Timely advice for our primary producers

00:00, Aug 14 2012

With farmer returns from commodities taking a tumble, biosecurity incursions threatening growers' livelihoods and torrential rain soaking new-born stock, times are tough for primary producers. In the past few months, large falls have occurred in commodity prices, with the July ANZ world commodity price index down 12.9 per cent from January and the high New Zealand dollar eroding farmgate returns.

The latest Federated Farmers confidence survey shows farmer optimism has dropped dramatically since the beginning of the year, with most farmers expecting farm profits to worsen over the year ahead. The National Bank's August agri-business report predicts lower farmgate prices and liquidity issues for the pastoral sectors during the next six to eight months.

Ministry for Primary Industries data shows total primary sector export revenue down 2.4 per cent to $8.3 billion in the March quarter, compared with the same period last year, mainly because of the stronger New Zealand dollar and easing international dairy prices. Beef, veal and lamb exports decreased by value in the March 2012 quarter to $1.4b and total horticulture exports declined 6.7 per cent, mainly because of lower vegetable exports.

Here is some timely advice from industry experts and fellow farmers to help see you through the tough times. Key advice includes the need to look after yourself and those closest to you; ensure good planning, cashflow and budgeting; communicate early and well with your staff and your bank; and maintain good health.

Advice for all farmers

James Houghton, Federated Farmers representative: Do what you can today because you never know what will happen tomorrow. Have a plan and communicate. Don't have a hierarchy or rank in your farm management. Listen to everyone in your team and focus on getting the best outcomes. Don't take a "my way or the highway approach" with your staff.

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Nigel McWilliam, partner, Diprose Miller chartered accountants: Prepare a cashflow. Focus on what your estimated trading bank balance will be in 12 months. Make and carry out decisions in a timely manner to ensure the cashflow plan happens. One of my largest clients believes there are 10 days between a good operator and a poor operator. Persist and resist. Stay informed. The best opportunities come out of and during downturns, for example, the neighbour's farm may be on the market; you may get stock and plant deals and so on. Stay healthy. The best plans can unwind if you are not in the game.

Advice for dairy farmers

Scott and Alicia Paterson, dairy farmers, Waikato: Ensure annual and cashflow budgets are up to date. Do essential spending only. Monitor your cashflow regularly. Minimise pasture damage and protect your future growth. Use the spring rotation planner and monitor pasture growth (farm walks). Look after your team. Chances are your staff will be just as frustrated with the rain as you are, especially if it is their first season. Show your appreciation and be positive. Talk to your neighbours. Tough times can be isolating, for we tend to just put our heads down and get on with the job.

Remember weather and payout are cyclical - the next lift will be on the horizon. It wasn't that long ago we were revelling in the best production year in decades. Don't waste energy worrying about the things you can't control. Most cows were in great condition leading into winter.

Dr Jacqueline Rowarth, agribusiness professor: Uncertainty is a fact of life. Farmers live within their appetite for risk. Bear in mind the big picture. Demand for food remains high, and milk oversupply is reducing because of drought in the United States. This means prices are likely to increase as the season progresses. Farmers with capacity will be setting their cows for high production. Those requiring finance are likely to be restricted by banks. Farmers struggling day to day might benefit from some top-level advice from consultants, but will need to be sure the outlay will result in benefit. Seminars offered by levy bodies and rural professionals can assist, if time allows.

Farmers can be admired for their ongoing resilience in times of change and uncertainty.

Sarah Speight, chief executive, Dairy Women's Network: Take a break. Calving is a busy and stressful time of year, especially when the weather is awful. Connect with others as often as practical. Every couple of weeks is ideal. A mid-calving pot-luck tea or pub lunch offers the chance to see others and share ideas.

Eat well. Good nutrition is as important for people as it is for stock. Keep a supply of high-energy snacks in the shed for days when a bit of extra fuel is needed. Ensure staff eat properly and have the opportunity to restock the shelves during calving. Cook everything as a double recipe and freeze half or use later in the week to cut down on food preparation time.

