Fonterra payout revision 'a fact of life'

Fonterra Cooperative Group's 2.3 percent revision downward of its milkprice forecast for the 2011/12 season, demonstrates the trade exposed nature of our primary industries. With the current global economic outlook, this may not be the only revision for the 2011/12 season.

"I don't think there are many farmers who were not expecting a downwards revision," says Willy Leferink, Federated Farmers Dairy chairperson.

"We had indications from the globalDairyTrade auction that prices have been drifting south.

"Most economic forecasters also expect commodity prices will ease over 2012. It's fair to say the international picture is more than a little choppy, especially with China revising its Gross Domestic Product forecast downwards.

"This is the reality New Zealand's primary exporters have to deal with. We're completely trade exposed and it's a fact of life for us. Times can be good, but we also know from the 2008/9 season, they can be pretty hard too.

"Farming returns can sometimes resemble an oscillograph. This is why corporate investors looking for predictable returns tend to find farming difficult.

"While the primary industries are generally growing, overall sector debt levels aren't. Many farmers have heeded our advice to run conservative budgets focussed on reducing debt.

"That said, we're increasingly anxious over how the Kiwi dollar is defying gravity. While soft commodities are correcting our dollar ought to be doing the same but isn't.

"While good growing conditions have helped us put in a blinder of a season, a high dollar could well skim the cream.

"As a 'foreigner' who worked his way through the New Zealand farm system, can I add that political stunts over farm ownership isn't the leadership we need. There's a 'little New Zealander' dimension that doesn't sit right with me.

"It risks turning off the people we need to attract and retain investment from, just when we need to increase production to counter lower commodity prices and a high Kiwi dollar.

"We've got farms that can't get Kiwis to work in them who have spent years training migrant farm workers to a high level of skill. All that skill, knowledge and abilities are lost when work visas come to an end. It's one of many issues Federated Farmers is working on.

"It should also be remembered that today's farm workers have often become tomorrow's farm owners, like I did," Mr Leferink concluded.