We're OK!
OPINION: Despite the volatility created by the shoot-from-the-hip trade tariff 'stratefy' being deployed by the new state tenants in the White House, farm commodity prices are holding their own.
While every industry is dealing with global uncertainty, I believe the Agri sector is well positioned to lead New Zealand’s economic recovery.
However, I know many farmers are experiencing mixed emotions. Over numerous cups of tea, I’ve heard optimism about how the Agri sector can support the Government’s growth plans. But that’s been balanced with uncertainty about what the current geopolitical environment means for Kiwi farmers and growers exporting overseas.
A new report published by our Westpac economist team in conjunction with MyFarm Investments – Proofing against shocks – building resilience in the food and fibre sector – digs into these themes a bit more.
On the growth side, the report suggests that investment is required to lift productivity in the sector and that current market conditions, along with forecast long-term demand, present a great opportunity for commercial investment in farms.
Meanwhile, the “liberation day” headlines a few months back struck fear into the hearts of many Kiwi exporters, bringing confirmation that US importers will face a 10% tariff on products that NZ exports to the US.
The report points out that seven of New Zealand’s top 10 export categories are tied to food and fibre products, with about $NZ5bn of these goods going to the US alone each year.
While in theory this means tariffs could potentially reduce exporter incomes by about $500m, our economists think actual impacts are likely to be significantly lower. Factors influencing this include how the NZ dollar performs, whether costs can be passed on to consumers and whether products can be sent to other markets.
Westpac economists are forecasting NZ’s key commodity export prices to continue to rise over the next year or so, which will also hopefully go some way to alleviating the impact of tariffs. But being prepared for all eventualities is always a good idea, and the report makes a number of recommendations for farmers and growers.
That includes reducing input costs or increasing output; increasing resilience by working out how on-farm processes could be improved; and being open to new “smart farming” practices. Smart farming is a broad term that covers things like automation in packhouses or milking sheds, robotic pickers, and GPS technology.
These can all sound like big, daunting areas to tackle, but as the report points out, Kiwi farmers have always shown both curiosity and open-mindedness when it comes to trialling new approaches. Think about innovations like electric fencing, rotary milking sheds and precision irrigation systems – all revolutionary in their time, and now in general usage throughout the country.
Along with that inherent curiosity, I think collaboration will continue to be critical to the success of our industry. At Westpac, we’re keen to have conversations with our farmers and growers about what’s changing, what that means for their businesses and how we can help to support their future goals.
We have a number of different products available to support investment in some of the new technologies available, from the Westpac Sustainable Farm Loan (a whole of farm solution) through to our Sustainable Business Loan (for funding specific projects) and Equipment Finance (asset finance solutions). We know our farmers need to be agile to improve on-farm resilience to whatever the markets, geopolitics and climate may throw at them, and our teams are committed to standing alongside them.
No doubt some of these conversations, along with plenty about the weather and what’s going on throughout the country, will take place at Fieldays this week.
I’m personally feeling energised about connecting with farmers and growers at Mystery Creek, and I know many others will feel the same. Fieldays is a great opportunity to get off the farm, share ideas, swap stories and find some inspiration to take back home with you.
I’ve been in the tractor seat as Head of Agribusiness at Westpac for just over a month now, and the job really does feel like a bit of a homecoming for me.
I grew up on a farm near Whanganui and my dad’s career advice to me was to, “get my own bloody farm” if I wanted to be a farmer, rather than waiting around for the property to be passed on. As they are still very much in charge of that property, I’m grateful I followed my own path.
Overseeing agribusiness at Westpac is an incredible opportunity to support the work of some of New Zealand’s best farmers and I feel privileged to lead a team who show up for the sector every day.
Richard Anderson is Westpac's new Head of Agribusiness.