Know your financial position. It is important to monitor your cashflow situation. Take time to understand your position and use the most up-to-date information you have. Involve your bank manager early if you think you may need to extend your overdraft or make other refinancing arrangements before November.

Treat each other respectfully. Be clear when giving instructions and be realistic in the expectations that you place on others and yourself. Be especially aware of the limitations of young or new team members. Saying please and thank you go a long way when everyone is tired and busy.

Advice for sheep and beef farmers

James Parsons, director, Beef + Lamb New Zealand: While returns will clearly be back on the 2011-12 sheep and wool prices, farmgate revenue for this sector is still forecast to be much stronger than the average of the past 10 years.

To maximise profits: Know your numbers and keep a strong focus on costs. Maximise your production through proactive and disciplined timing. For example, shifting or drenching stock a day too late reduces profit, as does putting on nitrogen too late. Timing is everything and requires discipline.

Block out time in the farm office to do the thinking.

Getting stuck into various projects and "doing the doing" compromises profitable opportunities and timing.

Advice for growers

Andrew Fenton, president, Horticulture New Zealand: Understand your costs. Take the time to make sure you know where your costs are and understand how you can control them. Seek a consultant and compare your costs with their cost model. Consider if you can ask for more on price. Don't take "that's the best price we can do" for an answer every time. Push back if you can. Be prepared to say no. Limit volume to support value.

Work with your fellow producers. The grower down the road is not the enemy, but your partner. Talk to them. Support industry organisations that are working for you. Go to the local grower association meetings, talk to your product group representatives and take a bit of time every month to follow what Horticulture New Zealand is doing on your behalf.

Communicate openly and often with your bank manager.

Mike Chapman, CEO, NZ Kiwifruit Growers Inc (NZKGI):

Financial help: NZKGI can introduce growers to financial advocates who can help where growers are having difficult conversations with their banks, as a result of valuation decreases or income effects of cutting out vines affected by the kiwifruit vine disease Psa.

Employment help: NZKGI has a staff member who matches those who have lost their jobs as a result of Psa to other employment opportunities in the kiwifruit industry.

Psa information: Kiwifruit Vine Health has advice about managing your orchard in a Psa environment on its website, phone 0800 665 825 or email info@kvh.org.nz.

Stress busters: Talk about your worries. Eat well and exercise. Spend time with friends and family. Start to solve problems. Get enough sleep. Get some enjoyment back in your life.

Stress help: Look out for stress in yourself, friends and colleagues and seek help when needed. To get help for stress or depression, phone your doctor, Depression Helpline (0800 111 757), Lifeline (0800 543 354) or Rural Support Trust (0800 787 254). In emergencies, phone 111.

The sun will come out

Bright spots on the horizon include:

All farmers: "Niwa is predicting an early spring. The Magic and the Chiefs." - Waikato farmers Alicia and Scott Paterson.

Dairy: "The US drought could provide a light at the end of the tunnel.

"As farmers in the US slaughter their dairy cattle, world milk supply is expected to reduce and Kiwi farmers could benefit in due course from higher milk prices." - James Houghton, Federated Farmers representative.

"Olympic coverage gives us the chance to celebrate our successes as a nation. Within a month, we will see spring growth start." - Sarah Speight, chief executive, Dairy Women's Network.

Sheep and beef: "We've had a kind winter, with stock in good condition and good pasture cover on farms, so we have a great platform to start the spring season on and we should make the most of this.

"On top of this, the indicators look strong for beef demand and pricing." - James Parsons, director for northern North Island, Beef + Lamb New Zealand.

Horticulture: "Growers are getting together, working together, innovating and developing new markets. Our history and our heritage will take us to the future. Even with the troubles we've had in recent times, I'm confident we are on target to reach our goal of an industry value of $10b by 2020." - Andrew Fenton, president, Horticulture New Zealand. Fairfax NZ

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