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Guy Trafford reports that new rains will start the cycle of recovery, but some may find it harder than others. And finally, officials start to face the consequences of excessive tax-farming with forests

Guy Trafford reports that new rains will start the cycle of recovery, but some may find it harder than others. And finally, officials start to face the consequences of excessive tax-farming with forests

With the heavy rain that Hawkes Bay and other parts of drought affected country received over the last week, the soils are starting to be in a fit state for a restart in the spring. However, that is only the start of a recovery.

Several things tend to happen with adverse effects on farms,  most likely farmers bank accounts would have been hammered by having to buy in additional feed to keep stock alive and hopefully in a state were they are able to achieve reasonable prices when sold. This aspect was severely compounded for some by the saleyards being in lock-down, a situation I believe was poorly managed and showed a complete lack of imagination by those with the ability to control this.

The other thing that can occur is some farmers may actually have inflated bank accounts as they have bailed out of capital stock (largely breeding and replacement animals) early on and have received additional income this year but have lost their ability to farm in the future unless or until they buy in replacement animals to restock. This means that they are potentially up for additional tax.

However, farming has experienced droughts before (too often, unfortunately) and the IRD has a deferred income system where the additional income can be spread over later years and be put against the restocking costs. The crunch part comes from the fact that it is likely that the cost of replacement stock will be higher than (often considerably) the price achieved for stock sold, which often occurs under adverse conditions.

This year with the COVID-19 adding another layer of complexity and schedules through the winter (now) still have not caught up to pre-lock-down prices. This may mean those farmers who made the decision to destock early and include capital stock among the destock may be in an ‘ok’ financial decision on current prices but again, the reality is restocking will not be able to occur until after spring growth has begun and when prices tend to peak. Also any restocking ignores the potential loss of genetics which is difficult to put a measure on but could be considerable.

Government has provided some assistance, $19 million at the last count and probably the total for this current drought. The majority of this has been in the form of providing farmer ‘wrap around ‘ support; that is, looking after mental health, rural communities and latterly assistance with feed budgeting etc from ‘experts’. Given that, on 12 March 2020, the Government classified the drought as a large-scale adverse event for:

  • all of the North Island
  • the top of the South Island (Marlborough, Tasman, Kaikōura) down to North Canterbury (Selwyn District, Christchurch City (including Banks Peninsula), Waimakariri District, Hurunui District, and Kaikōura District)
  • the Chatham Island

This makes up close to 2/3’s of the country and a similar percentage of farms which might mean there have been 27,000 farms affected (dairy and sheep and beef farms total around 42,000 farms).

This made the initial $500,000 fund for farmers to get professional farming advice, which I admit I found a bit laughable at the time, as too little and most farmers know what they should be doing, woefully inadequate as was shown by the gross over subscription to the point where it has been lifted to $3 million now. I do wonder how it is being allocated as the administration has been being done by MPI, and assuming AsureQuality and big brother MPI have similar pricing regimes, then it could soon be gobbled up by administration. For AQ to complete on farm food processing audits we get wacked $245 per hour and for that princely sum the agents are not even meant to answer questions. This came after the last budget. Remember the:

This initiative will alleviate increased pressure on the food safety system and address current issues owing to legislative, demographic and market drivers. It will enable the Ministry for Primary Industries (MPI) to deliver critical support to small, medium and rural-based food businesses; promote business participation and growth; address misalignment across critical food legislation; and investigate robust data requirements to inform regulations and set food and health standards.

This was a $2.5 million fund, so again peanuts in the context of government spending and given how costs have gone up. Perhaps our Minister needs reminding.

The irony in New Zealand is that the agricultural sector expects little help from government and yet it is the most important export sector. When an eye is cast over other developed countries where agriculture is nowhere near as important as an export sector almost without fail governments are far more generous and to a point where it impacts adversely upon New Zealand agriculture.

On a similar topic, there has been some belated recognition that just maybe too much productive land is likely to go into forestry under the ETS program. MPI Minister Damien O’Connor has said that if too much productive land starts to disappear then a cap may be put on the area. When pressed on what “too much” might look like he mentioned the figure of 40,000 ha’s per year. Given that the current area of exotic forestry in New Zealand is around 1.7 million hectares. The Minister said that 6,000 ha’s of ‘new land’ has gone into forestry in each of the last two years. Fed Farmers have said the figure for 2019 was 22,000 ha’s. When a search of the MPI’s website is done:

The provisional new planting estimate for the year ending 31 December 2019 is 22,000 hectares. This number may be revised in the 2020 NEFD (National Exotic Forest Description).

So, either the Minister is talking about something totally different or needs to have a serious chat to whomever provides him with the numbers.

