Flood waters inundate a road leading into Edgecumbe this morning. 7 April 2017 New Zealand Herald Photograph by Alan Gibson.
Flood waters inundate a road leading into Edgecumbe this morning. 7 April 2017 New Zealand Herald Photograph by Alan Gibson.
Ex-Cyclone Debbie has made itself felt in the rural sector, halting harvests in some regions and causing NZX whole milk futures prices to spike.
By mid-morning yesterday, June whole milk power prices were at US$3055 a tonne, from US$2850 a week ago.
There were similar movements along the price curve, right out to the third and fourth quarter of this year, reflecting concerns that supply could be constrained at that time - thereby pushing up physical prices - due to the current abnormally wet conditions.
"Clearly the news about the floods is driving the whole milk powder market," said Nigel Brunel, director financial markets at OM Financial.
"There are around 50,000 cows or 20 million kg milksolids in the affected areas; it will take weeks or months to clean up and will impact grass growth," Brunel said.
"It's not just there [Edgecumbe] - several parts of New Zealand are very wet underfoot and likely to have an impact on ability to grow grass as we head into winter," he said.
"Time will tell, but fears are driving prices."
Farmers could face a double hit from Ex-Cyclone Debbie, with crops also likely to have been damaged by the weather.
Federated Farmers spokesperson Katie Milne said this would be assessed when the water had receded, but could be an added cost.
"There will be damages and losses to crops, so it will add cost to farmers who might have to replace feed or leave animals out grazing that they wouldn't have normally done," Milne said.
"And they've lost the investment in those crops that they put in - some will be salvageable to an extent but again you'll run into other problems which will add costs," she said.
"If the ground is too waterlogged they won't be able to get the big choppers and trucks in to get that maize so there will be a lot of assessment into what's going to be the best way forward but that has to happen after the water has gone down."
Milne said although there was sometimes a limited amount of donated feed that became available in crisis situations, it may not happen this time due to a lot of this having been used during the drought.
New Zealand's kiwifruit industry is currently in harvest mode, with a spokeswoman for Zespri saying the weather had halted harvesting in some areas of the country.
"There's a bit of a delay in shipping, we've already got two ships away but there's a bit of a pause at the moment with the weather," spokeswoman said.
"In the overall scheme of the season it won't have a significant impact but it's definitely slowed us down," she said.
"In Edgecumbe we know some kiwifruit orchards have been affected by the floods but we can't get in there yet so we don't know the extent of that at the moment."
According to Horticulture New Zealand, there had been no serious reports of damage yet, however it was too early to say if this would change.
For most farmers, weather was factored into yearly turnover and harvesting, although Milne said with winter vegetables in the ground at the moment, any significant damage might lead to a hike in prices.
"It might make a difference to the price of vegetables and so on in supermarkets," Milne said.
"It usually does if there's a shortage, I wouldn't be surprised if there was an increase in price if supply falls."
The current dairy season, which ends on May 31, was unlikely to be greatly affected by the rain, said ASB rural economist Nathan Penny.
The weather has caused a spike in the NZX Milk Futures price.
Fonterra has already revised its 2016/17 season production forecast to a 3 per cent reduction compared with last season.
The co-operative had earlier expected a 7 per cent fall but it revised the figure on the back of better-than-expected growing conditions last year.
"In terms of dairy, the Bay of Plenty is not a major dairy region, so that would indicate that it's unlikely to knock them [Fonterra] off their current track that much," Penny said.
"Also it's so late in the season, farmers have been drying off cows anyway, so again it may not have a large impact."
Dairy giant Fonterra closed its Edgecumbe plant on Thursday after the town flash-flooded following heavy rain.
A Fonterra spokesman said as of yesterday morning the plan was to start reopening the site after the nearby flood bank had held up over night.
Around 380 staff work at the plant over varying shifts.
The spokesman said some staff would start going back to work yesterday but it would take 12 hours to get the plant fully functioning.
In the meanwhile some milk could be tanked to a number of other sites in the Waikato, he said.
ANZ rural economist Con Williams said he did not expect dairy production to be affected in the months ahead, although there was likely to be some disruption in the short term.
"No, it's unlikely, unless it continues to rain more than it should," Williams said. "If it's [a] one-off event, it should not be too much of an issue."
