Rural centres holding strong as economy plunges

The hard times in the 1980s started in the country, moved through the provincial towns, and only after the share bubble burst in late 1987 did the worst hit the bigger cities.

This time it is happening in reverse. Falling property prices and job losses in the cities signal tougher times there already.

But while people are concerned, there are few signs the recession has hit this part of rural New Zealand yet.

People are wary and many are worried, but one small-town retailer told me his sales for the first six weeks from the start of December had already equalled those for the whole three months of last summer.

The strength of the rural hinterland is one of the main reasons that, at least for now, North Otago is defying predictions of a looming crisis. Irrigation development in the past few years, last season's dairy payout and improved returns for crops kept the district's economy buoyant even though sheep and beef farmers were getting poor prices.

Cropping prices are following the overseas trend downwards now and dairy prices also reflect falling world commodity markets.

Fonterra's opening payout of $6.60 has already been reduced to $6 and is expected to go even lower this week. But even if it goes to $5, it will still be better than the long-term average.

And defying the doomsayers, beef and lamb prices are going up. After years of falling returns, sheep and cattle farmers are having a much improved season.

To keep it in perspective, last season's prices were so depressed, the only way they could go was up if many farmers were to stay in business. The improvement is overdue and it's due in no small part to the sharp fall in sheep numbers in the wake of dairy conversions and drought. It is also being helped by the fall in the value of our dollar.

But the improved returns are a glimmer of silver in the clouds which so many commentators see gathering, and balance sheets are being further brightened by falls in interest rates, inflation and the price of major inputs like fuel and fertiliser.

That contrasts with the 1980s, when inflation and interest rates got to more than 20%, the dollar was also high and stock prices fell.

People who not only survived the ag-sag of the '80s but have prospered in its wake acknowledge that the economic outlook isn't good, but some of the lessons which helped them two decades ago will be put to good use now.

One of those is the importance of containing costs, a lesson reinforced by a speaker at a dairy conference a couple of years ago. He entered the industry when the payout was $5, and a year later it went down to $3.60.

But he made as much in the second year as he had in the first by keeping costs to a minimum, which is an illustration of the wisdom of our Presbyterian grandparents who taught us a penny saved is a penny earned.

- Elspeth Ludemann is a North Otago farmer.

 

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