Dairy payout buoys Timaru's $2.3 billion year

Aoraki Development chief executive Nigel Davenport.
MYTCHALL BRANSGROVE/STUFF

Aoraki Development chief executive Nigel Davenport.

Timaru District generated more than $2.3 billion as it continued its drive away from the brink of recession on the back of a more-than $150 million dairy payout, a new report reveals.

An economy that ended the year last year close to recession was firmly in growth in the second half of the year to June, the Infometrics quarterly economic monitor found.

Timaru's economy stabilised in the June quarter and the provisional estimate of its gross domestic product suggested it was 1.3 per cent healthier than the year before.

South Canterbury dairy farmer John Gregan said most farmers would be very happy with the current milk price forecast, ...
HEATHER CHAMBERS

South Canterbury dairy farmer John Gregan said most farmers would be very happy with the current milk price forecast, despite the fact that in previous years the actual price had varied by as much as $2.

That was significant: there was no growth to GDP in the previous year, the report noted.

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It was buoyed by a 2016/17 dairy payout that, before dividends were paid, was $55 million healthier than the previous year and there was a strong chance that growth would continue, the report suggested.

Wendy Smith chief executive for the South Canterbury Chamber of Commerce says business confidence is holding in Timaru.
JOHN BISSET/FAIRFAX NZ

Wendy Smith chief executive for the South Canterbury Chamber of Commerce says business confidence is holding in Timaru.

Fonterra's recent increase in its farmgate milk price forecast from $6.50 to $6.75kg for the 2017/18 season "bodes well for farmers", the reports authors noted.

"A payout of this level will give farmers sufficient room to make healthy inroads into debt that was run-up during poor seasons, as well as modestly lift on-farm spending following cutbacks over recent years.

Other parts of Timaru's primary sector, particularly horticulture, fruit, forestry, and seafood were also enjoying good returns, the report found. 

"Nevertheless, a concern at present is that sodden soil in some parts of the district could hamper spring grass growth and affect horticultural plantings." 

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South Canterbury Federated Farmers dairy vice-chairman John Gregan said most farmers would be very happy with the current milk price forecast.

That said, he noted the actual price had varied by as much as $2 in previous seasons. Further increases in the international market might encourage competitors to release more product, he said.

Across the district, better employment conditions were aided by growth in food processing. 

"For example, Fonterra's new Clandeboye mozzarella factory requires 100 new workers, while Silver Fern Farms is also expanding employment at its Pareora plant following recent investments. 

"The fishing industry is also adding to employment, with Sanford's having created an extra 100 jobs over the past year." 

There were further positive signs in other measures. Traffic flow, house prices, retail trade, and car registrations were all up, as were commercial vehicle registrations and tourist expenditure. 

However, there were fewer building consents, , and guest nights and house sales were also down over the period. 

Aoraki Development chief executive Nigel Davenport said the report reinforced the fact the district was "very much a rural based economy".

"These figures are good news for us," Davenport said, noting positive growth in the broad primary production sector would have "a real

flow on effect through the community".

He noted the average house price had growth 9.3 percent in the year to June, well above the national average of 6.7 percent. The average house value was now $340,193 compared to $626,830 nationally.

There had also been a significant jump in visitor spending, to a record $211 million, compared with $201 million the previous year. 

This has come in spite of a drop in commercial guest nights, as private accommodation appears to have grown rapidly, he said.

South Canterbury Chamber of Commerce president Wendy Smith noted the impact of loan to value ratio rules on the volume of houses sold.

Visitor spending was positive but the drop in guest nights was of concern, she said.

Smith said the food processing and manufacturing sector was particularly important for the Timaru district and South Canterbury. 

"The recent developments at Fonterra, Sanford, DB and Silver Fern Farms have led to an even stronger demand for workers.  

"Although a challenge for the businesses this is all good news for employees and for our community." 

Timaru mayor Damon Odey was unavailable for comment.

 

 - The Timaru Herald

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