Farmers’ incomes expected to fall

Press, 13 January 1982, Page 12

Farmers’ incomes expected to fall

PA Wellington Farmers’ incomes are likely to fall in real terms this year, in spite of Government supplementary minimum price payouts of up to $4OO million. The Meat and Wool Boards’ Economic Service has said that gross sheep and beef farm incomes are expected to rise about 14 per cent in the 1981-82 season. But on-farm costs are forecast to rise about 20 per cent, said an Economic Service spokesman, so that even with the - Government’s S.M.Ps. farmers’ real incomes are likely to be lower this year than last.

As a result of the costprice squeeze, spending on the farm would not be maintained at last year’s levels, he said.

The service has already warned that the decrease in farm spending is likely to hit agricultural production in future years. In a report last month, the service noted a drastic 26 per cent fall in real farm incomes last season, and a 7 per cent fall in farm spending.

The service’s estimates for the present season. for incomes and spending and further to fears of retrenchment in New Zealand’s main export industry, in spite of the expected high payouts this year under the S.M.P. scheme, which was designed to boost farmers’ confidence and so keep up the momen-

turn of production. If the S.M.P. payouts-con-tinue at present rates for the rest of the season, they will cost about $4OO million, according to Government estimates.

The estimates include $2OO million for wool, about $lOO million for lamb, and about $7O million for beef. These figures assume no significant upturn in the markets for these goods.

However, there are now signs of an improvement in the vital United Kingdom lamb market. The problems over Iran’s payment for its lamb are now virtually resolved. and a new-season contract with Iran should further boost the market. But the outlook for wool and beef remains poor. Few in the industry expect any great improvement in the current returns before the wool season ends in June.

There is also no sign of an early upturn in beef prices, depressed by high interest rates in the United States, the major market, and cheaper competing meats. More than $6O million has already been paid under the wool S.M.P. Total payments are expected to at least double before the end of the season.

One well-placed industry source predicted a total wool and meat payout of $260 million for the season.

The Ministry of Agriculture. in its annual review of agriculture, says that the

S.M.P.s in some form are likely to form a cornerstone of . New Zealand’s agricultural policy for the foreseeable future, “however unsavoury the thought may be.”

“The'reason, of course, is that the alternatives have even less appeal, particularly from the point of view of the inevitable initial large-scale unemployment that would result from the structural changes implied." The Ministry also warns that overseas reaction will probably be unfavourable. "Cattlemen in the United States, and perhaps elsewhere. will be able to claim the. S.M.P.s for beef as an export aid. But without the S.M.P.s being set at reasonable levels, this season the contraction in sheep and beef incomes would have been such as to put at risk a lot that has been accomplished over the last five years and bring further development to a virtual halt."

Dairy product export returns are above S.M.P. levels and so the Government will not have to pay out in the dairy sector. But even with high overseas returns, dairy farm incomes are also expected to be down in real terms this year. Net dairy farm incomes are expected to rise about 16 per cent this season, but farm costs will rise about 20 per cent, according To the Dairy Board’s latest forecasts.