Farmers will need to make careful business decisions, but the agricultural sector will likely have another profitable year, Rabobank says.
The organisation’s annual Agribusiness Outlook has predicted a second consecutive year of strong returns for exports because of stable global markets.
However, Rabobank general manager of country banking Hayley Gourley is warning farmers to use the current situation wisely.
The industry and the whole value chain should be looking at how to invest their returns, she said.
“Particularly to position for the next time there is a downturn … or to position the sector in terms of what it wants to be going forward.
“The discussion in New Zealand around being a low cost, nimble producer, or being a niche high-value sustainable producer, is still really being had.”
Farmers need to consider how to invest in a long-term strategy during the good times, she said.
Her predictions for challenges close to home include regulation changes, with weather playing a part.
“Production will be down for many sectors, particularly as we see milk production being challenged and we have less lambs on the ground.”
This could put pressure on export supply.
“So while product prices remain very good, actually production levels are likely to be challenged – that will be what farmers are weighing up in their own businesses.
“If production declines outweigh the price improvement then that challenge is profitability.”