Drought leads to cautious attitude by S.I. farmers

Press, 28 July 1989, Page 20

Drought leads to cautious attitude by S.I. farmers

Farmers in the drought-affected east coast regions of the South Island were cautious about the prospects of recovery in the coming seasons, says a MAFTech official, Mr Grant McFadden.

Although the drought was over, its effects would continue to restrict production and slow down the rate of financial recovery for several seasons. The sheep sector would be particularly hard hit next season because of the huge drop in stock numbers, said Mr McFadden, policy manager for MAFTech, at Lincoln. In contrast to the improved confidence of farmers in other parts of the country — particularly dairy and beef farmers — farmers in the drought regions were much more cautious. The long drought had hardened farmers’ attitudes against taking on additional financial risks. They were concerned at the survival of their farm

businesses and wanted to avoid taking on extra debt or reducing their ability to handle fluctuations in outside influences such as interest rates or the weather. These feeling were totally understandable and similar to the attitudes of North Otago farmers after a major drought in the 19605, said Mr McFadden. For many years after that drought, farmers’ decision-making was dominated by conservatism because they were reluctant to take financial risks.

Many farmers, however, were highly vulnerable because they were already financially stretched and could not afford to take a conservative approach.

“The financial circumstances of many individuals will not allow them to ease the financial pressure by reducing debt,” he said.

A MAFTech farming monitoring report for the South Central region — Nelson, Marlborough, West Coast and Canterbury — says production prospects for next season varied greatly between the summer-moist and drought affected parts of the region.

Production in the moist areas is expected to be at least average but in the drought districts production will be seriously constrained, even if the spring was favourable. “Spring pasture growth will be less than average as a result of pasture damage and the very low

pasture cover in winter. Feed reserves on hand on most farms are negligible.” The number of lambs available for sale on drought-affected farms will be reduced because of lower breeding ewe numbers and lower lambing percentages.

“Farmers are unsure as to what extent they should rebuild stock numbers. While the condition of the farm is poor and sheepmeat returns remain low there is little incentive to restock to predrought levels.” “Farmers are unlikely to try to return stock numbers to the predrought level unless the season is very favourable and they are able to purchase reasonably priced ewes in good condition. It

will take time for farmers’ confidence to return.” In spite of an increase in sheep meat returns on drought-affected farms next season as a result of higher prices and heavier carcase weights, sheep income is expected to fall because of lower stock numbers and the need to rebuild flocks. 1 The report says farmers were not budgeting on receiving as high a price as meat companies were suggesting. Wool prices for the coming season were expected to fall, for fine wool especially, although pre-lamb shorn ewe wools were expected to be marginally higher. A reduction in the number of cattle for sale will mean cattle income on drought-affected farms will be down, in spite of cattle returns per head rising. Because arable farmers had sold the current season’s crop earlier than usual, they will need more seasonal finance earlier in the coming season to pay for the establishment of the new crop. The report says farmers intend to use any cash surpluses to reduce debt levels. The 1988-89 year had not allowed any reduction in debt-servicing commitments on droughtaffected farms and farmers intended to reduce personal and farm expenditure to limit the build up of more debt. The drought and the financial pressure of the last year had increased the variation in financial performance of farms within the same types, said Mr McFadden. During the early and mid-1980s, the financial results of farms in the same class were reasonably even. But now there is a widening gap between farms which were under severe financial pressure and had doubts over their future viability and farms which had strengthened their financial position.

A few farms had moved into the stronger group because of their early move to fine wool or because of the benefits from a well-established irrigation scheme, said Mr McFadden.