Two-Year Drought Put Dairy And Meat “Out Of Sync”
August 24th, 2009
Dairy and sheep farmers came to the 2007-2009 drought from very different parts of the economic cycle, which probably exacerbated the impact. This is one of the conclusions of MAF’s assessment of the economic impact, which it values at $1.49bn in lost output. The total cost was more like $1.89bn including rising costs of inputs like feed. Based on the Butcher Partners study, the Waikato’s dairy farms were the epicenter of the big dry, accounting for $799m, or 42% of the total cost of the drought.
Overall, losses from dairy farms over the two years amounted to about 8% of production, while for sheep and beef the percentage was about 4%. The study shows dairy farmers were getting exceptionally high prices for milk solids when the drought got underway in 2007, which had them buying feed at a fierce rate of knots to maintain production. Sheep and beef farmers, by contrast, had been struggling through an extended period of low profitability and had little room to cut costs.
The initial impact appeared like a boom for meat, as farmers sold capital stock, boosting their cash flow, while meat companies operated at full capacity. The rundown of the national flock is still being felt. Agriculture Minister David Carter says dairy and meat “were completely out of sync.”
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