Wednesday, 15 December 2021 06:55

An eye on costs is key

Written by  Peter Burke
ANZ’s Susan Kilsby says financial management skills and the ability to manage cash flow will be pivotal to farmers retaining profitability this year. ANZ’s Susan Kilsby says financial management skills and the ability to manage cash flow will be pivotal to farmers retaining profitability this year.

While the outlook for global food prices is positive for New Zealand primary producers, some challenges lurk in the year ahead.

That's the prediction in the latest ANZ Bank Agri Focus, which provides an insight into the primary sector for the coming months.

Author of the report, ANZ agricultural economist Susan Kilsby, says these challenges are a range of rising key farm inputs - especially fertiliser, farm machinery and labour. She says for intensive farming operations with essential inputs, there is little that producers can do to mitigate certain costs other than to shop around and try and get the best deals possible.

"One thing we are going to see is some varying outcomes from farm to farm, depending on how well people are able to manage costs and keep an eye on that," Kilsby told Rural News.

"While on the income side you don’t have a lot of control over the prices you get paid for your products, you do have a little bit more flexibility on how you can manage things to make sure you are still making a profit. I think we will see quite a big variance from those who are good at managing costs and those that let them get away.”

Kilsby says financial management skills and the ability to manage cash flow will be pivotal to retaining profitability, especially for those with the more intensive operations. She adds that the cost of compliance will be another challenge with costs in this area skyrocketing due to the complexity of the consenting process.

The other issue which looms again is that of logistics – getting product to market at key times. Kilsby warns there will continue to be price hikes for exporters – especially small ones – trying to get perishable products to market in time for festivals and important seasonal selling times.

She says there are ongoing problems in NZ getting products from small ports to the main ports, especially Tauranga, to connect to ships that take the goods to the main markets.

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