The downward slope of the New Zealand economy

More dairy farmers under pressure from banks as prices fall

A Federated Farmers poll shows worrying levels of stress over mortgages.

Stuff,

17 February, 2017

As  world dairy prices continue to slide, dairy farmers are increasingly feeling the pressure from their banks.

World dairy prices at the overnight GlobalDairyTrade auction fell 2.8 per cent to an average of US$2235 a tonne, after a 7.4 per cent fall at the last auction two weeks ago. New Zealand's major export, whole milk powder (WMP), fell 3.7 per cent to US$1890.

A recent poll of members by Federated Farmers showed more than one in 10 dairy farmers (11.1 per cent) are now under pressure from banks over their mortgage. That is up from 6.6 per cent in August and 7.6 per cent in November.

GLOBALDAIRYTRADE

Prices fell for the fourth consecutive auction.

READ MORE: Dairy prices drop sharply at auction

Dairy chairman Andrew Hoggard said that while banks were continuing to support farmers, it was a "worrying statistic" that one in 10 farmers were feeling the squeeze.

The poll was conducted at the beginning of February, with a sample of 1225 members representing all 24 provinces and seven industry groups.

"There's now a question over the viability of lower order workers such as sharemilkers. I know of some who are switching to contract milking," Hoggard said.

Commenting on an analyst's description of dairy prices presenting farming with the worst crisis since the 1980s, Hoggard agreed that expansion had put pressure on farmers.

"We were leaner and meaner in the days when I entered the industry in the late 90s," he said.

Hoggard called on the Government to hold European farmers to account for the subsidies they received, which were fuelling production.

"This is something our government needs to take up through direct diplomatic channels and the World Trade Organisation, and if next season is going to be any different to this one they're going to have to move quickly," he said.

"It's concerning that some European countries are wanting to move backwards to more regulation. Instead they need to keep moving forward to more market orientated structures. The more farmers around the world live with the economic realities of the decisions they make, the more stable a market we will get for all farmers."

Rabobank analyst Emma Higgins said the price fall was not surprising and "could have been worse".

"All eyes will now be on whole milk powder and skim milk powder. This is where the bulk of the volumes are sold and they are the key indicators of the farmgate milk price.

"We're sitting in a bit of an ugly mix at the moment where there's modest powder demand combined with high inventory levels as well as strong global growth, especially from Europe," Higgins said.

Rabobank was preparing to do its forecast milk price but that would not be ready until March.

Westpac economist Anne Boniface said the auction result was "broadly in line with our expectations and leaves us comfortable with our recently updated payout forecasts".

The bank was now forecasting a Fonterra farmgate milk price of $4 this season and $4.60 in 2016-17.

Agri HQ's Susan Kilsby said prices were higher than anticipated, judging by futures market indications, which had foreseen a drop of 4 per cent in WMP.

"Overall market sentiment still remains very bearish meaning a sustained price

Banks circling as dairy 

farmers feel low milk price 

pinch

One in 10 dairy farmers are coming under pressure from their banks over mortgage payments - double the number feeling the heat six months ago.

TVNZ,

16 February, 2016

For many farmers, this will be the third year in a row where cash losses are suffered, with farmers currently getting $4.15 per kilo of milk solids where they need about $5.30 to break even.

A new Federated Farmers survey shows that 11.1 per cent of its dairy farmer members are now experiencing pressure from their bank over their mortgage, while six months ago that figure was 6.6 per cent.

The average dairy farm has a mortgage of about $7 million to service, and rural accountant Neil McAra says some of his farmer clients are considering selling off land.

"A couple are considering that as part of their plan - and that's part of working with the bank," he said.

"If the position is getting that tight, that may be only option available."

Finance Minister Bill English says it is normal for banks to be looking at their own interests as prices drop, but also did not rule out government assistance for farmers.

"As the forecast payout has dropped ... you'd expect the banks to be going back to have a look," he said.

To watch the report GO HERE

Government agencies 'inventing numbers' to meet targets, says report

Stuff,

17 February, 2016

Government agencies are coming under pressure from politicians to meet public service targets, the Salvation Army says.

