Westpac Urges Farmers to Prepare Now for El Niño Drought

Earlier this month, Westpac's Economics team published detailed research into the likely impacts of El Niño across northern and eastern parts of New Zealand.

Based on past severe drought events, the research points to a potential 1% hit to GDP if conditions play out similarly this time.

Don't Assume The Worst - But Plan Now

Westpac NZ Head of Agribusiness Richard Anderson says farmers and growers shouldn't assume the worst outcome is guaranteed, but should use the time now to build flexibility into their operations.

"Every farming and growing operation is different, so now is the time to think about what El Niño could mean for your business and what steps you can take to manage the risks," Anderson says.

Anderson stresses that good financial planning deserves the same attention as operational planning. That means updating budgets, monitoring forecasts regularly, and being ready to adjust as conditions change.

He notes that while some farms may face higher costs from additional feed purchases or irrigation expenses, others could choose to sell stock earlier than planned to bring forward revenue and ease financial pressure.

Learning From Past El Niño Events

Anderson recommends farmers use their own history with the land as a guide.

Long-term property owners should reflect on what worked and what didn't during previous El Niño events, while newer owners are encouraged to talk to previous owners where possible.

"That local knowledge can be invaluable when preparing for dry conditions," he says.

Practical Steps For Farmers and Growers

Westpac has outlined a set of practical considerations for the season ahead:

• Livestock farmers should prioritise a reliable water supply and secure feed availability.
• Farmers should assess the condition and capacity of dams, troughs and reticulation systems, and review supplementary feed supplies such as baleage, silage and hay.
• Some may want to secure additional feed supplies or lock in contracts and prices before demand rises.
• Farmers with trade livestock could set trigger points for selling stock earlier if feed supplies come under pressure.
• Growers of fruit, grain and horticultural crops may benefit from warmer conditions, but should check irrigation systems for leaks, repair valves or pumps, and maintain storage tanks.
• Farmers and growers should also factor in any potential water restrictions in their area.

Farmers Are In Strong Financial Shape

Despite the drought risk, Anderson says most farmers and growers are well placed financially to cope with a dry summer.

"Arguably the industry is in the best position it's ever been to face into El Niño, thanks to generally low debt levels and high commodity prices," he says. However, he flags rising on-farm inflation — driven by higher fuel and fertiliser costs — as a concern for many customers Westpac has spoken with.

"This is where keeping a close eye on your budget and cash forecasts is key. Make sure you have enough cash on hand, keep an eye on markets for demand and price trends, and be prepared to change your approach as weather forecasts change."

Talk To Your Bank Early

Anderson's closing advice is straightforward: farmers concerned about how El Niño could affect their business should talk to their bank early.

"The sooner we understand your plans and challenges, the better positioned we are to support you," he says, adding that Westpac's agri bankers are embedded in rural communities and ready to work alongside farmers as they prepare.