HARDER TIMES FOR THE FARMER

Press, Volume CVII, Issue 31500, 14 October 1967, Page 8

HARDER TIMES FOR THE FARMER

Farming is facing challenging timtes. After a prolonged period of prosperity and expansion the industry is now in the throes of a recession.

One stock and station firm executive said this week that the position could perhaps best be brought home to people by saying that whereas about two years ago about $5 could be expected for lambs and $4 for the wool clip per head of a flock, the comparative figures would now be about $3 for lambs over the whole of a farm’s output and $2 tp $2.50 for wool. This was a pretty substantial drop. At both the last two Christchurch wool sales the market on average has been down by between 20 and 30 per cent on a year ago. Just at the moment there is no export market for primary produce that is really strong and the spectre of possible British membership of the Common Market is still close at hand. Farmers are inevitably facing substantial falls in their income and stock and station firms have to try to hold advances to farmers at about unchanged levels. It is a case of farmers having to keep their spending within their income. This means that there is going to be a pretty big fall off in farmer spending, and some even on the tightest budgets are going to find it pretty difficult to make ends meet in the current financial year. On the way that prices are shaping at present it seems that some will not be able to make ends meet Actually in some cases arrangements have already had to be made to postpone repayments of principal where money is owed to both lending institutions and private mortgagees, and also even for delays in making interest payments until a farmer’s position is clearer at, say, the end of the financial year. An extra problem with principal repayments is that they can only be made from the surplus after tax. But the numbers who are in such sore straits are probably relatively small. Farmers can be divided into a series of categories. There are those who are on old established family properties, who are unencumbered financially and who only an atomic or hydrogen bomb could shift. There are those who have been in farming since World War n and who have farmed through exceedingly good times and should be mainly reasonably well placed. There is also a group which have bought farms more recently at very high prices for land. Some of these should not be too badly placed in that they also sold out of farms at high prices and do not have a very large debt to service. Those who are in an unenviable position are those who have only recently broken into farming and who have had to borrow up .to the limit. These sort of people are likely to have trouble at present price levels to service their debt charges. In this latter category and in general farmers who are worst hit by the current recession are those whose income is narrowly based—who depend on wool and store sheep and who have little scope for diversification. Another sector that could also be feeling the pinch is made up of those on small properties.'

Another executive noted that a budget by itself was not enough—the need was for a monthly cash flow statement so that the progress of a farmer’s operation could be kept constantly under review and adjusted as the need arose. It is a case of taking remedial action before it is too late. Accountants, too, are moving in the direction of providing this sort of service and it is obvious that out of the present difficulties may come better farm planning and financial control. Someone noted this week that even in the period immediately following the boom in the early 1950 s there were some who could not meet their commitments.

It is apparent that in most cases farmers are realising the need to restrain spending

They were able to coast along well enough in good times but today their holdings may be barely economic. Some of the units settled by the Crown in recent years could fall into this category, particularly in the central North Island area. Whereas once a flock of 800 ewes might have sufficed, the need today is for a flock of more like 1500 where there are no substantial opportunities for diversification. In some areas, mainly outside Canterbury, farmers have had also to put up with reductions in production on top of lower prices for reasons such as drought, so that they have an extra burden to bear. In general Canterbury farmers are perhaps better placed than most to meet a situation like that at present. They can resort to some cropping and, although some difficulties are foreseen in disposing of next season’s bumper grain crop, the people in the cropping game will be considerably better off than those confined to a purely sheep economy. Also returns for fine wool even at the floor price are not too bad. Talking to the North Canterbury Agricultural Advisory Committee recently Mr R. C. Stuart, executive director of the Agricultural Production Council, made the point that farmers who were in trouble at present were frequently in this position because of lack of planning and budgetary control. They had not known where they stood at critical times of the year. “It is rather pathetic the mess that they have got themselves into because they did not know where they were going,” he said. All stock firms are accordingly now giving their clients this service, particularly where they could be rather awkwardly placed. Even some farmers who are in a strong position have also asked for this’service. Some, of course, have been doing this as a matter of’ normal practice for years It is time and labour absorbing but it is of mutual benefit to farmer and firm. One stock firm executive said that although it was doing this work it preferred budgets to be done by an independent outside reliable authority.

and where, for instance, it is vital to send children to board at secondary schools, sacrifices may need to be made in other directions. In this atmosphere interest in development is falling off. There are reports of farmers, who have yet to use up all money available from development loans, holding off taking up the remaining money, and of others with development loan money available to them hesitating now before taking it up at all. To quote one authority development expenditure could well now grind to a halt. There is every likelihood that expenditure on fertiliser will fall off. One authority pointed out that in recent years fertiliser consumption figures had been somewhat false in that people had applied fertilisers sometimes largely to reduce the impact of taxation. There would now be no need for this. How will stock firms regard expenditure on fertiliser? One stock firm representative said that it would be regarded as seasonal expenditure where it was used at sowing down or with sowing a crop, but topdressing could be regarded as semi - development expenditure. Capital or development expenditure as such could only be envisaged if there was likely to be a surplus on the current year’s operations —in other words if it could be done out of income.

To a significant extent it is a time of readjustment. The future of wool is something of an enigma. The question tfiat no-one can really answer at this stage is whether this is just one of those fluctuations in the market that have been experienced in the past and everything will come right again, or whether under the pressure of alternative fibres wool must permanently accept a minor role and therefore must . be permanently discounted. Of one thing many of those connected with farming are certain. A lot of people in New Zealand have not yet felt the impact of the drastic decline in earnings from the land and they may have an unhappy awakening in the next year. It is certain that the Government will collect a lot less tax from farmers.

People closely associated with farming are convinced that things are not going to be easy, but they feel that there is no need for panic. Farming is immeasurably better placed to meet a crisis than back in the 19305. Farms are in good heart. Fences and buildings are well maintained. The productive capacity of farms is much greater. Costs are unhappily still edging upwards and quite out of relation to produce values. Should the present position continue for long it is almost inevitable that Government will take some steps to ensure that no-one is forced off their property for reasons quite beyond their control. People in tt|e stock and station industry seem to be concerned that this should not happen again and there seems to be good grounds for feeling that the man who is an honest trier will be given every assistance to keep afloat. The crux of the matter seems to be that in times of extreme difficulty there is little to be gained in putting a man off a property because temporarily he may not be able to meet his commitments.