22 Jan 2019

Farmers can overcome financial uncertainty from global warming - research

3:26 pm on 22 January 2019

Farmers are well-placed to survive any potential financial uncertainty from major setbacks such as global warming, new research has found.

Opunake farmer Kerry Smith leaning on a fence.

A survey of more than 400 farmers has found that most are financially resilient in the face of events like global warming. Photo: RNZ / Robin Martin

Lincoln University academics surveyed more than 400 farmers, and found most farms were in position in which they could operate and absorb financial shocks, at least in the short term, associate professor Peter Nuthall said.

Prof Nuthall said an assessment of the financial resilience of farms was important given changing weather patterns stemming from global warming, and the impact this could have on the industry.

The study found farm equity is, on average, nearly 82 percent, while 12.2 percent of farms had an asset total of greater than $20 million.

"Profit levels are not high relative to the investment, but this has been the case for decades and has not caused problems due to farmer and farm family resilience," Prof Nuthall said.

"This does not mean some farmers have not struggled financially, particularly over periods of low payouts, including low wool prices, and periods of severe drought. New farmers with high initial debt will have found it difficult to meet their commitments in these periods," Prof Nuthall said.

"The majority, however, have had the equity to cope, especially the significant numbers with 100 percent equity."

However, he said, action to maintain current financial levels through prudent production system selection and good financial management would be needed.

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