A storm is on the horizon for farmers as they battle a bevy of rising costs. Photo / File
Hikes in fuel and fertilizer costs and debt servicing levels have knocked rural confidence and prompted fears about mental well-being, with farmers facing tough times urged to “talk to someone”.
Industry representatives say farmers will
tighten their belts but some were considering their future in the sector despite some strong agricultural economic performances.
A Federated Farmers November Banking Survey reveals farmers were being squeezed by rising interest rates, with debt or other financial concerns eroding mental well-being.
President and economy spokesperson Andrew Hoggard said it was a reflection of the impact of official cash rate rises and while plenty of other Kiwi households and businesses also felt the pinch, many farms carried high debt.
Since its May survey the average farm mortgage value rose from $4.07 million to $4.19m, with the median up from $2.25m to $2.50m.
The average overdraft level was up $46,000 to $328,800, with an average interest rate of 8.59 percent.
“It’s not a surprise given those big numbers that just over 40 percent of farmers said they felt their mental well-being had been affected by their debt levels, interest rates, changing conditions, or other forms of financial pressure.”
Farm expenses jumped 15 percent in the September quarter compared to September the previous year, with rises in fuel (53 percent), fertilizer (37 percent) and debt servicing (34 percent) leading the way, he said.
Beef + Lamb New Zealand chief executive Sam McIvor said its Lamb Crop 2022 report showed a stark contrast between results and farmer sentiment.
He said sheep and beef farmers had improved their performance in challenging conditions, but some still had “very low” confidence in the $12 billion-a-year export sector’s future.
“This is compounded by concerns that prices may ease – albeit from record levels – in the coming year.”
Some indicated they were considering exiting the sector, which could impact employees, businesses and regional communities.
“It’s important for farmers to remember that they have a lot of support from the public.”
The cost of all farm inputs had risen in 2022 with more expected in 2023 and potentially 2024.
“Farmers could defer repairs and maintenance and use lower volumes of farm inputs such as fuel to meet higher costs for operating the farm and pay increased interest payments on debt.”
McIvor said farmers were also facing higher interest rates and steeper prices for contractors, tradespeople, machinery and infrastructure or vehicle parts due to a tight labor market and inflation.
DairyNZ chief executive Dr Tim Mackle said dairy farmers had faced regulatory change, weather issues, staffing and inflation.
“Despite these challenges, our farmers have maintained their position as world leaders, with dairy exports hitting new highs of $22b.” He said the sector contributed $50b to NZ’s economy.
The Government’s border class exception saw 768 international dairy employees and their families nominated to fill crucial farm vacancies, and the sector launched a plan to position farming as a competitive career option and grow the workforce over the next decade.
While the milk price had been good for a few years, dairy had shaved off $5.2b in debt from 2018 to 2022 – “which is great news”.
But inflation of everyday costs and the impact on farm profitability would be front of mind for many this year.
Working expenses increased by around $1 per kilogram of milk solids last season.
He expected many farmers would spend conservatively, especially for purchases not essential for the current season.
Rotorua-Taupo Federated Farmers president Colin Guyton said farmers were all talking about costs. For example, 18 months ago it cost $450 to fuel his largest tractor’s tank – it was now $1000.
He said farmers would look to trim some fat and he expected less fertilizer would be used because of its high cost.
Rising interest rates and wages amid the labor shortage were also concerns.
“You definitely have to watch your pennies. Farmers tend to be very good at putting the checkbook away when times are tough but they are also very good at spending money on developing their farms when they’ve got some.
“And some have made the mistake with the big payout and then realized actually things are tight now.”
Te Puke beef and sheep farmer Rick Powdrell said fuel, fertilizer and interest rates were the biggest problems regarding costs.
Farmers were also conscious about paying their staff fairly as wages went up in other industries.
He said one week alone 20 cents came out of the lamb schedule and farmers could not put that back on a lamb in a week.
“Increasing costs and reducing prices are putting a lot of pressure on people and the mental health side of it is huge.”
Farmers for Positive Change chairman Rick Burke said many farmers had gone through tough times before and could talk about that with others. Consultants and industry representatives could also help.
“You just have to talk to someone. There are things you can do.”
He suggested farmers struggling with fertilizer costs be strategic in where it was used – parts of the farm could go without for a year.
The sheep and beef farmer, with at least 35 years in the industry, said it had been a terrific season so far, with grass growing well.
Some farmers were working hard to turn it all into silage or hay, he said, when they might do better to shut the gate and go surfing or fishing.
Bay of Plenty Federated Farmers provincial president Brent Mountford said lamb prices were back $2 on last year so a “double whammy” had hit incomes.
Shearing costs had jumped and could go up by 30 percent for another huge impact.
On the bright side, he was grateful for the rain and green grass allowing farmers to get some condition on their stock.
Where to get help
If it is an emergency and you or someone else is at risk, call 111.
For counseling and support
Lifeline: Call 0800 543 354 or text 4357 (HELP)
Suicide Crisis Helpline: Call 0508 828 865 (0508 TAUTOKO)
Need to talk? Call or text 1737
Depression helpline: Call 0800 111 757 or text 4202
For children and young people
Youthline: Call 0800 376 633 or text 234
What’s Up: Call 0800 942 8787 (11am to 11pm) or webchat (11am to 10.30pm)
For help with specific issues
Alcohol and Drug Helpline: Call 0800 787 797
Anxiety Helpline: Call 0800 269 4389 (0800 ANXIETY)
Outline: Call 0800 688 5463 (0800 OUTLINE) (6pm-9pm)
All services are free and available 24/7 unless otherwise specified.
For more information and support, talk to your local doctor, hauora, community mental health team, or counseling service. The Mental Health Foundation has more helplines and service contacts on its website.