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Westpac NZ is encouraging farmers and growers to start preparing now for the possibility of a dry summer caused by likely El Niño conditions.
Earlier this month, Westpac’s Economics team published detailed insights into the likely impacts of El Niño across northern and eastern parts of the country – with potential for a 1% hit to GDP based on past severe droughts.
Westpac NZ Head of Agribusiness Richard Anderson says farmers and growers shouldn’t assume the worst, but should start planning now so they’re flexible and ready to deal with drought conditions.
"Every farming and growing operation is different, so now is the time to think about what El Niño could mean for your business and what steps you can take to manage the risks,” Mr Anderson says.
"Good financial planning is just as important as operational planning. Update your budgets, monitor your forecasts regularly and be prepared to adjust them as conditions change.
“While some businesses may face higher costs through additional feed purchases or irrigation expenses, they could choose to sell stock sooner than planned, to generate more up-front revenue.
“Early planning for El Niño will give you the best chance of getting through the season in good shape. Our Agri bankers are deeply embedded in rural communities around the country and are keen to work together with farmers to help them prepare.”
Learn from experience; focus on water, feed and stocking decisions
Mr Anderson says a good starting point would be to look back at previous El Niño events and plan accordingly.
“If you've owned the property for a long time, think about what worked for you and what didn't. If you’re new to the property since the last El Niño event, talk to the previous owners if you can.
“That local knowledge can be invaluable when preparing for dry conditions.”
Farmers and growers could also consider:
- For livestock farmers, ensuring a reliable water supply and securing feed availability should be top priorities;
- Farmers should assess the condition and capacity of dams, troughs and reticulation systems, while also reviewing supplies of supplementary feed such as baleage, silage and hay;
- Some may wish to investigate securing more feed supplies or locking in contracts and prices before demand increases;
- Farmers with trade livestock could consider trigger points for selling stock earlier than planned if their feed supplies come under pressure;
- Warmer conditions could benefit many fruit, grain and horticultural crops, but growers should take care to review their irrigation systems. That means checking for leaks, repairing valves or pumps, and keeping their storage tanks well-maintained.
- Farmers and growers should also consider any potential water restrictions in their area.
Strong financial positions
The good news is that most farmers and growers are in excellent shape financially to cope with a dry summer, Mr Anderson says.
“Arguably the industry is in the best position it’s ever been to face into El Niño, thanks to generally low debt levels and high commodity prices. However, on-farm inflation driven by higher fuel and fertiliser costs is a dark cloud on the horizon for many customers we’ve talked to.
“This is where keeping a close eye on your budget and cash forecasts is key. Make sure you have enough cash on hand, keep an eye on markets for demand and price trends, and be prepared to change your approach as weather forecasts change.
“If you are worried about how an El Niño event could affect your business, talk to your bank early. The sooner we understand your plans and challenges, the better positioned we are to support you.”