An Otago sheep and beef farmer who’s had to find other work just to break even says he’s not alone, and that a “cashflow crunch” is coming for many farmers.
Simon Davies, who farms in Toko Mouth, just southeast of Milton, says the combination of sky-high farm costs and record-low returns have forced him to seek out other income streams.
“I’ve got 8500 stock units on a 1000ha effective farm and I’ve had to go off contract fencing to bring in about $60,000 to reach a break-even point this year.
“That’s how tough it is right now in farming.
“That does allow me to spend $50,000 on fertiliser, which is not really enough, but it’s $50,000 more than I’ve spent in the past two years.”
Davies, former president of Otago Federated Farmers, says the past few years have been the most challenging of his 20 years in farming.
“I don’t know a sheep and beef farmer right now who hasn’t had to go and get outside income, or their wife has gone to work, to make ends meet.”
“My sheep income has halved, but my expenses have soared about 30% in the past two years.
“Given there’s basically zero profitability in sheep at the moment, you’ve got to try and find a way to make an income elsewhere.”
Davies says he’s fortunate that the owners of the block he leases needed about 6km of boundary fencing redone, which he put his hand up for.
“Had I not found that income, I would have had to find something else to do to make some money.
“I’m loathe to say it, but that was potentially pruning pine trees.
“I’m actually doing a load of pruning on our block anyway, about 30 hectares, because I can’t afford to pay someone to do it.”
Davies has also turned to other income sources, like cashing up carbon credits, which he’ll have to do more of soon to provide cashflow through to Christmas.
“I’m lucky that I have those credits to sell.
“So, now our income streams are dairy heifers, carbon credits and beef. I’m not sure I’d call wool an income stream – it’s just a cost at this stage.
“I’ve been lifting my cattle numbers and dropping our sheep.
“We’ve also committed to investing in some on-farm accommodation, which is a bit of a gamble, but we hope it’ll bring in some extra money.”
While times are tough now, Davies is deeply concerned many sheep and beef farmers will hit the wall in a few months’ time.
“There’s going to be a real crunch in cashflow in October/November.
“For most sheep and beef farmers, their income all comes between January and March, and then from March through to December they’re spending money.
“Typically, in March/April, they have $100,000 in the bank, and then they work their way through that, then they work their way through their overdraft until they’re at their maximum in December and waiting for the first lamb cheque.”
However, this year, most farmers didn’t have that $100,000 in the bank in March but were either at near-zero or already in overdraft, he says.
“Every month the interest bill and various standing charges have to go out, and you have to have that money sitting there to cover it.
“That’s probably my bigger concern in the short term, that a lot of sheep and beef farmers out there don’t know how they’re going to pay their bills in October/November.”
Davies doesn’t see things improving for sheep and beef anytime soon.
“I really don’t want to sound too negative, but I will be honest that it’s a little bit daunting at the moment.
“The things I do have hope in are the things I can control, like getting some accommodation on the farm going. I’m optimistic about those.
“But things I can’t control – for example, the sheep meat price in China, or rock-bottom wool prices – I am less optimistic about.”
He says the rural banks need to get behind farmers and work with them to get through the coming months, in particular.
“With the next few months looking so challenging, I hope any farmers in strife are being proactive by having discussions with their banks now.
“I know I’ve certainly been talking to my bank.
“The banks need to be supportive and show some leniency.”
Federated Farmers, New Zealand’s leading independent rural advocacy organisation, has established a news and insights partnership with AgriHQ, the country’s leading rural publisher, to give the farmers of New Zealand a more informed, united and stronger voice. Federated Farmers news and commentary appears each week in its own section of the Farmers Weekly print edition and online.
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