Farmers having to adjust

Press, 3 April 1987, Page 11

Farmers having to adjust

The sheep and beef farm sector is adjusting with some difficulty to the macro-economic policies introduced over the last three years, according to Mr Neil Taylor, director of the Meat and Wool Boards Economic Service. The combined effects of a high dollar relative to previous years, a high rate of inflation relative to our main trading partners and high interest rates have weakened all export orientated sectors of the economy. However, Mr Taylor said that even small improvements in these economic indicators would directly benefit farmers.

In particular a lowering of the exchange rate would lift farm gate prices especially for lamb and beef. With interest now the main expenditure item for most farmers, lower interest rates would also be a direct benefit through a reduction in debt servicing.

Farm incomes remain for the second successive year at their lowest level

in at least 25 years, he told the biennial meeting of the Meat and Wool Boards electoral committee. Though farm land prices have fallen significantly since 1984 half of the industry’s sheep and beef farms still have 65 per cent or more equity and many of these farmers are able to weather the current problems. However those farms with less than 50 per cent equity are at risk with high debt and high debt servicing commit-

ments. The Economic Service estimates that some 23 per cent of sheep and beef farms are in this at risk category and have over 35 per cent of their gross farm income committed to interest payments. In 1984-85 only 8 per cent of sheep and beef farms were in this category. Since that time the service’s estimated land values have fallen 50 per cent and livestock values 30 per cent. Mr Taylor said another way to view the current

farm debt situation is that 70 per cent of industry’s debt is carried by 30 per cent of the sheep and beef farm units.

The short-term option available to most farmers is to move towards production systems with lower inputs and this may mean lower total output from the industry as stock numbers fall.

In spite of the current situation the agricultural sector still provides 60 per cent of New Zealand’s merchandise export re-