WELLINGTON, N.Z. (Reuters) — New Zealand has declared a drought in parts of the country’s South Island and offered financial assistance and tax relief to farmers.
Dry conditions have cut dairy production and increased sheep and beef slaughter rates.
The government said medium-scale drought conditions were affecting the east coast of the South Island, which includes a major dairy region.
It said it would offer extra funding immediately through rural trusts.
“It’s clear that conditions are only going to get tougher as the seasons change and we need to prepare now,” primary industries minister Nathan Guy said in a statement.
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He said he was also monitoring parched regions in the North Island.
The announcement comes after a drier than average summer.
Drought was last declared in 2013, when it shaved .3 percent from real gross domestic product in a country where farmers account for more than 55 percent of exports.
Analysts said the economic impact from the latest drought was likely to be smaller, given that fewer regions had been affected.
“It’s not clear where we’re going to finish up,” Deutsche Bank economist Darren Gibbs said.
“Does it take .1 percent off GDP? I don’t think it will be bigger than that at this point.”
However, industry experts said dairy farmers faced a bigger challenge in recovering from the current drought than they did in 2013 because plunging global prices have cut cash flows.
This year’s benchmark payout of US$3.45 per kilogram of milk solids is the lowest since 2008. Farmers have already have cut back on milk production and sent cattle to the slaughterhouse.
This is in stark contrast with 2013, when a record-high dairy payout in the following season enabled farmers to lift milk production to an all-time high.
“It’s a perfect storm with dry conditions and the lower payout,” said Virginia Serra, an adviser at industry body DairyNZ that represents farmers in the drought-affected Canterbury-North Otago region.
“With last year’s … payout, farmers had tools to deal with the previous season’s drought,” she said.
“But now, those tools are reduced. The margin to spend on expensive feed supplements and things like that just aren’t there this season.”
Dry conditions have spread throughout the Southern Hemisphere.
Australian farmers have struggled with lower rainfall for more than two years, although favourable weather in recent weeks has eased some of the pain.
