10 December 2000

Grain farmers are calling for more realistic prices for cereals produced in the coming season, according Neil Barton, Chair of the Federated Farmers Grains Council.

"Production costs for all arable crops have increased substantially in the last few months. The Federated Farmers' Arable Model Farm shows fuel expenditure is likely to increase from $12,460 in the 1999/2000 year, to $18,690 in 2000/01," Mr Barton said today.

The model also shows a rise of $4,100 for the direct and indirect costs of transport for the 2000/2001 season. "The recent increase of $40 per tonne for Urea is the beginning of significantly higher fertiliser prices, which is already one of the largest costs of arable farming. Chemical prices have also risen, with substantial price increases signalled."

"These cost increases must be set against fixed contract prices. Many farmers are locked into fixed price contracts so will not receive any immediate benefit from the lower dollar."

"There has been a continuing conversion away from arable production. If this continues, it will affect the long-term viability of the domestic milling and grains industries."

Local mills would then be exposed to supply uncertainty and fluctuations in international prices, currency, shipping rates, and product quality.

New Zealand growers are aware that the current Australian Standard White wheat price on the spot market, is above $400/tonne, This compares to an ASW price of about $270/tonne this time last year. Exports of 2001 harvest Optic Malting barley are expected to realise above $285/tonne compared with contract prices of $200/tonne for feed barley, and $225/tonne for malting barley.

"Current domestic prices do not reflect the international value of arable crops. This is mainly due to contracts set at the low prices of the last three years. However, I expect that prices of crops not yet contracted will increase significantly as the industry recognises the current market position."

"Farmers should think carefully when deciding at what price to sell uncommitted grain for. Many agents will now be trying to buy free grain, at prices that do not reflect international grain values."

"If growers are in any doubt, I recommend that they consult other farmers, other buyers, or industry representatives," he said.

ENDS For further information Neil Barton 021-441-125 Kevin Geddes 03-307-8148

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