Re­serve Bank pre­dic­tion good news for Waikato

Matamata Chronicle - - Rural Delivery -

be­fore eas­ing in the last two Fon­terra on­line auc­tions.

The dairy co-op­er­a­tive’s board has warned that high prices may choke de­mand in some mar­kets but the Re­serve Bank in­di­cated a growth in de­mand from an in­creas­ingly west­ern­ised Asia was larger than any likely growth in dairy out­put in de­vel­op­ing coun­tries.

As the world­wide bio­fuel in­dus­try grew, grain prices would rise be­cause of added de­mand, putting fur­ther pres­sure on dairy prices as feed be­came more ex­pen­sive. Mean­while, fall­ing agri­cul­ture sub­si­dies could cut pro­duc­tion in the de­vel­oped world.

‘‘New Zealand’s agri­cul­tural ex­port prices are likely to re­main at el­e­vated lev­els for some time,’’ the Re­serve Bank said, ad­mit­ting how­ever that it was ‘‘fiendishly’’ dif­fi­cult to pre­dict fu­ture com­mod­ity prices.

A lift in con­fi­dence was slowly be­ing felt around Waikato.

RD1 chief ex­ec­u­tive John Lea said farm­ers would have re­ceived their first big cheque last month.

RD1 had seen it trans­late into goods re­lated to on­farm main­te­nance.

‘‘They’re start­ing to work on any­thing on the farm that has been put off or held to­gether with a piece of No 8 wire.’’

He said sales for March were up about 10 per cent.

‘‘There was a pickup in March for us, ahead of what we fore­cast but we have been fore­cast­ing con­ser­va­tively.’’

Man­ag­ing di­rec­tor of AgrowQuip, Ken Walsh, said farm­ers did have pri­or­ity for where they needed to spend any in­creased cash­flow but he said there had been an in­crease in the amount of quot­ing go­ing on over the past six weeks as farm­ers started look­ing around.

‘‘There is more quot­ing and more in­ter­est but I still think it’s go­ing to be a long, slow haul but in some ways that is prob­a­bly bet­ter than an­other spike.’’

He be­lieved get­ting the in­dus­try fully back on its feet would be a ‘‘ two to three-year pro­ject’’.

Price­wa­ter­house­Coop­ers part­ner Roger Wil­son, who spe­cialises in agribusi­ness, said while farm cash flows were stronger, farm­ers were still spend­ing their money on the things they needed rather than the things they wanted.

‘‘ I think farm­ers have come through the last cou­ple of years and are much more aware of the risks around their busi­ness.’’

He said the flow-through ef­fects of an up­lift in the sec­tor would start to be seen in Hamil­ton’s high street in spring at the ear­li­est.

He said many farm­ers wanted to see the in­creas­ing com­mod­ity prices ‘‘lock in’’ be­fore they felt truly con­fi­dent.

West­pac Cen­tral North Is­land re­gional man­ager Tony Brooks said farm­ers were only now start­ing to make some head­way with their cash flow.

‘‘The debt lev­els out there are go­ing back­wards and they need to.’’

He said farm­ers

were only just now start­ing to see the de­cent pay cheques come in.

He be­lieved from now go­ing for­ward there would be im­prove­ment in the sec­tor. Bank of New Zealand head of agribusi­ness Richard Bow­man said farm­ers were start­ing to see an in­crease in their re­turn on cap­i­tal in­vest­ment and the amount of cash they had on hand was in­creas­ing.

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