Dairy farm returns hit by inflation

Press, 23 November 1981, Page 13

Dairy farm returns hit by inflation

Dairy farmers' debts are increasing at a time when export returns are among the best ever experienced, according to the chairman of the dairy section of North Canterbury Federated Farmers. Mr 0. W. Thomas.

He urged farmers to leave politicians in no doubt before the General Election that it was time for something positive to be done. Mr Thomas was critical of a recently announced 20 per cent rebate on the cooling portion of dairy shed power bills.

"I believe it is as of much use to us as throwing out a reel of cotton thread to a drowning man when one has a close look at what has happened in the way of cost increases over the last two to three years,” he said. While dairy farmers' gross incomes had increased from $38,208 in 1978-79 to $46,151 in 1979-80 (about 21 per cent), net income had gone up by

only about $BOO or 5.5 per cent.

"What other section of the community would stand for this situation?" he asked.

Dairy farmers' costs, he said, had been increasing in each quarter since December, 1979, by more than 20 per cent. This was well in excess of figures quoted for New Zealand’s inflation rate. Recently the inflation rate in the dairy industry had exceeded the consumers price index by 4 to 5 per cent.The federation had continued to ask for Government action to restrain inflation, but there was no respite in sight.

There had been a very sharp and unexpected increase in total overdraft and term borrowing, a continuation of the upward trend in borrowing on overdraft, and a growth in the ratio of term borrowing to total seasonal plus medium-term borrowing.

Mr Thomas said it was thought figures showed that dairy farmers were financing more of their' seasonal requirements with term borrowing, not from choice but because not enough of export receipts were passing through to farmers.

Borrowing long-term for short-term or working capital was unwise. Dairy farmers’ creditworthiness was temporarily good because of existing export returns and forecasts. But he believed that the present levels of indebtedness had to be reduced urgently.

. "I believe for the economic well-being of farmers and the country as a whole it is about time somebody did something about the real problems facing us and stopped handing out sugarcoated pills which are soon dissipated ..."