From The Farm: Jobless shocker doesn’t include farms

By Jonathan Underhill

Unemployment at 7.3 percent in the third quarter is the highest since 1999. But as manufacturing, construction and professional services thin their ranks, more people are working in agriculture, forestry and fishing.

Total numbers employed in the primary sector rose 6.8 percent between the June and September quarters of this year to the highest since at least the September quarter of 2010. That’s the biggest jump for any industry apart from mining, which is a tiny employer compared to those involved in primary production.

The numbers in the household labour force survey don’t bear much scrutiny as they’re derived from small samples but it is a clue that there’s still a level of optimism that’s lacking in say manufacturing.

Tertiary Education, Skills and Employment Minister Steven Joyce bravely put the jump in the dole queue down to “global economic headwinds”- factors beyond the influence of the government.

Farmers, in particular in dairy, had a very good last season with record production and a pickup in jobs is an understandable consequence.

Among the government data out this week, the labour cost index shows pay rates in farming have been growing as well – a 0.4 percent gain including overtime in the third quarter, following increases of 0.9 percent and 0.8 percent respectively in the previous two quarters. Pay rose 0.6 percent in manufacturing last quarter, even as the total employed fell.

Farmers have long struggled to attract enough workers and increasingly have turned to foreign workers to fill the gap. The common view is that career guidance at secondary schools tends to downplay the prospects of working in the rural sector

Federated Farmers/Rabobank Farm Employee Remuneration Report for 2011, which wasn’t made public like last year’s report, shows more detailed and diverse trends emerging in farm work. On the whole, salaries increased modestly last year and total pay packages rose even less in the rural sector. Hours worked were well down on 2010.

Average salaries on dairy farms generally rose, with the biggest advance for assistant herd managers, up by an average 7.1 percent to $43,536 a year.

Shepherds on sheep and beef farms got the biggest pay increase, the survey shows, rising 14.2 percent to $40,857, whereas arable farm manager pay fell an average 14.5 percent to $56,125.

The average sheep and beef general farmhand earning 10.3 percent more at $38,280.

Farmers may benefit from the consequences of weak employment, though.

Economists at at least one bank say a case can be made for further monetary policy easing in New Zealand. The rising dole queue has already driven the kiwi dollar down against the greenback and today it had fallen to a two-month low against the Australian dollar.

Even if the RBNZ doesn’t cut rates, there’s still scope for Australia’s central bank to do so, narrowing the gap between the 2.5 percent official cash rate and the RBA’s cash rate of 3.25 percent.

The prospect of borrowing costs at least staying low is a relief for a rural sector grappling with a deteriorating debt position, that the central bank highlighted again this week.

The Reserve Bank’s six-monthly financial stability report showed debt on dairy farms billowed to $24 billion from $11 billion between 2003 and 2008. Almost half the amount was held by the most indebted 10 percent of farmers.

The central bank said the most notable shift over the past four years was a marked increase in loan-to-value ratios, reflecting the 20 percent decline in dairy farm prices between the 2007/2008 and 2010/2011 seasons.

The question is whether there are more farm businesses like the Crafar farms out there, sailing too close to the wind, especially if prices for dairy products fall and the kiwi dollar stays high.

There’s some sign that global dairy prices may be stabilizing. Prices rose for the second sale in a row on Fonterra’s GlobalDairyTrade platform. Other signs of improvement include the ANZ Commodity Price Index, up for a third straight month in October, with firmer prices for cheese, butter and milk powder.



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