Wednesday, 15 January 2020 13:19

Cloud in sector’s silver lining — Editorial

Written by  Staff Reporters

OPINION: High farm debt levels have cast a shadow over the Ministry for Primary Industry's positive predictions for agriculture in 2020.

The latest MPI report on the state of NZ agriculture points to another good year ahead with export revenue from the primary sector expected to rise by 3.3% in the year ending June 2020.

Published late last year, the Situation Outlook for Primary Industries (SOPI) report paints a generally rosy picture for the farming and horticulture sectors. It forecasts the primary industry’s total export revenue will hit $47.9 billion for the coming year.

This revenue increase will come from an 8.4% increase in dairy export earnings, meaning it will earn $19.6 billion dollars. Meat and wool will reach $10.4 billion – up 2.5%. Revenue from the current sector darling horticulture will increase by 4.7% to reach a total of $6.4 billion. 

This is both impressive and vitally important for the future well-being (to use the current Government’s own twee terminology) of New Zealand’s economic future.

However, this same rosy report points to a worrying cloud on the sector’s horizon – dangerously high levels of debt in dairy farming. 

The report devotes an entire section to the debt issue. Titled: ‘financial vulnerability in the dairy sector’, it notes that the use of debt to fund business and industry growth plays an important role in economic success, but with this expansion, the risk level in the dairy sector has increased significantly. 

It also highlights that more than a quarter of dairy farmers have debt to equity ratios of more than 70%, some having as little as 4% equity in their properties. The report says that over the last two decades dairy farm debt has increased by 267%. Total dairy sector debt now stands at $41.4 billon.

MPI, quite rightly, warns that with such high debt levels, owners of these farms may not be able to meet the challenges and changes that lie in store for the sector. It warns that heavily indebted farms will struggle to meet the suite of environmental requirements that are already in place or have been signalled by the Government. 

This means it is now incumbent on both farmers and the banks to look at high farm debt levels and how these can be reasonably mitigated and managed. As Minister of Agriculture Damien O’Connor says, the banks need to share some of the responsibility for what’s happened and take a partnership approach to the solution – not put all the pressure on farmers.

Sound advice. Let’s hope the banks take heed.

More like this

Report highlights good pay packets

A report confirming a sharp rise in pay for dairy sector workers will help attract more New Zealanders to farming jobs, says Federated Farmers dairy chair Chris Lewis.


Water reforms come at a cost

The government’s new freshwater laws, signed off this week, have the potential to create significant unnecessary costs for ratepayers, farmers and entire communities, Federated Farmers says.

2020 harvest yields up

Final harvest data for wheat, barley and oats (milling/malting and feed) in 2020 show yields were up 17% overall across the six crops.


Difficult but the right call

DairyNZ chief executive Dr Tim Mackle says the joint decision three years ago to eradicate Mycoplamsa bovis was a difficult call.

Milking cluster milks runner-up award

DeLaval has come away with the runner up prize in this year’s Fieldays Online innovation competition with a new milking cluster that eliminates the need for conventional liner changes.

Glow worms to cows

Thomas Lundman's work focus has gone from tracking tiny critters in pitch black caves to looking after considerably larger animals in paddocks near Whakatane.

» Latest Print Issues Online

The Hound

Spell check

Your old mutt was not surprised to see the NZ Dairy Industry Awards hastily remove the title of this year’s…

About time!

Your canine crusader has been a long-time critic of NZ governments – of all stripes – who, for the past…

» Connect with Rural News

» eNewsletter

Subscribe to our weekly newsletter