Taranaki farmers face uncertain outlook despite grass growth after drought
The grass may be growing again in the drought-stricken coastal area of Taranaki, but the outlook for many farmers there is far from rosy.
The risk to primary production, if dry weather continues, needs highlighting, but every weather pattern is different, he says.
“It has been drying out – rapidly. It has got to the point now of many parts of the country having bigger soil moisture deficits than are normal for this time of year according to NIWA.”
It is most pronounced in western areas – typical of the La Nina pattern.
“It is of particular concern that conditions are getting dry so early in the season, even before summer has started. Some gentle widespread rain is required, not the recent localised thunderstorms and very heavy rain that has caused flash flooding in some parts of the country.”
Economic forecasts have not yet been adjusted.
“But it is a risk worth highlighting, especially with near-term weather forecasts showing little rain on the horizon. If dry conditions persist too long we would expect GDP to be lower than currently expected,” Steel adds.
“This could involve milk production falling short of our current expectation of about 1% growth on the previous season. October’s production was 2.9% higher than a year ago, but now drier conditions are putting a question mark over the rest of the season.
“Moreover, dry conditions tend to bring added costs such as for supplementary feed. Some consolation is that if NZ milk production were to stall or fall from here, it would offer some support to dairy product prices. But it would hardly be the best way to achieve this. Our forecast for Fonterra’s 2017-18 milk price currently sits unchanged at $6.30/kgMS.”
There was no sign of any NZ milk supply concern at the latest GDT auction when prices fell for the fourth consecutive auction, to be down in total about 10% since September, Steel says.
“Regardless, it is something to watch over the coming weeks and months, especially if the general lack of rain in NZ continues. We have already seen a mild bid tone return to the NZX whole milk powder futures market despite the latest softer GDT result.
“Lamb markets are also showing signs that it is getting dry, with reports of some pullback in store lamb pricing and more new-season lambs being sent for processing as feed conditions tighten. If dry conditions extend we would expect these moves to intensify.”
Steel says interestingly a weak La Nina weather pattern often brings optimism.
“This is because NZ agriculture, as a whole, often performs well during weak La Nina conditions as the typically more-than-usual rain in eastern areas lifts grass growth and agriculture production in that region by more than the drier-than-usual conditions that dent production in western areas.”
