Friday, 14 February 2020 10:44

Drought’s mixed effects on sectors

Written by  Staff Reporters
ASB senior rural economist Nathan Penny. ASB senior rural economist Nathan Penny.

Prolonged dry weather will have mixed effects on commodity prices, says ASB senior rural economist Nathan Penny.

For dairy, the drought will put upward pressure on prices as milk production will fall.

“Currently, we forecast 2019-20 production to be flat on 2018-19, but we are reviewing this forecast next week,” says Penny.

The big dry is already depressing lamb prices as farmers bring forward and increase slaughter of stock due to a lack of feed, putting more lamb on the market.

However, Penny says a hot summer can often boost production levels in the horticulture sector: this could see prices fall.

The Government last week declared an adverse event for Northland, where dry weather is causing feed issues for farmers.

Penny says other regions may soon see an official declaration too. 

“The Waikato, Bay of Plenty, Taranaki and the northern part of the South Island are also very dry. Moreover, weather forecasts show little sign of short-term rain relief in these areas,” he says.

In terms of commodity price impacts, the drought will have mixed effects by sector. For dairy, For meat prices, the drought is having a depressing impact as farmers bring forward or increase slaughter due to a lack of feed. Already, lamb prices have fallen more than they do normally at this time of year. Meanwhile, a 

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