WELLINGTON, N.Z. (Reuters) — The New Zealand government has declared a drought in key farming areas on the North Island.
The area has received no significant rainfall in more than three months, threatening to cost the economy $850 million.
The affected areas include the major dairy producing Waikato, south of the country’s biggest city, Auckland, and horticultural regions Bay of Plenty and Hawkes Bay.
“This extended period of hot and dry weather over the last couple of months has left dairy and sheep and beef farmers alike with parched paddocks and burnt and stunted feed crops,” said James Houghton, president of Federated Farmers Waikato.
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The official drought declaration gives farmers access to financial and social support.
Some of the affected regions have had one-third of their average rainfall this year, and only light rain is expected for the rest of the month.
Agriculture accounts for half of the country’s $39 billion annual export earnings, with dairy produce the single biggest commodity.
The drought would likely weigh significantly on production and incomes this year and next.
“The reduction in agricultural and primary production is likely to shave 0.5 percent off gross domestic product by the end of the year,” ANZ Bank rural economist Con Wilson said in a research note.
The dry conditions are forcing farmers to cut short milk production, cull animals and buy expensive supplement feeds.
Fonterra, a New Zealand dairy co-operative and the world’s biggest dairy exporter, warned that dry weather was cutting into production, which had risen five percent in the first half of the dairy season.
“The impacts of (a) prolonged period of dry weather are likely to be long-lasting, with agricultural and primary manufacturing production unlikely to recover to pre-drought peaks for at least 24 months,” Wilson said.
The last significant drought in New Zealand occurred in 2007-08, wiping an estimated $2.4 billion off GDP and helping tip the economy into a year-long recession.
The South Island, which has significant dairy and meat raising regions as well as much of the country’s hydro-electricity generation, is not affected by drought.
However, the drought could help underpin prices for dairy products because of reduced supplies to meet demand.
Fonterra’s latest online auction of products saw a 10.4 percent rise in average prices on reduced volumes.
It was the biggest single auction rise in nearly two years and took the market to within nine percent of its peak in May 2011.
