Guy Trafford takes a look at what 2019 might bring for farmers in terms of climate-related regulation, land prices, and product prices. He's not pessimistic on everything

Guy Trafford takes a look at what 2019 might bring for farmers in terms of climate-related regulation, land prices, and product prices. He's not pessimistic on everything

By Guy Trafford

With the current year rapidly drawing to an end it is time to start thinking about what may be in store for next year. Three main areas of focus quickly come to mind as what may be the major impactors for those on the land.

Climate, always close to the surface of any farmer and in this case, it is going to be more complicated as we not only have climate change, but also climate change policy.

Property, land prices have gone flat within the pastoral sector and next year may see some downward movement.

And finally, product prices.

Climate

Climate change minister is recently back from the COP24 UN climate conference in Poland. One of the major outcomes that was looked to come from this meeting of nearly 200 nations representatives was a set of rules as to how to keep the global warming temperatures below increasing by 2oC.

New Zealand is one of a group who are ‘committed’ to keeping the increase below 1.5oC although to date little real action has happened to actually make this a reality. This is why 2019 may turn out to be a watershed year around policy.

The clock is running down on the current government to try and get some runs on the board and so with the next election in 2020 it doesn’t leave much time. We can expect regulations coming thick and fast and given the conversations that haven’t been had yet hopefully there will be some further consultation. It is inevitable that agriculture will be dragged in and the areas that still need discussing are; at what rate and how soon and how will farms be assessed regarding their emissions? Will it be a cheap and nasty broad-brush ‘tax’ based upon product and collected by processors? This has the attraction of being simple and cheap to run, the downside is that it does not provide any incentives apart from producing less.

A more targeted regime which potentially should measure individual farms is the ideal but is going to be costly to administer with no doubt farmers paying and given the time frames the agreements aspire to these conversations should have been happening years ago. NIWA have been forecasting for some time now an El Nino weather pattern, this normally brings a drier east coast with westerly’s dominating the weather patterns. However, in Canterbury just reverse has been occurring this spring and early summer giving contractors a real headache trying to get the increasing feed surpluses harvested. This time last year a record of 46 days with zero rainfall occurred whereas it feels as though 46 days of rain have occurred this year and in the meantime parts of Southland and Taranaki have been experiencing drier than average rainfall and need more. Just looking at the NIWA updates although an El Nino is still trying to establish itself it is weaker than earlier forecasted and both sides of the country look to be set for a fairly average summer ahead.

Property prices

When it comes to land prices, the Colliers Research Update predicts ”the dairy sector will step out of the limelight as it enters a challenging period in terms of land values”. For all farmers with mortgages (all of them?) the RBNZ new regulations to require that banks will need to double their cash reserves from 10% to 20% may mean that business interest rates are likely to have a small shift upwards. This, plus the weaker dairy prices and the unwelcomed cost and time required to be put into compliance issues is likely to increase the flow of farms for sale. We already appear to be seeing a lot of farms of all types coming onto the market and there are some whispers that banks are quietly lifting the pressure onto some heavily leveraged farms.

While bank pressure this side of the Tasman appears to be a lot more measured than in Australia, it will not require a big shift in more sales to have an impact upon prices. Sheep and Beef while enjoying reasonable profitability will not be immune from the influences of the heavy debt loadings of the dairy industry. Hort land does seem to be the one area that is still on the increase in value.

Product prices

When it comes to product prices so much is in the lap of the offshore politicians which is not a good place to be. The Trump effect, in particular with China but most of the trading globe is affected makes trying to second guess what role China and the USA while have on markets tricky. On top of this Brexit has got complicated and a second referendum is looking more and more likely as the only way to get out of the current impasse that the UK is currently in and this spills over into the EU.

Lamb is looking positive, largely from a lack of strong competition from other lamb producers. Milk is looking weak and likely to stay weak for some time yet and beef is already at last years prices and not too many upsides visible just yet.

Longer term, the impact from fake meats and other products may impact, but given the growing middle class and with New Zealand’s production fairly much capped at current levels for livestock systems those that hang in there should be rewarded, providing you can put up with the increased uncertainty with bureaucracy, and weather.

