Pessimistic farmers pare back their spending to essentials

Fonterra suppliers are expecting virtually flat gross revenue this season.

Dairy Farmers of New Zealand chairman Frank Brenmuhl said the figures - from yesterday's Ministry of Agriculture and Forestry dairy report - bore out anecdotal comment from farmers.

"Most of the ones I'm talking to are talking about battening down the hatches and only looking at essential stuff that they need to buy."

On Thursday, the Real Estate Institute said farmers generally were focusing less on expansion and more on maintaining and, where possible, increasing returns.

A MAF Situation and Outlook (Sonzaf) report on the entire agricultural sector - released this month - had tipped gross dairy farm payout across the sector to rise $200 million or about $16,000 per farmer this season, based on a payout of $4.10/kg of milk solids.

But yesterday's MAF report had the 100 Fonterra suppliers surveyed budgeting on $4.05/kg - the co-op's present forecast.

They believed production would rise 3 per cent and cattle sales returns by 8 per cent. But the budgeted-for lower payout of $4.05/kg meant gross farm revenue would rise only 1 per cent or about $4000.

The predicted average cash deficit this season from farming operations was just over $25,000, about $5000 less than last season.

Interestingly, MAF said the surveyed farms actually expected more than $4.05/kg as the season progressed - a possible reflection of the fact that Fonterra has regularly bumped up forecasts in the past.

But Brenmuhl said there was no actual indication from Fonterra or other dairy companies that farmers could expect much more this season.

Farmers remained confident overall that the industry was heading in the right direction.

The Sonzaf report predicted gross dairy payout will leap from $5.2 billion this season to $6.2 billion by 2010.

Meanwhile, yesterday's report also said that last season's 4 per cent jump in production did not translate into farmer profit due to lower payout and rising expenses, such as rates and fuel. Seventy-one of the 100 farms recorded an actual cash loss compared with 59 the previous year.