“Farming has lost its momentum”

Press, Volume CXI, Issue 32588, 23 April 1971, Page 11

“Farming has lost its momentum”

(From Our Own Reporter)

- WELLINGTON, April 21.

Farming in New Zealand has lost the momentum which was a characteristic of the 1960 s—this is a conclusion of the report of the Agricultural Production Council on the economic position of the farming industry.

The report, which covers 130 pages, including graphs and appendices, says that the rate of increase in livestock numbers has declined. The total output for 1970-71, it says, will be similar to that of the previous season, and slightly less than 1 per cent lower than the record level of 1968-69. Since that season, meat production (especially beef) I has expanded. Wool output

has remained fairly static. There has been a decline in dairy production, grains and field crops, and horticultural products.

The report suggests that while a proportion of the decline has been caused by unfavourable seasons, these conditions have not been solely responsible for loss of momentum. Lambing percentages at 94.8 per cent in 1968 and 94.4 per cent in 1970 were lower than the average 99 per cent. A return to the higher figure would allow sheep numbers to increase again.

Cost rises A low level of farm profitability has resulted from sharply rising internal costs which over-ail have not been offset by increases in commodity prices. In addition to the increase in prices paid by farmers, off-farm costs have also risen; these latter costs are ultimately borne by farmers, as they result in lower prices received for farm output. Net farm incomes in the 1970-71 financial year are expected to be lower than in 1969-70, although on a production-year basis dairy farm incomes will be considerably higher than for the 1969-70 production year. This will be the situation in spite of a reduction in the physical volume of inputs. A lower volume of inputs per unit of livestock affects development and accentuates file effect of adverse seasonal conditions.

Debit level The low level of profitability affects the farmers’ ability to service a level of debt which has been rising at a rate which approximates the increase in land value. The burden of principal repayment becomes a major problem under these circumThe number of forced sales in the farming industry does not indicate general individual hardship but it should be noted that the lenient policies of some lending agencies and specific Government assistance have probably obscured the position, says the report. The growth of amalgamations has resulted in the absorption of numbers of uneconomic properties. In spite of Government

relief measures, inflationary pressures on the farming industry have intensified during the last 12 months. A continuation of these pressures undermines farmer condence in the future of tbe industry, and this confidence is further weakened by apprehension about future prospects should Britain join the E.E.C.

Help urged The report says positive measures of assistance are necessary. After outlining declines of agricultural production (with the exception of beef) the report says that sheep numbers have been virtually stable at 60m. Lambing percentages in 196869 and 1970-71 were 4 to 5 per cent lower than usual—down 2m or more than 25,000 tons of bone-in weight. Output of milk-fat this season is estimated to be slightly below that of last season. Meat production is expected to rise 21,000 tons, or 2 per cent. Beef is expected to rise 23,000 tons, or 6.4 per cent. Mutton production will be up 4000 tons, but lamb will be down 7000 tons.

Greasy wool production will be up to 730 m lb (from last season’s 723 m lb). Grain and wheat production is expected to be below that of 1968-69; oats about last season’s level; and barley and maize up. Gross to be up The total gross value of production in 1971-72 is expected to be 8 per cent higher than in 1970-71. The report predicts that gross farm incomes from 1968-69 to 1970-71 are expected to rise 7.5 per cent. Sheep farm net incomes in 1970-71 are expected to fall $6OO, to $5400 average. Dairy farm net incomes have fallen steadily since the peak in 1966-67, apart from the 1969-70 season. In 1970-71, with a lower gross income and higher expenditure (resulting from the 1970 drought) net incomes are expected to fall from $4710 to s3B6o—the lowest since 1964-65.

Over the period 1968-69 and 1970-71, the proportion of sheep farms with net incomes below $2OOO increased from 16 per cent to 23 per cent. Over the same period the percentage of sheep farms with incomes of $4OOO or more has fallen from 61 per cent to 55 per cent. An estimated 15 per cent of dairy farms will have incomes below $2OOO in 197071, while only 40 per cent will have a net income of more than $4OOO (compared with 45 per cent in 1968-69).

Land prices

Total farm debt has increased since 1963 at an annual compound rate of about 11 per cent, from $11,900 a farm on average to $24,700 a farm. These figures indicate the change in the magnitude of farm debt. The increase in land values, and the capital involved in increased livestock numbers has broadly kept pace with the increase in indebtedness, and an examination of the average equity per farm shows a decrease over the same period from 73 per cent to 71.6 per cent. Mortgage lending to farmers has increased from all sources, but there has been a marked decline in the relative contribution from insurance companies and from private individuals during recent months. This movement could indicate the development of difficulties in the provision of adequate long-term finance for farming.

Sharp rise There has been a sharp increase in the last 12 months in the level of short-term debt, particularly with stock and station agency companies. This has resulted from an increase in seasonal advances; an increase in prices paid by farmers, and from the increase in capital required as a consequence ofj diversion into cattle.