Cheyne Waldron Bailey Ingham
Survive until 25 has become a common phrase in the media over the past year – referring to businesspeople and individuals who have been dealing with the increased cost of living, and for many businesses, reduced profits as consumers have reduced their spending on non-essential items.
The phrase is also relevant for many farmers who have contended with negative factors including inflation and increased on farm costs, higher interest rates, and a severe slowdown in international economies, which has reduced consumer demand and export returns.
Statistics from Beef + Lamb New Zealand tell us the level of profitability for sheep and beef farms is the lowest since 2008. The 16 per cent on farm inflation for the 2023 financial year was the highest since 1981.
A recent Dairy New Zealand report noted average on-farm operating expenses are above $6 per kilogram of milk solids. The global push to reduce farm methane emissions continues to be a threat that we cannot ignore.
The flow on effect of reduced profitability in the agriculture sector has affected all parts of the economy. Fortunately, there are positive signs around the corner.
Inflation is clearly on its way down with the latest update showing a rate of 3.3 per cent, almost within the Reserve Bank’s target band. Interest rates have already started falling in response to the reduced inflation figures. Some key farm input costs such as fertiliser prices have also eased.
The long-term outlook for dairy prices is also lifting. Banks are being supportive and offering cashflow and other assistance where necessary.
While some parts of the country have been dealing with floods, cyclones and droughts, we have been reasonably fortunate in the Waikato and King Country with good seasons climatically, and hopefully this continues.
One thing is clear and that is people all over the world will keep liking our high food quality and will be prepared to pay for it.
Recently I spoke at the annual Farmers Party at the Ōtorohanga Club.
A couple of key points that I shared were: Ensure you have a good understanding of your financial position.
Take ownership of your numbers and understand your budget and cashflows for the year ahead.
Control your costs and eliminate unnecessary spending, but not to the long-term detriment of your farming business.
Remember you are farming for profit, and it is not necessarily higher production that achieves that.
Communicate well and keep in touch with your bank manager. If you have a cashflow shortage coming up at any time, let them know early so plans can be put in place.
Build a good team around you. If you are under stress and have problems, talk to people. Get along to farm discussion groups.
While many farming businesses have seen lower profits and challenges still exist, well run farming businesses will endure, and we are positive that agriculture and our farming community will continue to have a great future.
