Farmer lobbyists are battling to dampen down expectations of a rural-based boom in the wake of commodity price surges, and suggestions that the already-high predicted dairy payout for 2011 could soar to record levels."There's an automatic and downrig
Farmer lobbyists are battling to dampen down expectations of a rural-based boom in the wake of commodity price surges, and suggestions that the already-high predicted dairy payout for 2011 could soar to record levels.
"There's an automatic and downright dangerous assumption that farmers are direct beneficiaries of a bounce in soft commodities," said Federated Farmers economics spokesman Philip York.
"The risk is that local and central government may hike rates, fees and charges on an assumption of wealth that is illusionary.
"The private and public sectors have to realise farmers are no ATM."
If there did turn out to be windfalls, then the priority for some farmers would be to pay debt before looking to productivity.
"Farmers must make hay while the commodities sun shines because the short to medium term international horizon is anything but clear," Mr York said.
That "sunshine" was beaming down this week as the ANZ Bank's commodity price index hit another record high in May: its world price index notched up its 14th consecutive monthly rise, lifting by 2.5%, following a 5.4% increase in April. In New Zealand-dollar terms, commodity prices have risen by 30%t over the past year.
Prices for eight of the 13 commodities in the index rose, including dairy prices (up 4% last month and now up by nearly two-thirds compared to this time last year), skins (up 12%), kiwifruit (up 11% ), wood pulp (up 6% ), wool (up 5%), lamb (up 3%), venison (up 2%) and logs (up 1%).
Seafood prices were unchanged, apples fell 6 percent, beef fell 3% and sawn timber fell 2%, compared to the previous month.
The optimism over commodities has been underpinned by Fonterra's announcement that its predicted payout for the 2010-2011 season has been set at $6.90-$7.10 for each kilogramme of milksolids, and advice that the payout could easily exceed a record $8/kg if current conditions hold.
The company has warned farmers that international markets and prices are volatile, but the figures are seen as underscoring Fonterra's view that dairy prices are not expected to weaken, only strengthen, during the next 12 months.
But Mr York took a gloomier view, arguing that structural problems in the nation's meat sector, and the high exchange rates for the NZ dollar were stripping value from the returns at the farm gate.
Though the prices paid for wool rose at today's national wool auction -- with some South Island lambswool up by as much as 15% -- despite the sector's index for the NZ dollar having risen 1.76%, Mr York said: "You take one step forward in terms of overseas price and almost one step back with the kiwi".
The lift in wool prices was "truly encouraging" but said there was a need to get the NZ dollar to a realistic level that balanced the domestic and export economy.
Federated Farmers have started running off-the-record meeting to canvass possible options "at a high public policy level," he said.
"But my fear is that people will believe the price-per-kilogram in supermarkets goes straight into farmers' hands," he said. "In fact, we only get a fraction of that value."
He said the average pre-tax profit for a sheep and beef farm in New Zealand was forecast at just $39,800, though new forecasts are due from the Ministry of Agriculture and Forestry later this month.
Mr York said the speculation about an $8/kg Fonterra payout in 2011 did not explain that in the 2010 season farmers started out expecting only to break even, or even lose money.
