Devaluation — farmers warned 'don't expect windfall'

Waimarino Bulletin, Volume 2, Issue 9, 31 July 1984, Page 11

Devaluation — farmers warned 'don't expect windfall'

Farmers should not expect a 20 percent windfall as a result of the incoming Government's decision to devalue the dollar. And they would be wise to proceed with caution before embarking on increased expenditure. This was the warning sounded by Federated Farmers' junior vice president Brian Chamberlain last week. The benefit to most farmers would be much less than the 20 per cent devaluation figure, Mr Chamberlain said. Complicating factors in the various commodities meant the adverse effects of a devaluation had to be taken into account. And cost increases of at least five percent are likely on fertiliser, chemicals and fuel, he said, reducing farmers'nett returns. Dairy Dairy farmers cannot expect an advance on the season's basic price of 355 cents per kilo. The market

expectancy before devaluation was estimated at 270 cents, with the difference between that figure and the 355 cents basic price to have been made up from industry reserves. A 20 per cent devaluation almost makes up the difference, but without an improvement in market returns dairy farmers could not expect any advance on the 355 cent price, Mr Chamberlain said. Sheep Sheep farmers could expect an increase in wool prices this year, but that increase would not reach 20 percent unless the market value itself improved. As of last week the market was below the 320 cent SMP price farmers were receiving. The gap between the market and the 320 cents price had to be filled before farmers got more, Mr Chamberlain said. Moreover, in the past the full extent of a devaluation had not found its way into prices, he said, The wool price to farmers

might only increase by 10 percent. One commentator had suggested the nett benefit to sheep farmers would be in the order of $5,000 per farm, a result Mr Chamberlain welcomed. If the figure was correct the devaluation would provide an opportunity for some catching up, because in recent years the level of spending on sheep farms had been well below maintenance level, he said. The devaluation should take lamb clear of the SMP level — but only just. The increase to farmers would be at a level of two or three percent rather than 20 percent. Devaluation would not be substantial enough to take mutton prices clear of the current minimum price, thanks to existing poor returns, so there would be no increase to farmers there. Beef The brightest news was in beef. With the price already above the SMP level farmers could expect a 20 percent lift, which would also benefit dairy farmers. Horticulture Horticultural returns, too, should increase by the devaluation level. But some products have benefited from export incentives, and

if these were phased out too quickly farmers would finish with a nett gain of less than 20 percent. Federated Farmers saw the devaluation as removing distortions from the economy and bringing some reality to the situation, Mr Chamberlain said. "In some ways the taxpayer gets the greatest benefit because the devaluation has removed the need for SMPs," he concluded.