It's just as well money isn't all that motivates beef and lamb farmers

OVER THE FENCE - BY JON MORGAN

OPINION: The taste of lamb that we know and love so well is also appreciated by diners in Britain and Europe. Sales in this market that takes half of our exports have never been better.

It is the same story for our beef in the United States. Hamburgers are being chowed down like there is no tomorrow.

Our sheep and beef farmers should be grinning, but they are not. The benefits of all these extra sales at high prices are not ending up in their bank accounts. By the time the exchange rate is calculated they are no better off.

It is frustrating, to say the least. New Zealand is a world leader in agriculture production, combining science with farm management skills to get the best out of a climate ideal for year-round pasture farming.

Science has provided the tools and farmers have worked hard to use them to the best of their abilities. Commercial acumen has assisted in marketing the produce despite tough economic times.

Then, when the money is translated into New Zealand dollars, it shrinks. Farmers could be forgiven for wondering why they bother. Compared with this time last year, the Kiwi dollar is up 22 per cent against the British pound, up 27 per cent against the Euro and up 26 per cent against the US dollar.

In cash, that means - according to Meat & Wool New Zealand's economic service - each sheep and beef farm will get $30,000 less for lamb and $15,000 less for beef. Across the country, it adds up to $600 million - money that would have given the economy valuable stimulus if the exchange rates were the same as at May last year.

It must be tempting for the Government to do something about this - various ways of adjusting our financial instruments are suggested from time to time - but the considered view is to do nothing and take our punishment. The gains outweigh the losses, we hear. Imports, particularly fuel, are cheaper when exchange rates are high.

But this is of little comfort to farmers, who rely on exports for their income. This year the average sheep and beef farmer is expected to come out around $40,000 ahead, before tax and mortgage payments, just enough to keep the wolf from the door but not to pay for essential maintenance. In some drought-hit regions they will be in the red.

So why do sheep and beef farmers bother? Mainly, I suspect, because it is a great lifestyle. The fresh air, green hills and close connection with animals is a tonic. Better than being shut all day in an office and then battling smog and traffic to get home. Of course, in bad weather it's not much fun.

They also feel pride in being at the forefront of agricultural science and seeing the results in the animals they produce. And the chance to make real gains comes along every so often, providing an opportunity to pay for improvements, buy extra land or sell up at a windfall profit. The last was eight years ago, when climate, markets and exchange rates all aligned.

But eight years is a long time, particularly if three of those were in drought, as eastern North Island farmers can testify to, and a repeat alignment isn't likely anytime soon.

For those who despair at the prospects for sheep and beef an option is to plant trees on their hills and sell the carbon credits.

An attractive case is being made for this, and I am sure regional councils in flood-prone areas would be delighted, but there are pitfalls over liability for fire and storm damage, not to mention future prices. A further unknown quantity is government intervention, highlighted recently with Australia's reluctance to embark on a scheme to cut greenhouse gas emissions.

There would also be a social cost as farm animals and the families of the people who looked after them were replaced by trees and maybe an economic one too as the rugged landscape attractive to tourists disappeared.

It all sounds rather gloomy for the hill country farmers, but I don't want to appear overly pessimistic. Many are coping quite well and the best of them have an angle.

For some, it is a breed of sheep or cattle, or even a goat, that has a specialised market with elevated returns. Such is the ingenuity of these farmers that if one breed doesn't quite fit the market parameters they will interbreed it with one or two others till it does.

In fact, a case could be made out for keeping farmers under financial pressure to make them constantly strive for ways to improve.

That is easy to say if you are not a farmer, though. Right now, they would appreciate a break.

- © Fairfax NZ News