Tough but not all bad

"Will some farm businesses fail as a result of lower payouts and a high dollar? Sadly, that answer is probably yes," says Bruce Wills, Federated Farmers president.

"I can understand why the outlook for some is negative given a slew of farm confidence results and projected falls in income. Federated Farmers was painfully honest even before the start of this season that it would be a tough one.

"Before the Ministry for Primary Industries (MPI) forecasts, farm sales recorded by the Real Estate Institute had slid back to levels last seen in September 2010.

"Yet there are blue clouds appearing among the grey. Five of the last six GlobalDairyTrade auctions have been up and in the latest auction, wholemilk powder jumped 9.2%.

"This comes off an excellent production start to the new season. I have read that milk volumes are up 13% on last year and last season was one out of the box. I can say from my farm we currently have excellent growing conditions for beef and lamb too.

"That said cold weather and rain has impacted grass growth in some areas and is a concern going forward.

"After a terrible start to the new season, we are seeing wool prices slowly climb with an encouragingly high clearance rate too.

"Beef prices are holding up despite the drought in the United States. While lamb has reversed recent gains to be in the $90 range, initiatives like what McDonald's New Zealand is doing with lamb may open up new export opportunities.

"Look, this is a tough season and make no bones about it. Yet tough does not mean dire because we produce food and fibre the world needs.

"What would really help us is less pressure on the dollar. There is no quick fix but winding back government spending and paying down debt would help relieve the pressure. Combine that with a focus on the quality of regulation instead of the quantity and things will look up.

"I guess we need to look past the short term because the medium term remains bright," Wills says.