Farming industry resilient despite several strong undercurrents
8 December 2022
Despite the agribusiness sector already looking weary from the past year, there are still significant headwinds to navigate for New Zealand’s most critical industry heading into 2023, including the well-publicised rising costs, market and regulatory uncertainties, and the familiar and more acute problem of labour shortages. Some of which are self-inflicted, others out of their control.
There is a lot going on around the world and there is a big focus on the Ukraine situation but in reality, the bigger struggles are coming from the trade relationship with China, who are going through their own internal issues, from strict Covid restrictions to their own economic stability. Other constraints impacting productivity include local politics, regulations causing uncertainty, other environmental laws, and significant immigration challenges impacting labour.
On top of all this, access to capital has been a long-standing challenge for the agribusiness industry, and the rising interest rates piling on additional pressure. The resulting uncertainty in outlook means that within this capital-intensive industry, investment becomes limited, retarding development and, ultimately, productivity.
The biggest struggle right now though is the lack of labour available, which is coming from the government’s reluctance to let workers into the country. Besides the fact that a shortage in staff means stunted productivity and heightened frustration, not having workers available is a health and safety issue for farmers who are overworked.
Despite all of this, and after all of the struggles of the year, most farmers are still paying tax as a profitable operator. There is a lot to be positive about in the sector and although farmers copped a beating from what seemed like every angle, with little help from the government, the profitable year is a testament to the resilience in the face of substantial artificial constraints. Resilience that continues to be tested.
Looking ahead, New Zealand is still the cleanest most efficient producer of protein in the world, and there is a forecasted shortage of protein through southeast Asia over the next 4-5 years, so the farmers are well placed to meet this demand. Supporting this, dairy futures look solid for the next three years, however, they recently slipped under $9 which needs to be watched.
So, unless people stop eating, New Zealand farmer’s place in the future is assured. With the highest quality in the world, the demand is strong for their products, and they have a good story to tell.
At the National Fielday's 2022 event, I caught up with the hosts from REX to discuss the resilience of the New Zealand farming industry. You can listen to the full interview here.
At Findex we work with many agribusinesses around the country, with expertise in accounting and business advisory, risk insurance, succession planning, lending and finance and more. Get in touch with our team to discuss the future of your farm and how we can help you prepare for the years ahead.