Drystock farmers who lost tens of thousands of dollars last season due to the Waikato drought and rising fuel and fertiliser costs are expecting further pain this season.
Graeme and Lynn Merchant, who have run a sheep and beef farm in Mangaorongo Rd, Mahoenui, in the Waitomo district, for two decades, made a $70,000 loss last season in a good year they can make up to $60,000 profit.
As a result, they are expecting this season's profit to be about $48,000 20 per cent less than their top figure- as a resultand are turning to dairy grazing to help pick up the slack.
The financial pressure means son Jonathan, 14, who boards at a Hamilton school, is spending more weekends away from home as the couple say it's uneconomical to pick him up every weekend.
"The costs of going up to Hamilton for tennis and basketball, on a Friday, and picking him up are prohibitive,'' Graeme says.
It is a 200km round trip.
"A year ago we would pick him up every weekend and we used to go up occasionally during the week, but now it is one in three weekends. It used to cost $75 to fill up and now it's $120. It impacts on everyone who lives rurally.''
Graeme says lifestyle changes are necessary to avoid running up even more debt.
"Every second year we liked to get away overseas to somewhere like Fiji or the Gold Coast, but we can't do that sort of thing now. This season will be a difficult year. We will have to do more things closer to home.
"Our costs have rocketed up. All farmers are being hit.'' Federated Farmers Meat & Fibre chairman Bruce Wills says farmers are concerned by the "frightening'' increases of farm costs such as fuel. "It is no different from the pressure the urban population is feeling. For farmers the effect is multiple because most are a (long) distance from the city and fertiliser or stock has to be brought in or trucked out.''
Bruce says farmers are hurting from a price increase of 95 per cent last month for superphosphate after a six-month freeze.
"The difficulty any farmer faces is our transportation costs," he says.
"On our Hawke's Bay property we have to truck 500 tonnes of superphosphate from Napier, and this has to be aerially topdressed, with aviation fuel going through the roof, or spread by trucks, so we are being hit many times.''
Many farmers took advantage of the price freeze by buying up fertiliser, but from next spring will likely stop fertilising because of product and fuel increases.
Graeme says feed cover on his farm was poor following the drought, and using nitrogen to boost grass growth was out of the question because of the doubling in costs.
"In the past we would have been able to use nitrogen to boost it but that's gone up horrendously too,'' he says. ``It's just not economical to use nitrogen to lift the feed this year.''
Last season he spent about $45,000 on 100 tonnes of phosphate and nitrogen fertiliser. This season he plans to spend about $18,000 on lime instead. "Applied fertiliser will be $60,000 for 100 tonnes this season,'' Graeme says.
"Last season I kept it the same, but lime, produced in the King Country, has not doubled and, in future, a bit more will be used on the farm. Lime, a long-term thing, changes the pH of the soil and it's a lot cheaper than fertiliser.''
Last season's lambs, which usually averaged 16.2 kg and sold for around $60, grew to around 14.5 g because of the drought and sold for an average $42.
"Because sheep are not paying, and because of the drought, we have cut our numbers by 20 per cent.'' Instead of 2500 ewes the Merchants are running about 2050, and they have not replaced about 50 breeding cows and 30 replacement heifers.
"The bulls usually killed around Christmas won't be big enough they will be about 220kg, 70kg lighter than they should be, so we will kill half of them over the summer and carry the others through for another season.'' That could change, depending on how the winter progresses.
"We are having to go back to the way we were farming 15 to 20 years ago with less input and less productivity.''
Using 20 per cent of his farm for grazing other farmers' dairy heifers would help them out of the doldrums. Fonterra suppliers will receive a record $7.90 per kg of milksolids this season.
"We can make more income that we can from sheep and beef, by running heifers, and you don't have the capital cost,''
Graeme's and Lynn's accountant, David Bailey of Bailey Ingham in Otorohanga and Taumarunui, says their story had been replicated on hundreds of farms across the King Country, Waikato and Thames Valley.
"We have had a very difficult season,'' says David. However, there was some optimism with improved protein prices in the last two months.
"Lamb has gone from $3.50 per kg to $4.25 and beef from $3.30 to $4. They are positive trends,'' David says.
Waikato Federated Farmers president Stew Wadey says farmers with young families who live 25km from colleges and sports venues are suffering the most.
"I am aware of a few farmers considering the trusty equine again,'' Stew says. "Perhaps we will see history repeat itself and see horses on Victoria St, Hamilton. They still have the right of way in law, as I understand it.''
Stew says the biggest impact will be in agricultural support businesses passing on higher costs.
Alan Kempthorne, who runs Kempthorne Transport from his Te Kauwhata depot, said his fuel bill had rocketed to $70,000 per month so high that he had given up comparing it with what it was a year ago. He didn't expect to see fewer trips to outlying farms, rather a decline in the number of lifestyle farmers sending their animals to the works. "Everything has still got to be done,'' he said.
In June livestock listings on TradeMe increased 40 per cent nationally, although Waikato listings, which made up a quarter of those listings in June 2007 and 21 per cent last month, were only up 20 per cent.
TradeMe spokesman Jon Macdonald says he expects livestock auctions on the website to continue to grow if fuel prices continue their climb.
Livestock auctions were part of the fast growing business, farming and industry sector on the website.
Fonterra director Earl Rattray, who farms in Otorohanga, says Fonterra will have to adapt to the rising fuel costs to run its fleet of milk tankers. This season fuel is expected to cost the milk giant $55 million, up from $43 million last season.
"To offset that our transport managers and teams are expected to deliver significant efficiency gains, and they are doing pretty well at it,'' Earl says "Last year they collected more milk with 50 less tankers than two years ago. They are shifting a lot more milk by rail, and the milk concentration plants stationed at some of the more remote collection areas are further reducing transport costs.''
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