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Federated Farmers is calling on support for water storage initiatives as a new report puts the total cost of the 2007/08 drought at close to $3 billion.
A Ministry of Agriculture and Forestry (MAF) report calculates the total cost to New Zealand’s primary sector was $1.9 billion on-farm and $900 million off-farm.
Waikato dairy farmers took the biggest financial hit.
MAF’s Regional and National Impacts of the 2008 Drought report used farm modelling to compare forecast budgets with actual outcomes for each sector and region.
MAF compared the loss of value added over the drought years to expected non-drought farm income.
In financial terms, the impact of the drought was felt most heavily by dairy farmers with a $1.476 billion loss. Waikato dairy farmers shouldered more than half of that with estimated losses of $799 million – 44% of the national costs of the drought.
The drought struck at the time of an exceptionally high dairy payout from Fonterra at $7.90 per kilo of milksolids. Farmers spent heavily on feed to maintain production and also on pasture redevelopment.
Since then, the payout has plummeted to an expected $5.20 per kilo of milksolids for the 2008/09 season and a forecast $4.55 for 2009/10.
Because many dairy farm operational expenses are fixed, the MAF report said farmers had difficulty in reducing total overheads so the drought has a bigger impact on direct incomes compared with other operations such as sheep and beef.
Dairy farmers, working hard to maximise returns, spent up large on supplementary feed before it was known that the Fonterra payout was going to be significantly less.
Agriculture minister David Carter said the size of the economic impact of the drought reflected how important the primary sector was to the New Zealand economy.
Mr Carter said that with extreme weather patterns increasing farmers need to plan drought recovery and should familiarise themselves with the assistance available for adverse events.
“Not having a plan is planning to do nothing,” he said.
Meanwhile, Federation president Don Nicolson has called for the government to invest further into water storage ahead of any further drought events.
The government’s Community Irrigation Fund is worth $5.7 million in grants over eight years, which translates into about $700,000 a year.
Mr Nicolson said the organisation plans to meet with Don Brash’s 2020 productivity taskforce to discuss future plans.
The taskforce has been created to grow New Zealand’s per capita productivity to match that of Australia by 2020.
“While commodity prices are down, export volumes are up. The world needs more food and water is the key,” Mr Nicolson said.
He said the effects of any further drought would be amplified due to the global recession.