A West Coast dairy farmer says buyers paying top prices for farms are the ones most likely to bring risk back into the dairy industry as interest rates and costs climb.

Speaking on the DAIRY Country panel with Senior Journalist Anne Lee, Richard Reynolds says three-year interest rates are heading back towards 7% from 5%.

He says on debt of about NZ$20/kg milksolids (MS), that adds about 40c/kg MS in debt servicing.

“It’s always the margin that matters, not the average. Margins move markets.”

“It’s the guys going out there buying farms at some of these high prices [who] will move the market farm values up and they’re also the ones that have that potential to bring in that risk into the industry later on.”

Lee says the Reserve Bank’s September Financial Stability Report puts potentially stressed loans at about 6% across agriculture and less than 2% for dairy, compared with 22% for dairy in 2010.

She says dairy debt has fallen from a high of about NZ$22/kg MS to about NZ$18/kg MS, but is starting to creep back up as banks look to lend.

Reynolds expects farm working expenses to rise by NZ$1/kg MS rather than the 70c/kg MS DairyNZ is budgeting for, because of dearer inputs, suppliers lifting margins and “systems creep”.

“It is great fun spending money on farm.”

On the West Coast, a wet and cold spring left low pasture covers, but warmer weather has brought grass growth. He says trucking is stretched, so farmers ordering fertiliser or feed should book at least a week ahead.

CountryWide CONNECT with Andy Thompson & Sarah Perriam-Lampp is our daily rural show livestreamed from 11am-1pm. Visit country-wide.co.nz on how to watch/listen or download the CountryWide CONNECT mobile app, available on Apple iOS and Android.