Tuesday, 12 March 2019 11:41

Cash tight, costs rocketing — Feds

Written by 
Chris Lewis, Federated Farmers. Chris Lewis, Federated Farmers.

Spiralling expenses are the biggest concern to farmers right now, says Federated Farmers’ national dairy chair Chris Lewis.

“Farmer morale out there…? It’s been a tough few years and money is tight onfarm with a $6 payout,” he told Dairy News. 

“Cash is tight and expenses are rocketing at the moment. For instance, [when you call an] electrician, a milking shed job that used to be a few hundred dollars is now a thousand dollar job. 

“It is all the compliances and all these little businesses passing on costs to farmers. 

“The prices of feed, everything you buy in your shops, electricity and fuel are all increasing. And it can have a massive effect.”

Lewis says farmers tell him they are not purchasing any more materials or other items and the cost of everything is skyrocketing. 

“You’ve seen the likes of minimum wages increasing; all these things have a contributing effect on what we pay.”

 Rates are skyrocketing; a lot of dairy farmers are paying up to $50,000 in rates – in that range -- when a few years ago they were paying $5000 - $15,000.

“It all has a contributing effect; money is dashed tight onfarm. 

“Now to live comfortable you need a $6.50-$7/kgMS milk price. A few years ago if I had said that in the media I would have been laughed out of the media.”

He says people in town are struggling with the cost of living too. It is not just restricted to farmers; everyone is feeling the effect.

“Costs are tight. Running a business is hard work. Even in the construction industry, builders are going belly-up. It is not just farmers.”

Share price dilemma

Asked if Fonterra farmers are fed up with the share price and dividend situation or are prepared to ride it out, Chris Lewis says there are always two schools of thought.

One is that they have money invested and may have bought their shares for about $6 and now they are worth about $4; they question whether they should get a dividend off it to help service the debt.

Another school of thought is they are not likely to sell their shares for a long time. 

They look at the total payout and if it’s greater than $6.30 -$6.40/kgMS they are “happyish”.

“I wouldn’t say they are jumping for the moon but they are happyish.”

But farmers this year who are selling their farm and banked on a $6 share and are now looking at $4.20 would not be as happy because land prices are slightly down.

 

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