Canterbury arable industry is 'close to collapsing’

Press, 13 March 1987, Page 18

Canterbury arable industry is 'close to collapsing’

Farmers and Ministry of Agriculture and Fisheries’ farm advisors agree Canterbury’s arable industry is perilously close to collapse after drought and continuing economic pressures.

“Many cropping farmers are now technically insolvent, and working capital will be very difficult to obtain in 198788,” Canterbury farm advisors reported recently.

Yields and harvest quality are only average to below average, prices are disappointing, and the advisors believe the industry’s problems will flow on to the region’s economy.

Arable farmers will again apply for Government assistance, but mixed-crop farmers see themselves in a no-win situation, according to Mr Michael Murchison, provincial president of North Canterbury Federated Farmers.

Management policies to relieve the financial pressure on mixed crop/livestock farms are exhausted, he said. "About 500 or 600

farmers will not be able to balance the books this year and will be hardpressed to get working capital for next year.” Arable farming contributes about 30 per cent of Canterbury’s income, and, if lost, will markedly affect business in Christchurch and other centres, Mr Murchison said.

A strong dollar and increased interest rates have made the on-farm financial situation worse than at the same time last year.

Many arable farmers bought expensive machinery after several good years, but because of decreased demand and prices in recent seasons, they are unable to sustain payments.

The critical situation confronting farmers is not all due to their own mistakes, Mr Murchison said. Stress on families is growing again, but generally they are better equipped to cope than they were 12 months ago. “I still get a few stressrelated calls but not nearly the number I used to,” he said.

Bad yields in previous seasons prompted many farmers to seek loans from sources outside their regular banking facilities to finance this seasons crop, Mr Murchison said.

The new loans have added to repayment problems. In some cases, if they had stayed with their banks, the growers would have been carried through their financial problem.

The situation facing meat and wool farmers is not as serious at present, Mr Murchison said.

“Lambing percentages are way down, wool weights are down, and now with the dry conditions farmers cannot carry stock over, and they are selling at much lesser prices than they anticipated.” With the wet spring, lamb survival rate was much lower than expected, and farmers do not have the lambs or desired weights. He said dairy production is also way down, and those irrigating are finding they are not getting good results because of

low water levels and resrictions.

Despite that, meat and wool farmers are generally better off than arable farmers, and their cash flows are better than anticipated.

Mr Murchison believes “the rug” should , have been pulled from under a number of less competent farmers 18 months ago.

“I think we have been trying to protect and keep some farmers on the land who are financially impossible when we should not have.”

Many farmers with financial difficulties did not believe it could happen to them, and pride prevents them from facing the problem. They should talk to their financier or accountant to enable them to get out with a bit of grace, he said.

Conversely, competent farmers who have never had problems now face a crisis, through no fault of their own, he said, and every effort should be made to keep them on the land.

Capital for next year’s crop is one way of assisting, and total replacement of mortgages on some properties could also be considered.

Mr Murchison suggested first mortgages be paid off at the low rates and second mortgages could be brought on as first mortgages with the same rate.