27 Mar 2024

Southland businesses hit as farmers slow spending

8:44 am on 27 March 2024
Drought on North Canterbury farm.

Farmers throughout the South Island are facing dry conditions. Photo: Supplied

Farmers closing their wallets is having flow on effects for Southland businesses - with some even closing down.

Sheepmeat prices are well down this season due to softer demand from China and an influx of Australian lamb flooding markets - and dairy farmers have been cautious when it comes to spending as the season started off with a low milk price forecast.

Southland Chamber of Commerce president Neil McAra said there'd been a considerable drop in farmers spending over the last year - which means surrounding service industries are doing it tough.

"It's been very noticeable, both sheep and beef and dairy farmers have had to cut their budgets significantly which flows directly into the service sector and anything else that relates to that whether it be boats, cars or discretionary spend.

"Coming out of covid businesses had a bit of stock on hand and now with the downturn they're struggling to move it, so that's a challenge having to fund it when people aren't buying."

McAra said companies providing essential maintenance like electrical work are doing okay but others were having to make tough decisions to survive.

"Farmers are having to make decisions on where to spend and where to defer, if they can put off things like upgrading buildings or even using fertiliser they are doing so."

"We have seen some redundancies, some companies have downsized or are just not replacing staff or they're finding some additional finance from the banks to fund their way through until things come right."

We are starting to see things turn in the dairy sector with prices lifting in recent months and that in turn is resulting in dairy farmers spending more he said.

"That's the light at the end of the tunnel for struggling businesses but with the sheep sector there's a way to go yet."

McAra who works as a financial advisor said more farmers are asking for help - but they're wary to borrow more money when interest rates are so high.

Things have also slowed in Taranaki but not to the same extent.

Chief executive of Taranaki Chamber of Commerce Arun Chaudhari said farmers are being cautious with businesses reporting sales are down.

"January and February we're ok, farmers were buying vehicles because the ute tax came off, but this month things have slowed down.

"In general outlets like Farmlands and other farm suppliers are seeing people spend on essentials like animal care but discretionary spend on things like maintenance."

Chaudhari said it's been a tough few years with covid and the economic down-turn but businesses have managed to stay afloat.

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