Farmers ‘careful with their chequebooks’ at Field Days as weaker commodity prices, higher costs bite
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 and a weaker milk price.
“We’ve gone into a more cautious mood,” Stewart said at 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, putting the squeeze on farm incomes.
“Things are materially skinnier than they were last season,” Westpac senior agri economist Nathan Penny said at Field Days. “Commodity prices have come back and probably more so it’s been a cost story in the last season as on-farm inflation has been running really hot.
“That combination has really tightened farm margins and profits and so farmers are quite careful at the moment.”
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Penny said sales may be flat at 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’s not there’s not much in it at all so farmers are just being careful.”
That’s 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 4,500 last year, expectations for this year were for a decline to the high 2000s to mid-3000s, according to David Silk, national sales manager for Norwood, the country’s biggest farm machinery supplier which sells tractors worth $15,000 to $200,000 and machinery like seed drills up to $300,000.
“Most pundits in the industry are thinking that there’s going to be a significant softening of the tractor and machinery market,” Silk said at Field Days.
The rural sector can expect more disruption as a result of climate change, Agriculture Minister Damien O’Connor warned during a Stuff political panel at the Central District Field Days in Feilding,
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.
Some had taken the opportunity to buy ahead of price rises, with prices on some products having increased 50% over the past two years due to a combination of higher supplier and freight costs, he noted. The market may now be saturated with those needing to upgrade having done so.
Still, Silk said he was pleased to see a lot of new enquiries at Field Days, particularly around Kubota construction equipment, which may 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 anytime 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.
“We’re going to have to look at a wide range of options to support our customer base, rather than just the traditional straight out purchasing decision,” he said.
Some retailers at Field Days benefited from the teachers’ strike on Thursday which brought more families into their stalls.
Hunting & Fishing Manawatū store owner Simon O’Connor said his sales on Thursday were up 10% on the previous Field Days two years ago, which he attributed to more children and families visiting during the strike.
But he said that went against the trend he was seeing during a normal day at the shop, which relied on the rural sector, with fewer people coming in.
“Two years ago, we couldn’t get enough stock and people were just wanting to buy, but now the stock levels have gone the other way and the people have stopped,” he said.
Beds4U Palmerston North manager Davey Murphy said it was the brand’s first time at Field Days and he was offering extra deals to try and make sales, with up to 60% off, free delivery, old bed removal and new pillows thrown in for free.
Murphy said he had noticed more browsers in the shop and sales were down on last year as it was harder to get sales over the line as rising costs meant shoppers were more focused on what they could afford.
“We have to try a lot harder to get the same sales,” he said. “People are looking in their pocket.”
So far this month, he had made 20 sales compared with about 50 at the same time last year, he said.