Ouch!
OPINION: Your canine crusader notes that the Reserve Bank forecasts that more than 80% of beef and sheep farmers would be unprofitable if any future emissions pricing on carbon dioxide equivalent hit $150 per tonne.
Dairy remains a key risk to New Zealand’s financial stability says the Reserve Bank.
The bank is reviewing the capital commercial banks must hold as sufficient provision for the dairy industry’s debt.
And it is concerned about housing market vulnerability and bank funding pressures.
Auction prices for whole milk powder have increased 69% since July and Fonterra has raised the farmgate forecast to $6/kgMS, which is likely to return the average dairy farm to profitability, says Reserve Bank governor Graeme Wheeler in his six monthly financial stability report.
“Nevertheless, parts of the dairy sector remain under significant pressure,” he adds.
“In aggregate, dairy farms have reduced costs, but there is significant variation in cost structures across farms. Even with the improvement in dairy payouts, some farms may struggle to achieve profitability, especially given that 20% of farms account for about 50% of overall dairy debt.”
Debt levels have been stretched further as dairy farms have borrowed working capital to absorb operating losses over the past two seasons. High debt levels leave the sector vulnerable to any weakness in dairy prices.
With recent price improvements, credit losses are likely to be lower than suggested by the more severe scenarios in stress tests of banks’ dairy exposures last year, Wheeler says. Nevertheless, problem loans are likely to increase further, as losses take time to materialise.
Therefore, he says, banks should ensure provisions and other buffers are appropriate for expected losses.
South Waikato farm manager Ben Purua’s amazing transformation from gang life to milking cows was rewarded with the Ahuwhenua Young Maori Farmer award last night.
Bankers have been making record profits in the last few years, but those aren’t the only records they’ve been breaking, says Federated Farmers vice president Richard McIntyre.
The 2023-24 season has been a roller coaster ride for Waikato dairy farmers, according to Federated Farmers dairy section chair, Mathew Zonderop.
Ministry for Primary Industries (MPI) director general Ray Smith says job cuts announced this morning will not impact the way the Ministry is organised or merge business units.
Scales Corporation is acquiring a number of orchard assets from Bostock Group.
Family and solidarity shone through at the 75 years of Ferdon sale in Otorohanga last month.
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