Y Lamb

Select chart tabs »

The 'NZ average $/hd' chart will be drawn here.
Loading...
The 'NI avg 17.5kg $/hd' chart will be drawn here.
Loading...
The 'SI avg 17.5kg $/hd' chart will be drawn here.
Loading...

 

We welcome your help to improve our coverage of this issue. Any examples or experiences to relate? Any links to other news, data or research to shed more light on this? Any insight or views on what might happen next or what should happen next? Any errors to correct?

We welcome your comments below. If you are not already registered, please register to comment.

Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.

12 Comments

You Do have readers, Guy, even though little comments are evident.

Forecasting weather patterns (which is what CC is trying to do) is always a fraught business, particularly in NZ, being a long, cloudy country with hundreds if not thousands of microclimates, a temperate surrounding ocean, and known swirls around geographic features (Banks Peninsula is a striking weather traffic director...). Weather forecasting at a national level has zero skill a fortnight out, although the Moon Man may have different ideas. At a local level, less.

Hey ho....

I work in the agriculture sector and Guy's articles do get read and talked around the office (not the comments section).

They sure do get read, and well. Just a perspective reminder, interest.co.nz gets read by between 15-20,000 unique readers each day who read 55-60,000 pages of content in that day.

We get about 250 comments on an average day, from about 80 different readers. (Almost 20,000 people are registered to comment.)

I can tell you that the number of comments on a story, even the number of upticks, has little or no relationship to the number of times a story is read.

To get comments you have to put "house" somewhere in the article.

He did mention property prices

They are just farm prices - who cares about them.

Anyone with Rabodirect investments or any other bank holding the mortgages & loans for those farms. Not to mention those hoping to see how the meat sector is doing so the big BBQ in future can go well. Not everyone has access to homekill lamb. Even our access is limited and family & friends are directly in farming, small may they be. But given the agriculture sector is a big factor in NZ, and NZ is heavily financially & interconnected to those in farming. It is not hard to have connection to someone who relies on financial farming movements even if you are say a beautician working in Auckland CBD.

At last count I think we are going into our fourth wet summer. Woohoo. Come on the rain.

Yes , but the heat is meaning it evaporates quick , and the stock are too hot to eat. Its spring when we needed the rain , and that was too dry. The seasons are definetly changing , the drought treat now is April- May .

Are the seasons changing or just moving forward a month or two? The key thing is that we still have more than one season. If they move or change, but we still have more than one season, we just need to adapt. Here in Central Otago when I look around the Ranges in and around Cromwell basin, Alexandra etc they are still green almost to the tops. Farmers are more than happy here. Horticulturists maybe not quite so much. But every sector has its day.

Hort land prices will be interesting to see what happens. In CO cherries and wine have been reported as competing for land, though some cherry land has been sold for as much $100k/ha. Though they are usually cashed up buyers. Last seasons cherry season was one difficult and this year is proving to be more so for a lot of growers.
As I write this it is a gloomy, bleak, wet day with a orchard temp currently showing 12deg - not ideal for cherry ripening. Frost in Oct (the biggest for that time of year in living memory) and lots of rain in Nov and Dec has done nothing to produce quality cherries. Some orchards have 100% loss and with this current rain there will be additional losses to that caused by frost, low pollination rates, rain - cracking. The late varieties will be what growers are pinning their hopes on now.
And if you like apricots - get them when you see them. ;-)

I think lab grown animal meat would be interesting in the NZ market but given the manufacturing ability is small and not easy to setup to manufacture at a large scale it is hardly a threat yet to NZ meat market. Even then it would be very different in size, texture and quality offered. It would have to have a significant attraction for even a restaurant to take it on to promote and there just is not much there yet. It would significantly reduce the land and climate effects but then the toss up is how much varying animal stock would be needed to maintain the system and are the costs as equitable or is it say more energy intensive to produce the same by weight.

Other than that the increase in marketing vegan meat textured vegetable proteins comes and goes. Even vegan friends don't bother with it. After all why try having fake chicken pea protein when they could just have chickpeas for far less fuss and false trickery. Have a daal not a dramatic meat replacement. It is made of the same stuff anyway.