New Zealand economy

NZ: Farmers facing 'serious financial problem'

Nearly a quarter of all dairy farmers are expected to be badly hit over the next year as milk prices continue to drop-off from recent highs.

TVNZ,

24 October, 2012

A report from the Ministry for Primary Industries is warning farmers to brace for a subdued 2012/2013 season with milk solids forecasted to fall 20% to around $5.25 per kilogram. The lower prices are expected to result in a profit reduction of around 57%,compared with the previous year.

Report author Phil Journeaux said heavily indebted farmers, or around 20% of those involved in the industry, would be especially vulnerable.

"It depends on a number of things but certainly if the $5 pay-outs continue for another year, a number of farmers would be in a serious financial problem," said Journeaux.

He said dairy farmers generally needed a pay-out of around $6 per kilogram of milk solid to break-even.

The predicted profit decline comes as the once buoyant dairy industry begins to suffer from lower prices and a strong kiwi dollar.

Last month, Fonterra missed its forecast with a 19% drop in its 2012 pay out to farmers, in spite of record production, even after the dairy giant managed to fetch record-high prices in a post-recession economy.

Journeaux said the years of growth in the industry had resulted in practically no change to the level of debt carried by dairy farmers.

"Farmers have paid off a fair share of debt over the last 18 months but having said that, others have borrowed equally as much. In aggregate the total situation has not alerted."

The Reserve Bank found rural debt topped $49 billion earlier this year, of which Journeaux said two-thirds was dairy debt.

Despite the gloomy forecast, Journeaux believes global commodity prices are looking brighter for 2013.

"Hopefully that will be directly reflected in the pay out, compelled, of course, by the strength of the New Zealand dollar."

The Ministry for Primary Industries report is also predicting sheep and beef income is expected to be down 6% in 2012/13. However, profits in the deer industry are expected to continue growing after their third season of relative stability in product prices and productivity.

NZ dollar drops as investors avoid risk

TV3 News,

Wed, 24 Oct 2012 9:20a.m.

The kiwi dollar traded at 62.50 euro cents from 62.55 cents on Tuesday

The New Zealand dollar fell as weak US earnings weighed on equities and added to a "risk-off" tone in currency markets.

The kiwi dollar fell to 81.15 US cents from 81.65 cents at 5pm in Wellington on Tuesday and the trade-weighted index fell to 72.6 from 72.82.

Shares of DuPont, Xerox and 3M weakened as earnings disappointed. The Dow Jones Industrial Average fell 1.7 percent.

In Europe, Spain's economy shrank for a fifth consecutive quarter while Moody's Investors Service cut the credit rating on five Spanish regions, adding to doubts about the sustainability of global growth and growth-linked assets including the kiwi dollar and commodity prices.

"It's a continuation of some very poor earnings from some large US companies," said Tim Kelleher, head of institutional FX sales NZ at ASB Institutional. That's added to the "risk-off" sentiment.

The kiwi dollar traded at 62.50 euro cents from 62.55 cents on Tuesday and slipped to 79.06 Australian cents from 79.13 cents and to 64.79 yen from 65.19 yen

There was a time (back in 1979 after the Iranian revolution) when the NZ government didn't let external politics affect trade relations. Now we'll do anything to please the Empire.

Iran sanctions could hurt NZ exports

Radio NZ,

24 October, 2012

A US plan to toughen sanctions against Iran over its nuclear programme could cut New Zealand exports there.

New Zealand's exports to Iran, mostly butter, are worth $224 million a year.

US senator Mark Kirk is preparing legislation which would blacklist Iran's entire energy sector and ban insurance or reinsurance services to Iran.

Blocks on bank payments and insurance deals for shipments could make even food sales hard to achieve.

Foreign Affairs Minister Murray McCully says New Zealand has fully implemented UN sanctions against Iran because of its nuclear programme and the sanctions will affect this country's trade.