If the ETS prices alluded to by Minister James Shaw (see last weeks report) are reached, then 40,000 ha’s seems a quite plausible figure to be achieved. No doubt there is still a conversation to be had and probably Minister of Forestry Shane Jones will have something to say on the topic especially if he wants to achieve his 1 billion trees target. I also presume any regulations regarding a cap on land being converted to trees would require a significant piece of regulation, as it will bite into the rules around “willing Buyer” and willing seller”.

Saleyard Store lamb

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21 Comments

11
up

So 27,000 farmers, of which quite a number (including us) suffered through a severe drought losing money along the way, get less than twice the government support that one Bungy company is likely to get?
Seems fair to me.

That should be the top comment for the year Wilco.

How's the season going Bell? I'm sure that Bungy just one of thousands scammed from taxpayers by companies, including the likes of The Warehouse. We all are going to get taxed into peonage to pay the future liabilities.
I'm looking at cattle and there is not a lot of confidence out there, I'm growing grass but it is slow this is the first really wet patch, the creeks might even start to flow. Im hoping this rain will reduce the chance of heavy frosts. Soil temperature is over 12 degrees, so some grass should grow.
Interesting thing about my disk drill, which I went straight into my brown dead pasture, has been a success. Not all of it but kahle, Rape, Swedes have bolted, oats are slower. Italian rye is 4 to 5 " high so should keep growing through winter. Cheap italian has done just as well as expensive seed.Oats sowed two weeks later than other field is way behind. Timing in May is critical.

The damage to the world economy by the covid lockdown looks impressive, bit like a huge train wreck. One of my agents tells me the sheep job is going to weaken, I suspect cattle too. I bet the works have made a fortune this past few months. He tells me calf rearers are really gun shy and don't want to commit without contracts and other farmers don't want to put their necks on the line by signing up. Bit of a struggle when last year's weaners are often worth less than farmers paid for them, so not much of a margin in trading down to this seasons calves.

The other worry is that there could be more shutdowns as Covid goes into a 2nd wave. Mates farming beef in USA are very unhappy, trading losses for many before feed costs.

Having the saleyards closed destroyed price discovery, sent some lambs away this week 17.3 kgs and $116 , back on what I got last year. They probably would have been worth more in the store but I only had 45 of them, it was just cleaning thing up really.

Truck driver told me they are still sending in calf cows and in lambs ewes to works, lots of bulls killed that hardly weighed 400kg live weight. These animals desperately need to be kept out of the works, almost at any cost. Govt would be better off spending 5 million on a ship load of grain and give it to farmers to keep these animals in system rather than decimate the breeding herd.

Really insightful comments Andrewj, I enjoyed reading that

Thanks karlymal.
I don't know how anyone can make sense of what's going on in the world today. Read these two articles

https://wolfstreet.com/2020/06/24/business-uncertainty-about-sales-goes-...

https://wolfstreet.com/2020/06/24/barcelonas-epic-tourism-boom-is-over-n...

Scary graphs alright. Stayed at my fathers in Spain just east of Malaga in 2015. Even then there was newly built apartments within walking distance of beach all empty. Also lots of half built and abandoned apartments as well. Empty villas very cheap. Yeah stock market hard to pick but weve done alright with lambs in the Whanganui hills. Farming is still a good business to be in, even with the dry or wet or whatever. As far as this tree planting thing goes, can't understand why they don't just introduce a land class permit system based on soil type. That way we keep economic diversity. There is plenty of low fertility areas suitable for production forests, that don't graze many animals per hectare.

I think we should be growing hardwoods for local processing. Oaks are denser if they grow fast and Eucalypts to a degree too. Look at the price this guy is getting for his gum trees at 30 years old.

https://www.youtube.com/watch?v=72j4FiyCHCc

I milled some trees that washed out of our stream in flood, only a handful, i got them milled and then they sat in a shed for 20 years, went into musical instruments, I send some more away to a violin maker just a few months ago. Problem is I give it away as Im so happy for it to get used in high end products. Brazilian rosewood is pretty much off the official market so hardwoods, well aged are really hard to find.

Some went into guitars like this
https://www.youtube.com/watch?v=KialZHRdD7A

This is a Rod Capper guitar, I supplied Maire timber washed out of the river, had been buried under meters of soil probably for hundreds of years.

https://www.youtube.com/watch?v=3-H3fbu9t0A

Always a pleasure to hear from real farmers (not just frustrated lifestyle blockers) with real things to say. Keep it up.

Yes hard woods of real quality will become hard to find,bearing in mind they take hundreds of years to mature. Specialty timber is definitely a good option for most farms. We have Maire here, still use it for firewood. Cut a good log recently and every time I put a piece in the fire I feel guilty and wish I had it milled.

you can grow eucalyptus, we desperately need some research done, even if it's just in case pine beetle or Pitch pine canker arrive.

We should be able to harvest Gums in 30 years, Juken are planting a ton of them.

