Farmers hold purse-strings tight

Manawatū dairy farmer James Stewart is being more careful with his spending on the farm this year as he faces accelerating costs, uncertain global markets, more compliance demands and a weaker milk price.

‘‘We have gone into a more cautious mood,’’ Stewart said at the Central District Field Days at Manfeild in Feilding. ‘‘A lot of farmers are not really making a lot of money.’’

Farm costs accelerated 15% last year, ahead of the 7.2% overall inflation rate, while prices for farm products have weakened, squeezing farm incomes.

‘‘Things are materially skinnier than they were last season,’’ Westpac senior agri economist Nathan Penny said at the field days. ‘‘Commodity prices have come back and it has been a cost story in the last season as onfarm inflation has been running really hot.

‘‘That combination has really tightened farm margins and profits and so farmers are quite careful at the moment.’’

Penny said sales might be flat at the field days as farmers looked closely at their discretionary spending.

‘‘With costs on farm rising quickly and incomes back on what they were, farmers will be being a bit careful with their chequebooks,’’ he said. ‘‘We think most farmers are still doing better than breakeven but there is not much in it at all so farmers are just being careful.’’

That is being noticed in tractor sales, with a 50% drop in industry sales across the country in the first two months of this year.

After record industry tractor sales of 4500 last year, expectations for this year were for a decline to the high 2000s to mid3000s, according to David Silk, national sales manager for Norwood, the country’s biggest farm machinery supplier.

‘‘Most pundits in the industry are thinking that there is going to be a significant softening of the tractor and machinery market,’’ Silk said at the field days.

Still, he noted the slowdown was coming after some exceptional years during Covid when high farm product prices boosted farmers’ cashflow, enabling them to invest in new equipment and machinery.

Silk said he was pleased to see a lot of new inquiries at the field days, particularly around Kubota construction equipment, which might reflect the clean-up needed following Cyclone Gabrielle.

Demand for other equipment for affected areas may take some time to flow through, as many businesses would not be back in production any time soon, he said.

To help cash-strapped farmers access equipment, Norwood was likely to offer more hire and rental options, and zero interest finance, he said.