Squeezed by costs and dogged by bad weather

Press, 12 September 1986, Page 18

Squeezed by costs and dogged by bad weather

By

DAVID LUCAS

In hindsight, Peter Rainey feels he probably should not have bought his 105 ha specialised cropping farm at Horrelville, North Canterbury, in 1981. “The price was a bit higher than we wanted to go, but the farm was ideally set up for cropping,” said Mr Rainey. “The soils were versatile, deep Templeton silt loams, the farm was compact with not too many sheds or silos, and it was in the district we wanted to settle. “And the price wasn’t too much dearer than a sheep farm on poorer type of country.” The outlook for the arable industry looked steady and land prices were a long way below those in the United States and England, where Peter Rainey and his wife, Judith, had spent several years. “We knew it would be a struggle, but decided to give it a go.” Five years later, the Raineys have been caught by high-flying interest rates, “horrific” price increases, and a world wheat surplus. Bad weather at crucial times during the last three years has prevented them from “farming themselves out” of the financial squeeze. Like most recently settled fanners, the Raineys have watched their financial position deteriorate during the last two years, ever since the lid came off interest rates. A disastrous harvest last season resulted in 81 per cent of their gross farm income being paid out on farm working expenses — not including interest payments, personal drawings or plant replacement In 1983 farm working expenses made up 47 per cent of farm income. For this coming season, Peter

Rainey has pruned expenses to the bone and is budgeting for farm expenses to take 65 per cent of farm income — which will still lead to an expected deficit of $15,000 to $20,000. Peter Rainey admits that unless interest rates drop sharply and cropping returns improve he must soon realistically face the option of selling the farm. Last November, he sold a separate 12ha block to ease the hardcore debt, but this has built up again through high interest rates, low prices and bad yields. Attempts to encourage city money into the farm and develop it into an orchard have so far drawn a blank. “Diversification sounds simple — but it needs cash,” said Peter Rainey, who has spent many hours trying to attract investment money. The deep loam soils are highly suitable for horticulture, a feature which helped sway the Raineys into buying the farm in 1981, and shelter has already been established. Although Peter Rainey has limited horticultural experience, he feels he could make a success of an orchard development venture. The phenomenal returns from the share market were starving New Zealand’s productive sector, such as fanning, from access to capital, said Mr Rainey. Selling some of the farm’s machinery would do little to ease the Raineys’ financial burden as their plant has been kept to a bare minimum and is worth no more than $50,000, which is much lower than a cropping farmer’s average machin-

ery investment Judith is already working off the farm and Peter is looking at putting the farm into “low gear” and finding another job in an attempt to balance the budget

As well as increasing the cash demands on farmers, high interest rates had slowed down the whole cash flow in the farming industry, said Peter Rainey. Until five years ago, most fanners were paid in full by June 30 for all their crops which had been harvested and sold, but now split payments and pool systems were delaying farmers’ incomes.

“The only crop I have been paid for in full this year is peas — everything else has been pushed back six months.”

Farmers were being forced to find extra seasonal finance while waiting for payment an extra burden they would not have had to carry five years ago.

The Raineys have proved that they can grow high-yielding crops, but for the last three seasons the weather has not allowed them to take full advantage of their ability. In their first harvest 1982-83, marrowfat peas yielded an excellent six tonnes per hectare and white clover averaged 750 kg per hectare (machine dressed). Barley that season suffered a few problems and no . wheat was grown, but Peter Rainey now looks to average six tonnes per hectare of barley and wheat although the land is easily capable of giving eight tonnes of wheat if all goes right

For the last three seasons the Raineys have been thwarted by unfavourable weather at critical periods which has resulted in only average

yields. Last season’s harvest was a disaster, which was compounded by the flow-on effect of big increases in input costs.

Rather than stick to a fixed crop rotation with soil health at the forefront of his mind, Peter Rainey has now had to look for crops promising the best financial returns. White clover has been eliminated because of its unreliability, leaving peas as the major break crop after two crops of wheat" and one of barley. Peter Rainey will probably plant an area of sweet fennel this season and is also considering oilseed rape. In autumn he might sow perennial ryegrass, which provides an opportunity of taking a seed crop as well as grazing for stock. The depressed nature of the world wheat market is a major blow to the confidence of New Zealand cropping farmers, said Mr Rainey. For many years, wheat has been the cornerstone of the cropping industry because of its ability to survive a wide range of conditions and to nearly always provide a good crop.

Now that New Zealand farmers were fully exposed to the effects of subsidised world wheat production and the resultant trade wheat wars, their confidence had been undermined. The stockpiles and trade war had created an artificially low price for wheat which New Zealand farmers had to accept without the benefits of lower input costs.

Previously the wheat price to farmers was set by the Wheat Board and had traditionally been below the world market price. Farmers had initially been excited at the prospects of being paid world prices, but the world oversupply and resultant depressed prices had shaken the confidence of farmers.