What a predicted dry summer means for farmers

Dairy farmers in the North Island are reasonably well positioned to withstand a predicted dry summer, agribusiness sources say.

For November to January, rainfall is likely to be near or below normal in all North Island regions and in Nelson-Marlborough, but near normal for the rest of the South Island, the National Institute of Water and Atmospheric Research says.

In its latest seasonal climate outlook, NIWA says Northland, Auckland, Waikato and the Bay of Plenty will be particularly dry, with soil moisture levels likely to be below normal.

BNZ's head of agribusiness Richard Bowman told NBR ONLINE most farmers are set up quite well and are used to dealing with volatile weather.

"Despite it being a bit of a cold spring, livestock has come through the winter particularly well.

"Feed reserves are at normal levels, so we've got the ability for farmers in drier areas to finish livestock and get them off before things get particularly dry.

"When you get a poor autumn followed by a poor spring, that's when things get really hard, but this year they were really good," Mr Bowman says.

Prolonged dryness a problem

However, KPMG's head of agribusiness Ian Proudfoot warns farmers may struggle, particularly if the dry weather continues into February and March.

"That would put pressure on balance sheets because lower supply, coupled with a lower price, will put a number of farmers into an unsustainable cashflow position."

A drop in milk supply would also be a problem for Fonterra, which has recently released the details of its $525 million investment fund, as it would struggle to allocate milk to all its customers, Mr Proudfoot says.

However, the dip in dairy prices has not been as large as predicted earlier.

"The drop off in supply from the US due to the drought has been much greater than was expected.

"That's beneficial for New Zealand because there's less dairy supply coming into the market, which is providing a bit of support to pricing."

That could offset the effects of a drier summer than usual.

"Weather is naturally volatile, and it will always affect agricultural activities.

"But we don't want a full-blown drought, as that would hinder our ability to continue to supply at really strong levels."

callison@nbr.co.nz


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