Reserve Bank prediction good news for Waikato
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.