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Drought makes high New Zealand dollar unjustifiable

27 February 2013

Drought makes high New Zealand dollar unjustifiable

With widespread dry conditions and the first adverse event declaration in Northland related to drought, Federated Farmers believes there is no justification for the high New Zealand dollar.

“It seems dairy production is not just falling but in some key areas is starting to crash,” says Bruce Wills, Federated Farmers President.

“DairyNZ confirms Northland’s February milk production is some 20 percent down year to date while in the Waikato, it is about 15 percent down. Speaking to Kevin Robinson, the vice-chair of Federated Farmers Dairy, milk production at his farm is down 15-20 percent and is falling daily.

“Given there is still a fair proportion of the dairy season left to run, dairy farmers are either on once a day milking or looking at drying cows off. Once that takes place, it is the end of milking until August

“When you put this effect on dairy together with the way meat and fibre farmers have rapidly destocked over summer, New Zealand’s two leading exports are under the gun.

“It needs to be remembered that the North Island is now where most of New Zealand’s sheep and beef cattle are located. In addition to Northland, key sheep and beef areas on the North Island’s East Coast, Waikato, the Bay of Plenty and the top of the South Island are very dry.

“We can add into the mix inland Taranaki, the West Coast of the South Island and even Southland

“We have also spoken to colleagues in horticulture, another one of our top-ten exports and they are now finding things increasingly tough as well.

“When you put all of this together the economic fundamentals provide no justification for the substantially overvalued Kiwi dollar. Any short term uplift in commodity prices will likely reflect supply concerns and while helpful, it won’t provide a cash boon for farmers or the economy.

“The droughts of 2007-9 cost New Zealand $2.8 billion and these were widely seen as tipping points for the last recession.

“The dollar is like a balloon and drought declarations ought to be the sharp pin,” Mr Wills concluded.


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