Econ­omy may lose a bil­lion from drought

South Waikato News - - NEWS -

The eco­nomic im­pact of the Septem­ber storms and the dry start to sum­mer could eas­ily stretch to more than $1 bil­lion, BNZ econ­o­mists said.

The risk was grow­ing as each day passed with­out sig­nif­i­cant rain, they said in their lat­est ru­ral re­view. It was hard to be pre­cise with so many un­knowns ‘‘ and with much still in the hands of the weather gods.’’

The Septem­ber lamb losses alone had al­ready put the dam­age into the hun­dreds of mil­lions.

For dairy, a rough guide was to com­pare cur­rent pro­duc­tion fore­casts with those made pre-sea­son, they said.

The Min­istry of Agri­cul­ture and Forestry fore­cast of a 14 per cent pro­duc­tion rise from last year’s poor late­sea­son milk­flow was op­ti­mistic.

The bank’s view was that an 8-10 per cent rise looked likely.

How­ever, the Septem­ber weather bomb and the present dry spell had changed that to a rise of just 2-3 per cent.

Econ­o­mists said the dif­fer­ence be­tween MAF’s pre-sea­son pro­duc­tion view and to­day’s out­look was about 165 mil­lion kilo­grams of milk­solids.

‘‘ Tak­ing Fon­terra’s re­cently up­wardly re­vised milk price of $ 6.90 a kg of milk­solids, this trans­lates into rev­enue be­ing around $ 1.1b be­low what it might have been.

‘‘Even with a more con­ser­va­tive fore­cast of 9 per cent growth, rev­enue lost is about $650m.’’

Fall­ing pro­duc­tion ex­pec­ta­tions in New Zealand were likely to be one fac­tor putting up­ward pres­sure on world prices, the econ­o­mists said.

‘‘This is lit­tle so­lace for those bat­tling dry con­di­tions and sharp re­duc­tions in pro­duc­tion. And, of course, on the other side of the ledger, costs are ris­ing and es­pe­cially so for those fac­ing dry con­di­tions.’’

Ru­ral con­fi­dence was low, with Waikato farm­ers fac­ing a fourth con­sec­u­tive drought and ex­tra costs of around $ 100,000 per farm for ex­tra feed and lost pro­duc­tion. The ru­ral prop­erty mar­ket has also dried up. Real es­tate agents said it would take nearly six years to sell the Waikato’s farm in­ven­tory of 296 farms if sales con­tin­ued at the cur­rent rate.

BNZ econ­o­mists noted the Na­tional In­sti­tute of Wa­ter and At­mo­spheric Re­search De­cem­ber-Fe­bru­ary fore­cast was for nor­mal or above-nor­mal sea­sonal rain­fall in the north and east of the North Is­land.

‘‘ This rain can­not come quick enough. Even if it does come as fore­cast, it will not be the sil­ver bul­let to res­ur­rect the sea­son.’’

- Fair­fax

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