DAIRY
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Dry spell bites after record-breaking rain rising, then ends up overcorrecting. The same pattern can occur on the way down, with rates remaining higher for longer than necessary, creating avoidable pain for households and businesses before eventually being cut further than would otherwise be required. It can become a vicious cycle.
Economic outlook
Dry conditions have stalled pasture growth, forcing early dry-offs across the district.
With farming, a lot can change in a month. In my last column, I mentioned that rainfall had reached a record-breaking 865mm by April 20. A month later, we’ve added just 21mm to that tally. The ground has quickly turned dry and hard, grass growth has stalled, and dairy farmers across the district have suddenly had to dry cows off as pasture covers have fallen away. As a maize grain grower and contractor, I couldn’t have asked for a better harvest season. The dry weather has meant very few rain delays, allowing us to harvest more within a compressed window. Grain quality has also been excellent. On the flip side, annual grass crops grown for dairy grazing have underperformed. Rather than selling all the supplementary feed I have on hand, I will be feeding out a significant amount to meet grazing commitments.
Fieldays confidence test
This month also brings the annual Fieldays at Mystery Creek, a highlight on many farmers’ calendars. With the strong Fonterra payout following the $4.22 billion sale of its consumer brands business to Lactalis, combined with generally favourable commodity prices, it will be interesting to see whether spending on machinery and farm equipment reflects that confidence. One thing that occurs every Fieldays is the annual Palm Kernel Expeller (PKE) price war, as suppliers compete
To be fair, I can understand why this latest decision was so finely balanced. While nobody wants to sound overly pessimistic, I suspect there may be more economic pain ahead before conditions improve. New Zealand has yet to fully recover from the challenges of the past
three years, and many businesses remain fragile. A meaningful rise in interest rates could quickly place further strain on already depressed business profitability. Here’s hoping the Reserve Bank has judged the situation correctly this time. Fixed-term mortgage rates have moved considerably over the past six months. Those who secured a five-year rate at 4.99% may be feeling relieved, while anyone who hesitated could be kicking themselves, with the best five-year rate among the major banks now sitting around 5.79%. Until next month, take care, stay safe, and if you need feed on farm or just want a chat, please give me a call.
agggressivelyy for market share. However, with spot pricing recently sitting around $450 per tonne ex-store, it’s difficult to see prices falling back below $300 per tonne, as they have in previous years. As I’ve mentioned before, locally grown feed options such as maize silage, lucerne, and grass silage are becoming increasingly attractive for New Zealand farmers looking to reduce exposure to volatile imported feed markets. Despite recent falls in diesel prices, the ongoing conflict involving the United States and Iran continues to push up the cost of key farm inputs, particularly fertiliser. Some of my clients are already storing fertiliser for spring application, concerned about further price increases. There is growing expectation that DAP, already trading around $1800 per tonne - about $400 higher than in September last year - could exceed $2000 per tonne. At present, only one fertiliser supplier I am aware of is prepared to lock in pricing now for product that won’t be uplifted until spring.
OCR decision highlights
The Reserve Bank of New Zealand’s latest Official Cash Rate decision highlighted just how uncertain the economic outlook remains. The vote was split, requiring Governor Anna Breman to cast the deciding vote to leave the OCR unchanged at 2.25%. I’ve long felt the Reserve Bank is often too slow to react when inflation starts
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