GRAHAM and Shelly White share a dilemma facing many middle-aged Kiwi couples on large, specialised sheep farming properties today.
The Whites farm Willow-lea, a 600ha property on rolling Otago hill country at Hindon, between the Taieri and Strath Taieri Plains. Their farm ranges between 1100ft and 1500ft (330 to 460m) in altitude, which makes it unforgiving in winter and drought-prone in summer.
They run 3500 Perendale ewes and depend on their wool and lamb cheques for their economic survival. The Perendale breed is hardy and suits the region, bouncing back quickly from tough winters and dry summers.
The Whites pride themselves on a low-cost, low-input operation. They are very conscious of cutting costs to a minimum and don’t drench or inoculate their stock at all.
As Graham explains, the dilemma facing the majority of the country’s sheep farmers is that they are making a one-and-a-half to two per cent return on their investment. That’s why a lot of their peers are leaving the industry.
“A lot of people our age and older are getting out of it and I don’t blame them,” he said. They would be better off to leave their money in the bank.
The Whites have watched while neighbours on similar properties have sold up and moved on. Several properties in the district are currently on the market, but they have also heard of three farm sales that have fallen through because of the current credit crisis.
“I feel sorry for those with a high debt loading, because they’re not going to survive this round,” Graham said.
“The banks and stock firms have got some lined up that are going to have to go.”
The global financial crisis has compounded the problem and may be the last straw that puts many debt-loaded farmers out of business.
“Some have been hanging on for too long. The only thing that saved them was their equity in their farms balanced off their debt,” he said.
Despite a grim industry outlook, the Whites say they have to remain positive.
“If I wasn’t confident in the industry I wouldn’t be here. I still enjoy going out every day and working with stock,” Graham said. “If I didn’t enjoy it, I may as well get out of it.”
Shelly shares the same outlook. Farming is a cyclical business and she believes the fortunes of the sheep industry will turn for the better.
But the couple is realistic about how long they can continue to run such a large property on their own. They have given themselves another two or three years.
Their son was working on the farm, but declining returns in the past four years meant they couldn’t afford to keep him and he left to pursue a career in the farm service sector.
Like many farming families, ideally the Whites would like their son to take over so they can retire to a smaller holding down country, but buoyant land prices and big business have pushed that option out of reach.
“Places up here and in a lot of areas are selling way above what they are worth,” Graham said. “You’d be better off putting your money in the bank. People are selling out to dairying, moving here and buying at prices much higher than the productive value of the land.”
A whole generation of young farmers has been lost to the industry because they cannot afford to pay the interest on a big mortgage from farm income alone, he said.
“There is no way this place would generate the money for (our son) to borrow on a mortgage.”
The Whites’ average return for lambs last year was $60.52, which included a 50c a head commitment premium from the former farmer-owned co-operative PPCS (now Silver Fern Farms).
They have been loyal suppliers and have pooled lambs for PPCS since taking over Willow-lea in 1982, but Graham voted against the recent merger between SFF and PGG Wrightsons.
“SFF shareholders voted to sell half the company for a return of $15 more for a lamb this year,” he said. “What a joke. It’s costing us $15 a lamb more to produce it anyway, so we’re no further ahead.”
“If farmer shareholders had been loyal to the co-operative and pooled lambs, it would probably not be in the financial mess it’s in now, but some were chopping and changing from one company to another,” he said.
Graham believes SFF should remain a farmer-owned co-operative and join forces with the Southland-based Alliance Company to pursue new markets around the world.
With six million fewer lambs available nationally this season, the procurement war is already costing producers dearly and no company could afford to get involved.
While the banks were budgeting on a return of $70 a lamb for the coming season, Graham is not confident that lamb prices will be any better than last season.
Meanwhile, other farm costs continue to spiral out of control. When Graham sat down and worked out his shearing costs, he wished he hadn’t bothered - a whisker under 60% of their ewe wool cheque went in costs.
“If people sat down and worked it out on a percentage basis, they’d get a hell of a fright I’m sure,” he said.
Graham does not want to cut back on fertiliser but it is one of the few discretionary expenses left where they can still cut costs.
The Whites are now looking seriously at other farming options open to them.
In a good season they could run beef or graze dairy dry stock, but realistically the property is just too high and too cold for “thin-skinned” Friesians.
“We could cut ewe numbers down, which would ease the workload on us, cut back on shearing costs and turn it into a lamb fattening operation,” Graham said.
They would have to direct drill specialised lamb finishing feed crops, such as summer turnips and brassicas, because the property does dry out in summer.
They are also considering growing baleage and selling it as winter feed for dairy farmers on the nearby Taieri Plains.
The outlook is not all bad though. The region has had its wettest winter in five or six years which augers well for a good summer. They were able to flush their ewes on silage and they scanned 166% with more twins than expected and just 1.75% ewe losses, a very good lambing.
“We’ve got to think positive,” Graham said.
“We have been here before and we have survived tough times so we can do so again.”
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