Sheep Farmers Closing Chequebooks

12 February 2007

Sheep Farmers Closing Chequebooks

New Zealand sheep farmers are closing their chequebooks due to lower farm gate returns for their produce, said Keith Kelly of Federated Farmers of New Zealand.

“Most New Zealand sheep farmers are not making a profit at present, and all the economic and anecdotal evidence point to one thing: sheep farmers have stopped spending until returns improve.

“Closing chequebooks will seriously impact rural communities, especially in hill country areas, many of which rely to a large extent on the income of sheep farmers.

“There are a number of reasons why returns are low but the main ones are flat commodity prices and a ‘stronger-for-longer’ kiwi dollar, which is being propped up by high interest rates.

“It is alarming to hear that the Reserve Bank is considering putting up interest rates at its next review. Recent data from the ANZ showed the New Zealand dollar commodity price of meat, skins, and wool was at its lowest point in three years and nearly at a seven-year low.

“The economy is becoming seriously unbalanced if sheep farmers, one of New Zealand’s largest export industries, are not profitable, and interest rates and the exchange rate are possibly heading higher.

“At times like these it is important that the government creates the right regulatory environment for exporters, which, unlike domestic businesses, cannot pass on compliance costs to customers.

“I appreciate that the blame for low farmgate returns cannot be sheeted home entirely to local and central government. But they must do their bit to help restore profitability to farmers.

“For example, the government must take a serious look at compliance costs linked to persistent high-cost areas such as the Resource Management Act, ACC, and the Holidays Act. The government must also contain the rampant growth in its spending, a factor behind burgeoning consumer spending, which is in turn is stoking inflation and interest rates.

“Meanwhile councils must make more effort to reduce the ratepayer burden on landowners, many of whom are paying rates for services they do not receive.” Mr Kelly said. Mr Kelly is chair of the NZ Meat and Fibre Producers Council, an industry group of Federated Farmers of New Zealand.

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