Grass is growing quite well here Aj. Still no water in the dam. I think we will be way down on where we should be with annual rainfall so if we get another dry season it will be very ugly.
The price of cattle is getting a little high over here. I am getting a bit wary of what might happen if some of our export partners are hit with a big wave of coronavirus as that is looking in progress now.
Or even if we do. Meat processing facilities seem to be a hotbed of covid in the cool surroundings. Its unsettling to know you may not get stock killed when you need them gone.
Manoeuvering my way through this Autumn has probably been my most difficult season ever. I found just killing stock as they came ready for whatever I could get and replacing when I could as soon as I could meant I still made money. I was lucky to have straight beef heifers mostly, they kept fattening despite the drought. And local trade kept the throughput. Anyone with big steers just had nowhere for them to go. It was an ugly ugly time for many.
I was disappointed the stock companies bailed out of the early weaner fairs. I think they should have held them. Then covid hit and it still didnt rain. What a disaster.
I think this year will be discussed for a long time. So many factors came together to make it so bad. Wilcos comment further up really sunk in. We are screwed. Our taxes will rise to pay for this nonsensical spending. I have encouraged my kids to apply for whatever they can get. Wage subsidies, free loans. As my son says they will spend the rest of their lives paying off these huge debts so they need to take the freebees now to give their businesses a good kick start for survival.
On the bright side its raining tonight, which means our grass will keep growing. We as farmers can keep making money as many other folk lose their jobs and livelihoods.
They say farmers with grass are crazy. I am thinking the spring store market will be scary as everyone tries to fill up their empty farms. I hope sense prevails but I doubt it.

it's a tough one predicting the future, so many farmers around here have killed capital stock, the works will struggle next season. I don't know which way to go, it's tempting to drive and get some breeding stock on board, so I can cruise without having to worry about store markets, but then it could dry out again.

From the USA

'Good fundamental news is hard to find and that won’t change for some time. Hopefully, boxes will find support in the $200-204 area in July. But to think selling beef for a living won’t be an outright slog the next few months is naïve. And selling fat cattle will be just as tough or tougher.'

I emailed Ag minister and Keiran McNulty. These guys seem genuinely sympathetic but none of it generated a modest 5 million feed transport subsidy

Hi Guy, I note your saleyards comment, and a lack of elaboration around that. I hope your view might change with a bit more detail. I manage a significant national livestock business operating across a range of saleyards. We certainly closely reviewed, but judged that opening at Level 4 could not be reconciled with the rules and circumstances. We opened at Level 3 as we considered it vital that we service farmer needs in obviously very challenging circumstances. We put enormous effort and resources into ensuring the yards were covid-compliant and had live auctioning available, despite some strong opposition and lack of support/co-operation in some quarters. Experience and review had highlighted to us, the critical value of yards around both price discovery and effectively transacting stock in the full range of market conditions.
At Level 3 it was a very unusual looking and well controlled saleyard operating format across yards we could access and resource, with in-yards bidding supported with live online bidding capability – we refer to it as a ‘hybrid auction’, and the term appears to have appealed to at least one of our larger competitors. Attending farmers appreciated the need but also understood and supported the Covid-related controls.
That initiative arose from the imagination and drive of our livestock team, the excellent IS support behind our MyLiveStock website (that put our ‘hybrid auction’ capability in place fast), and a governance team that grasp why our business is here. I assure you we appreciated the (continuing) pressure on farm and the effort was clearly appreciated by farmers involved.
I recently thanked those I dealt with at MPI for the foresight they showed with the early ‘essential service’ designation of agents supporting urgent livestock transactions, and for the guidance and support we saw from MPI (right to Ministerial level) during our planning, set up and execution of what I still have a sense was challenging in the Covid environment, but hugely valuable to farmers facing severe drought and approaching winter.
I hoped that our early saleyard opening, our sharing of the related operating protocols with other yard operators, and our ongoing effort to increase uptake of our ‘hybrid’ auction platform, perhaps hastened yard opening elsewhere, supported widely held Covid priorities, and helped farmers.

Hi Morrison, I used your platform to buy this autumn. Its a bit scary, the damn video keeps stopping. You dont really get a good look at the stock. But I was very happy with what I bought. On the whole it worked very well. The only thing I would say is I never recieved TB cards with the stock.

I'm just going through the website now, looks interesting enough for me to have a go, see some stock that would suit.. The world is changing just got to keep up.

It is great not having to chase the sales around.

my stock agent is going to have to work his butt off to beat this, all the stock he has quoted me are at least $40 above auction prices.

Dp

We bought several units of replacement cattle off a different platform. Was nerve racking. Received only one animal unhappy with. One line was markedly better than described. My experience it still relies on quality and integrity of the vendor's agent. The video tends to focus on the better part of the line, whether colour or confirmation. Other lesson was when buying direct off farm some farmers didn't wait long enough off grass so weight included gut fill. We will use again.

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Days to the General Election: 38
See Party Policies here. Party Lists here.