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2014 - A Year of Contrasting Fortunes

With Christmas just around the corner it is time to reflect on another year which seems to have come and gone very quickly. And how the fortunes have changed for our regions farmers over the past twelve months. The start of the year saw dairy prices at all time highs with Fonterra forecasting an $8.30 payout (which ended up even higher), beef prices remained flat at $4 and lambs were averaging $90.

Since then the demand for sheep and beef, particularly from the United States has resulted in export beef prices hitting their highest levels in twelve years. Lamb prices are around $100 and wool prices have also increased. Sheep and beef farmers are heading into 2015 with renewed optimism. On the downside, the dairy sector has seen a swing of fortunes that no one really predicted. Key economies like China and Russia have stopped buying with the milk payout plummeting to below $5. Volatility continues to plague the dairy sector which makes forecasting and budgeting extremely difficult.

The season so far has been pretty reasonable however, with production up and yields from crops and silage so far looking pretty good. The demand for good properties in both the dairy and sheep and beef sectors continues with some excellent prices achieved in recent farm sales.

Going into 2015 it is more important than ever for farmers to plan well for the year ahead. Budgeting and working with your bank and accountant over the next twelve months is going to be crucial with sheep and beef farmers looking at ways to minimise their tax, while dairy farmers will be looking to cut costs where possible. Indications are that the dairy payout for next season will be up, however at this stage it is too early to say. Commodity prices are reflected by supply and demand and it won't take much for demand to increase and dairy prices to head north, particularly once China re-enter the milk market. There is no doubt that next year is going to be a difficult one for many dairy farmers. A lot of capital expenditure and discretionary spending will be reduced. This will have flow on affects for the entire economy. Fortunately many of our input costs such as fuel, fertiliser and palm kernel are showing price decreases, while interest rates remain at a moderate level.

Remember nothing stays the same in life - just look at the Black Caps recent performances for an example of this! It will not surprise me if dairy prices are well on their way to recovery in twelve months time. I'm picking prices in the drystock sector to stabilise but remain at above average levels as well.

Make sure you all have a good break over the Christmas and New Year period, ensure that staff and family are looked after and get the time off that they need. I'd like to wish all farmers a Merry Christmas and all the best for 2015.

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