KEY POINTS:
Getting an accurate reading of the health of the rural economy can be tricky. Just like when you visit a doctor to discuss an ailment, the diagnosis that emerges can depend a bit on who you talk to and when, and what sort of questions you ask.
What
is clear is that things are expected to be tight for many farmers this year, as they are affected by factors such as the high dollar and interest rates, a mixed outlook for commodity prices and higher costs. But beyond that?
Leading rural lender Rabobank last week published its rural confidence survey, conducted late last year amid a strengthening dollar and expectations of another interest rate hike. It was the second survey in a row that confidence declined and showed 37 per cent of farmers expected the rural economy to worsen over the next year, compared with 18 per cent in October. Just 11 per cent expected an improvement. The biggest drops in confidence were amongst sheep and dairy farmers.
Rabobank said the challenging economic factors - combined with high rural land prices - had seen debt growth slow in the second half of last year, a trend it expected to continue in 2007.
However, a "remarkably stable" 85 per cent of farmers still expected to maintain or increase investment in their farms "reflecting stable, long-term confidence that further on-farm investments will generate acceptable returns".
A cynic might say that any lender with significant exposure to farmers has an interest in helping to prop up such views. But, in an interview, Rabobank's general manager rural, Ben Russell, was clear that this positive sentiment on investment highlighted a difference between short and long-term confidence among New Zealand farmers.
Although cashflows this year were worrying, farmers were saying they could still see a strong future in their businesses.
Rabobank, he said, shared the view that the underlying fundamentals of New Zealand agriculture remained "extremely positive and strong", with good long-term demand for major commodities, "milk and lamb in particular".
Low or non-existent cash returns from farming, or indeed losses, could lead to suspicions some farmers are mainly still in business to get capital gains, although Reserve Bank Governor Alan Bollard warned last year that farmers should not expect the double-digit growth in farm values in recent years to continue.
Russell believed farmers were motivated by good long-term prospects for agriculture and capital gain. While Rabobank believed growth in land prices had stabilised "we don't believe that there's going to be a significant retraction of land values - we think that there's a very firm base underlying the property market".
Some "marginal" properties may have difficulty getting the value they would have fetched a year ago but good farms "are still in strong demand" with multiple potential buyers, further evidence of long-term confidence in agriculture, said Russell.
"New Zealand farmers are separating out this year, which is going to be a difficult year. Cashflows will be tight ... but looking out longer-term ... New Zealand farmers have got strong equity levels, very good production systems and efficiency."
Scary Stuff
It was the sort of stuff that could make the hairs on a cow cockie's neck stand up. In this month's AgResearch magazine Now there's a headline: "New Zealand's $6 billion dairy industry could be at risk if the European Union insists on pathogen-free milk and milk products". The text of the story talks about the possibility of such move by the EU.
Pathogens are disease-causing organisms and the Food Safety Authority (FSA) says standard pasteurisation doesn't necessarily kill absolutely everything in dairy products. Of the $6.2 billion in milk powder, butter and cheese exports in the year to last November, just over $450 million worth went to the EU. So any EU insistence on pathogen-free products could potentially be problematic.
But attempts to track down the source of the information proved tricky. Senior FSA officials had not heard of it.
Inquiries with AgResearch's media man early last week met with an undertaking to try to track down exactly how and why the information got into the magazine.
By Thursday he had been in touch with the article's writer who was checking her notes to see exactly where the statement was from.
On Friday, clarification was still awaited.
Job Sharing
It turns out Sanjay Khosla - the former managing director of Fonterra Brands - is not being replaced directly.
Khosla finished up at the co-op last week to head for a senior role at Fonterra rival Kraft Foods in the US.
His former responsibilities are being split between a newly created role of Fonterra Australasia managing director - to be filled by Australian consumer goods veteran John Doumani - and Pradeep Pant, Fonterra managing director for Asia.
Doumani, who will report to CEO Andrew Ferrier, will start his new Melbourne-based role on March 1.
Ferrier said the new role reflected Fonterra's commitment to investing in the growth of its Australasian businesses. Doumani will be responsible for all Australian business and for Fonterra's consumer brands operations in New Zealand, as well as Tip Top ice cream. Also, he will take charge of Fonterra's global food-service business. Doumani, who has 25 years' experience in international business and consumer brands, is at present international president of Campbell's Soup.
Romp Time
Transtasman collaboration is helping develop a right good RoMP for dairy herd breeders.
An agreement last year between research funder Dairy InSight and Dairy Australia has led to knowledge sharing on improving reproductive performance.
The Aussies have developed a learning programme called InCalf.
Dairy InSight is already working with research organisation Dexcel to develop a similar package, known as RoMP.
The RoMP people are now talking to InCalf's people about adapting the InCalf programme for New Zealand conditions, thus saving money through avoiding duplication of what the Aussies have come up with.
Currently, only 67 per cent of New Zealand cows get pregnant within six weeks of starting mating, and the dairy sector wants to lift that figure to 78 per cent within 10 years.
Oh, and by the way, RoMP is short for reproduction management plan.
