effects of loss of equity, investment, purchasing power and employment opportunities that will affect the entire country.

While farm prices have dropped logic would suggest they have further to go and that would be catastrophic.

And what no one is talking about is the mental health of our farmers, especially those involved with sheep and beef.

They're actually between the proverbial rock and hard place with very few real alternatives.

Carbon farming, while appealing to foreign investors, won't pay the interest bills for some years into the future.

If the dairy price comes back there will be less income from dairy support.

I would argue we have a lot of farmers needing professional support and with it guidance.

The problem is that no one is listening.

If, for example, our tourism industry was going down the same hole our sheep and beef industry is, there would be loud cries, politicians of all persuasions would be racing to the rescue and there would be unsurpassed news media frenzy.

What do we have now?

Nothing.

Mind you, just last week Economic Development Minister Gerry Brownlee announced an additional $40 million for the NZ Venture Investment Fund.

That was on top of the $160 million the Government had already provided.

Brownlee said the Government was partnering with the private sector to "improve NZ's economic performance".

The money will be invested in early stage businesses requiring $2 million to $5 million in capital.

I know quite a few farms that would require between $2 and $5 million in capital but they're not early stage businesses - they're more of the closedown variety.

I wonder if the Government would contribute $200 million to them?

*Alan Emerson is a semi-retired Wairarapa farmer and businessman; dath-emerson@wizbiz.net.nz

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