Government agencies are "inventing" new numbers and changing the definitions of targets to make their performance seem better, a damning report says.

The Salvation Army says the organisations feel under pressure from the Government to come up with favourable results, creating an attitude where they "find any reason to celebrate success or progress", regardless of their original goals.

The charitable organisation's State of the Nation report attacks the ways in which government agencies appear to be using targets, and the numbers behind them, in a "less than straightforward and reliable manner".

The report says agencies have been using a number of "subtle and ingenious approaches" to improve their performance against targets.

They include changing the definitions behind indicators to make results appear better, "inventing new numbers" that are difficult to verify, and changing the way figures are reported without improving the reliability of information provided.

"This can cause us to slip into a 'moveable feast' mentality, where we find any reason to celebrate success or progress, even though we have lost our sense of the purpose behind it all."

The report says the "political capital" invested by the Government in meeting targets, such as its Better Public Services goals, puts pressure on public sector managers to come up with favourable results.

Previous calls for greater transparency had been met by a "quite disingenuous" government response, with claims that the public, rather than auditors, should scrutinise the targets it had set.

The report cites Child Youth and Family's statistics for child abuse and neglect as an example of particular concern, with a large gap between its recorded cases of abuse in 2014-15 and those recorded by police.

Changes to the way CYF investigates allegations mean "there is no way of knowing if the background level of abuse or neglect is falling, rising or staying the same", the report says.

'BIT OF A SPIN'

The report's author, Salvation Army social policy analyst Alan Johnson, said the organisation supported the idea of targets, but not the way they were being reported.

"The problem you really have is there's no independence of how they're reported: the agency responsible for the targets are also responsible for measuring them and then reporting on them."

While some government figures could be trusted, Johnson said others had "a bit of a spin on them" which would undermine public confidence in all the numbers.

Government agencies should make their targets subject to audit so there was more transparency about the methodology behind them, Johnson said.

The report outlines a number of areas in which New Zealand is improving, such as a decline in youth offending and teen pregnancy rates, wage and job growth, and a drop in criminal offending.

It also singles out a number of areas of concern, including the lack of progress in addressing child poverty,  a record high prison population, and ballooning house prices in some areas of New Zealand.

'DELIBERATELY MANIPULATING STATISTICS'

Labour leader Andrew Little said the report was a "damning indictment" of the Government, and showed it was "deliberately manipulating statistics" around poverty and crime to meet targets rather than addressing the underlying problems.

"It is appalling that, as the report says, enormous pressure is being put on public sector managers to go along with their agenda.

"They are targets designed to be met, not to change anything."

Green Party co-leader Metiria Turei said the Salvation Army highlighted serious doubts about the Government's "much-trumpeted achievements" for children and others, such as with CYF.

"No amount of massaging of the numbers is going to make the truth go away – that this Government's decisions are hurting those who need the most help," Turei said.

Child Poverty Action Group social security spokesman Mike O'Brien said the Government's deliberate decision not to act for the poorest children and their families could only be described as a moral and economic failure. 

"Child poverty is, then, clearly a low priority for this government."

Unicef NZ national advocacy manager Deborah Morris-Travers said the Salvation Army report raised serious concerns about the reliability of information generated by government agencies to report on issues central to children's wellbeing, like child abuse.

GOVERNMENT RESPONSE

Social Development Minister Anne Tolley said: "This is the first time any government has set public targets to be measured against, and we are moving in the right direction in many areas."

Tolley said the "unfounded" allegations about CYF figures were disappointing, and the Government was not trying to "paint a rosy picture" of child abuse statistics.

"The stats are dreadful, which is why I am completely overhauling CYF and rolling out children's teams."

The difference in child abuse statistics between CYF and police were because they measured different things, she said.

CYF's statistics related to cases investigated by the agency with a substantiated finding of abuse, while police statistics related to offence proceedings under the Crimes Act, which did not necessarily involve a complaint to CYF or any involvement by the agency.

"For example, an assault on a child which didn't involve a parent or caregiver would not be investigated by CYF if there were no ongoing care and protection issues."

Tolley said the Salvation Army should make available any evidence it had that CYF was not sufficiently investigating an allegation of child abuse.