KEY POINTS:
First there was news of a dip in the dollar and another record month for commodity prices, fuelled by dairy.
Then there was another rise in the official cash rate and a Reserve Bank warning of more to come amid widespread inflationary pressures.
This set of cards dealt to the primary production sector last week means farmers, growers and the businesses that support them will be looking at how to best play their somewhat mixed hands.
There is, of course, the short game and the long game.
Rural sector commentators agree there are positive signs that prices for the commodities New Zealand produces will stay strong. But they warn firmly against expecting a big and lasting decline in the dollar to provide some sort of longer-term earnings "double dip".
Bank of New Zealand chief economist Tony Alexander said commodity price rises were a fundamental factor keeping the dollar up, as they increased demand for the kiwi currency when earnings were repatriated. The dollar's trade weighted index and the ANZ Bank's world commodity price index "move together real closely", said Alexander.
"Based on the relationship, the kiwi's undervalued at the moment."
He believed the commodity price outlook was "reasonable" for at least a few years. This factor combined with pretty good economic prospects generally, and the likelihood that the OCR would not be cut for some time, meant solid support for the dollar.
"Don't count on some big windfall gain from a currency decline coming along."
ANZ National Bank chief economist Cameron Bagrie said that where commodity prices would go in the next few years was a "lottery" but the long-term trend would be upwards because of increasing consumer demand from China.
"I think they're going to move from a model of industrialisation to consumerism. And as they go down the consumerism track we're going to be off to the races when they start demanding a lot of the products we sell."
This would help underpin the dollar's strength. While people talked of US58c being "fair value" for the dollar, Bagrie thinks it has now moved to the US62c-65c range.
But farmers could feel "pretty comfortable" about their futures given commodity price prospects. There was always the risk of optimistic scenarios not coming to pass, but Bagrie believes the situation a decade from now will be healthy.
"If I'm looking at where all the action is, it's going to be 10 years down the track and there's quite an optimistic story there in terms of where things are going to end up. You're basically going long butter and short DVDs."
Rabobank senior analyst Hayley Moynihan agreed extra Chinese demand could support commodity prices but he thought increasing use of biofuels could have an even more significant impact.
As grains used for biofuels became more expensive, this would increase the cost of producing livestock and, subsequently, keep supporting agricultural commodity prices.
"With the Government regulation that's coming in in various parts of the world surrounding biofuels, it's likely to continue to sustain that."
Given that New Zealand uses more grass for feeding animals, that could add to rural sector profits.
However, Moynihan said a wild card was just how much more extra land could be brought on stream to produce grains. "Particularly in the US, and in places like South America as well, there is potential for some switching of land use so that more could go into corn and grain production."
But she said "that's more likely to have a moderating effect on [grain] prices rather than actually causing them to drop significantly".
As the rural sector waits to see how these longer-term factors pan out, the BNZ's Alexander believes cashflow-constrained farmers will continue to hedge their bets and restrain their spending in rural towns for at least another year.
Quota Auction
The Government's proposals on the future of New Zealand's export dairy quotas, currently managed by Fonterra, have prompted a suggestion that rights to sell under quota should be auctioned.
A recent letter from Agriculture Minister Jim Anderton to dairy sector stakeholders proposes that - once Fonterra's rights start expiring from this year - shares of some quota markets be allocated by Government, while other quotas effectively be filled by whoever gets their products in first.
But a dairy company employee - writing as a taxpayer and who understandably wanted to remain anonymous - argued quota is allocated "to the nation of New Zealand, not to the largest dairy company, nor even the dairy industry".
To his way of thinking, the nation meant every citizen: "[It] seems to me that New Zealand's dairy quota allocations, being an asset of the Crown, ought to be managed in a manner that provides value to the greatest number of NZ citizens possible.
"I doubt this will occur through a political divvying up between gluttonous vultures eager to plunder the carrion."
He suggested quotas should be placed "on the bidding block" allowing "the forces of the free market" to determine who gets to rent the use of these national assets for a defined period.
"By this means, all interested parties could bid for the portions of the quota we all own."
Such a strategy would encourage bidders to try to maximise the value-added return from products sent under quota arrangements.
"By this means the economy might benefit from a double whammy - an immediate return from quota lease and, in time, the boost of proprietary [value-added] dairy products providing a more buoyant NZ dairy industry."
Hasta La Vista
The latest export of New Zealand dairy expertise is Oamaru dairy farmer Robert Borst, who's been appointed to manage a 3000ha farm in Uruguay acquired by the PGG Wrightson-promoted NZ Farming Systems Uruguay.
Borst has been farming about 3000 cows on three self-owned farms and one leased property near Oamaru, and has employed an overseer to help run them while he's away.
His wife, Kim, said she and their three young children were due to join him in Uruguay at Easter.
PGG Wrightson was paying for a children's teacher for the first four months but it was eventually hoped the children could transfer to a local school when their Spanish was adequate.
Learning Spanish was a fairly daunting prospect. "It'll certainly be fairly challenging," said Kim Borst.
Feminine Touches
The Bank of New Zealand's latest addition to seminars aimed at the rural sector is one targeted specifically at women.
Officially offered to support existing customers and the rural sector generally, the seminars also clearly won't hurt the bank's business.
The latest programme - Real Time for Women in Agribusiness - teaches business and life skills. The two-day courses get under way in Taupo in May and will be held around the country.
BNZ agribusiness general manager Will Purvis said women were the "unsung heroes" of the rural sector who often had to balance their farm business with the personal demands of family and the community, with isolation often adding to their stress.
The bank believed many rural women wanted to start their own businesses or use existing equity in farms to invest in other commercial ventures.
