Sheep farmers face $250M debt

Press, 19 August 1983, Page 3

Sheep farmers face $250M debt

Farm editor

Sheepfarmers must face a debt in the Meat Industry Stabilisation Account by the end of the year which could be as high as $250 million, said the chairman of the Meat Board, Mr A. M. Begg, yesterday.

The board is nearing the end of its first full year of centralised marketing of export sheepmeats. The expected M.I.S.A. indebtedness will be a four-fold increase in the debt level at the end of 1982.

"This is a debt incurred through the price-smoothing scheme on behalf of all sheepfarmers and will have to be repaid by them when prices recover,” Mr Begg said yesterday. However, the M.I.S.A. debt to the Reserve Bank financed on 1 per cent interest, is only a quarter of the nearly $1 billion shortfall in export returns this year below the farm maintenance levels established by the Meat and Wool Boards’ Economic Service. The service has said that expenditure by farmers this year needs to be $27 per stock unit to maintain farm output for the future. A meeting of the Meat and Wool Boards’ Electoral Committee in Wellington yesterday was told that the total shortfall in export receipts below farm maintenance levels could be calculated by adding: • The projected M.I.S.A. debt — $250 million. • The total supplementary payments by the Gov-

ernment to sheepfarmers this year — $350 million.

• An additional shortfall below farm maintenance levels already predicted by the Economic Service at $5 per stock unit — $350 million. Thus farmers have been only partly cushioned by S.M.P.S against the effects of the total fall in export receipts from sheepmeats. Below-maintenance expenditure by sheepfarmers must subsequently reduce farm output into the largest export industry in New Zealand.

Mr Begg told the Electoral Committee that the M.I.S.A. indebtedness could be as high as $3.50 a sheep by the end of this year. Later, he said he was using a sheep flock figure of 70 million.

He agreed that a fuller picture of export market return shortfall below farm maintenance levels could be deduced by adding the M.I.S.A. $3.50; the $5 a head S.M.P. payout; and the $5 a head additional shortfall already publicised by the Economic Service. The Electoral Committee members, representing all sheep and beef farmers, responded with concern to the presentation of these figures. Mr A. W. Begg, of Southland, said it was imperative that the Meat and Wool boards and ’ Federated Farmers make a combined approach to the Government and emphasis most forcibly the seriousness of

the position. “This lack of export competitiveness cannot be overcome by any marketing schemes but must be corrected by the Government’s economic policies,” he said. The chairman of the board, Mr Adam Begg, had said the profitability situation for the average farmer was “appalling.” “If it were not for the board’s price smoothing scheme and the Government’s S.M.P. support the situation facing many producers would be disastrous. In our industry and New Zealand generally we have been living on our fat — reserves, strengths and credit built up in better times,” he said. “While there is an upturn in the world economy and overseas prices for some of our products are improving, only a blind optimist would believe this alone will be enough to lift the meat industry out of its current difficulties.

“We face challenging times, but I am encouraged to believe that for the meat industry the worst is behind us. This year we have cleared the decks. Now we can attack the opportunities,” Mr Begg said.

Later in the meeting with the electoral committee, Mr Begg spoke on the board’s submission to the present Meat Industry Task Force. He is also chairman of the Task Force, which is expected to report to the Minister of Agriculture, Mr Maclntyre, later this month or early in September.

The board released its submission two weeks ago. Mr Begg said experience over recent years had convinced the Meat Board that anything less than centralised control of sheepmeats would not achieve the necessary unity of approach. The board was well aware of the inherent weaknesses of single marketing systems and had sought to guard against them through the use of approved selling channels and buy-back “We are not advocating single-desk selling,” said Mr Begg.