KEY POINTS:
Drought in Uruguay this week triggered emergency state intervention in the South American country but does not affect the outlook for dairy farm operator NZ Farming Systems Uruguay, says chairman Keith Smith.
"We flagged that in December," he said. "So it's not new news to us."
In December NZ Farming Systems forecast an earnings before interest and tax loss of US$7 million to US$11 million for the year ending June 30, although director Craig Norgate, who is also chairman of PGG Wrightson, said at that time the company expected to be profitable in 2009/10.
Uruguay declared on Monday emergency measures for farmers because of a serious drought in large areas of the beef and dairy-producing country. Rainfall is at a three-decade low in some areas, hurting farmers at the same time as they struggle with falling demand and prices for key products due to the global economic slowdown.
"[There is] very seldom any rain in Uruguay in January ... and it had been a very dry November," Smith said.
The company would look at the emergency measures but thought they would relate to smaller landholders, he said.
Shares in NZ Farming Systems Uruguay - set up by PGG Wrightson to develop dairy-farm operations in Uruguay and floated on the NZX in December 2007 - closed down 1c at 59c yesterday.
Juan Chiruchi, governor of the San Jose department, a dairy-producing area in southwest Uruguay said: "We're in a total emergency situation. We are at the edge of a catastrophe and no one is going to escape."
Livestock Minister Ernesto Agazzi said the Government would provide farmers with cattle feed with deferred, interest-free payments, aid for pumping water and extra time to pay their electricity bills.
"There is an agricultural and livestock emergency in some geographic areas, not in the whole country, but it is in more than the 2.5 million hectares that I reported a few days ago," Agazzi said. "This is going to last for a while. No one knows when it will rain."
At the start of the year the Government banned watering gardens, washing cars and filling swimming pools to try to conserve water. Temperatures are high during the summer months of January and February.
In addition, the National Emergency System has offered more than 200 water tanks, of up to 2000 litres each to the country's 19 departments.
The lowest rainfall since the 1960s or 1970s is also affecting neighbouring Argentina, where growers have asked for emergency aid as output levels of soy, wheat and corn are all threatened.
- ADDITIONAL REPORTING: AGENCIES
