Ouch!
OPINION: Your canine crusader notes that the Reserve Bank forecasts that more than 80% of beef and sheep farmers would be unprofitable if any future emissions pricing on carbon dioxide equivalent hit $150 per tonne.
Dairy remains a key risk to New Zealand’s financial stability says the Reserve Bank.
The bank is reviewing the capital commercial banks must hold as sufficient provision for the dairy industry’s debt.
And it is concerned about housing market vulnerability and bank funding pressures.
Auction prices for whole milk powder have increased 69% since July and Fonterra has raised the farmgate forecast to $6/kgMS, which is likely to return the average dairy farm to profitability, says Reserve Bank governor Graeme Wheeler in his six monthly financial stability report.
“Nevertheless, parts of the dairy sector remain under significant pressure,” he adds.
“In aggregate, dairy farms have reduced costs, but there is significant variation in cost structures across farms. Even with the improvement in dairy payouts, some farms may struggle to achieve profitability, especially given that 20% of farms account for about 50% of overall dairy debt.”
Debt levels have been stretched further as dairy farms have borrowed working capital to absorb operating losses over the past two seasons. High debt levels leave the sector vulnerable to any weakness in dairy prices.
With recent price improvements, credit losses are likely to be lower than suggested by the more severe scenarios in stress tests of banks’ dairy exposures last year, Wheeler says. Nevertheless, problem loans are likely to increase further, as losses take time to materialise.
Therefore, he says, banks should ensure provisions and other buffers are appropriate for expected losses.
Federated Farmers president Wayne Langford is claiming “some real success” on the 12 policy priorities it placed before the Coalition Government.
Federated Farmers is throwing its support behind the Fast-track Approvals Bill introduced by the Coalition Government to enable a fast-track decision-making process for infrastructure and development projects.
The latest report from ANZ isn’t good news for sheep farmers: lamb returns are forecast to remain low.
Divine table grapes that herald the start of a brand-new industry in Hawke’s Bay have been coming off vines in Maraekakaho.
In what appears to be a casualty of the downturn in the agricultural sector, a well-known machinery brand is now in the hands of liquidators and owing creditors $6.6 million.
One of New Zealand’s deepest breeder Jersey herds – known for its enduring connection through cattle with the UK’s longest reigning monarch, Queen Elizabeth II – will host its 75th anniversary celebration sale on-farm on April 22.
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