Westpac Urges Farmers to Prepare Now for El Niño Drought
Westpac NZ is calling on farmers and growers to start preparing now for the possibility of a dry summer, as likely El Niño conditions raise the risk of drought across parts of the country.
"After a bumper 2012 worldwide production season, the curse of drought has hit several major grain-producing areas, particularly the US," says Westpac senior economist Felix Delbruck. "This has pushed up feed costs for Northern Hemisphere cattle farmers and is likely to boost global dairy and beef prices."
Delbruck notes that world dairy prices have already risen from recent lows, with Global Dairy Trade auction prices up about 20% since late July. The impact on beef prices is likely to take longer as farmers off-load stock.
However, immediate gains to local farmers may be limited. "As is often the case, the dollar has followed dairy prices higher, tempering the gains at the farm gate," says Delbruck. Westpac continues to forecast a dairy payout of $5.70 for the 2012/13 season.
"In the 2013/14 season and beyond, prospects are firmer," says Delbruck. "With a recovery in global growth and ongoing income growth in emerging markets, particularly China, we expect increased demand to underpin prices."
