4 May 2012

Falling commodity prices force farmers to tighten belts

7:41 am on 4 May 2012

Federated Farmers' president Bruce Wills is expecting his sheep and beef farm income to drop by about 20% this year, as a result of falling commodity prices.

The ANZ Commodity Price Index shows sheepmeat prices fell 12% last month, to an 18 month low and wool prices were down 9%.

Beef fell by 2% and dairy prices dropped 6%.

Mr Wills says the speed of the commodity price drop has been a surprise after the healthy returns farmers were getting last year.

He says against this trend the New Zealand dollar is staying stubbornly high, adding to the pressure on declining export returns.

Mr Wills says the currency has traditionally been a good buffer, it goes up when commodity prices go up, it comes back when they retreat.

But he says farmers would expect the New Zealand dollar to come back after the prices dropped by as much as they have - but this hasn't happened which is concerning.

Mr Wills says the across the board decline means all farmers will be tightening their belts and revising their farm budgets.