Drought impacts business and will affect GDP

2 February 2015

Drought impacts business and will affect GDP

Businesses which rely on trade in parts of the country which are experiencing drought conditions are very concerned about the extreme weather.

Canterbury-based transport and contracting company Woodley’s says the need for casual workers has dropped by half compared to last year and in some areas harvesting, silage and transport has completely stopped because there has been no growth due to the lack of water.

“I have seen dries before but this is one of the worst,” says Alister Woodley, owner of Woodleys which started baling in 1983 and now has 22 trucks moving feed and stock from the South Island up north. “We are a big enough business to push through, but my concern is for those who find themselves out of work with mouths to feed. All of the community is suffering with less and less cash going around,” he says.

“Farmers are being hit with a double whammy – first the low pay-out which meant they had to rely on grass growth as they couldn’t afford feed, and now there is no grass available.”

“Anyone who doesn’t think that irrigation is the lifeblood of this country needs to come down to South Canterbury and see for themselves what the value of water is,” says Mr Woodley. “I am talking about irrigation which supports entire communities – and when there is not enough water everyone suffers.

“The knock on effect is more significant than people realise. I can tell you right now, water cannot be underestimated, in the future, water will be more valuable than land,” he says.

The weather will also impact workers on processing plants as lamb supply this year is likely to be down.

Gerard Scott has a crop and lamb finishing operation in South Canterbury and says the biggest issue will be the prospect of a dry Opuha dam and no irrigation for the establishment of autumn sown seed crops like ryegrass for winter feed. “The issue of restricted feed is widespread and the impact on lamb supply and subsequent processing plant employment will be serious,” says Mr Scott.

While Mr Scott has completed irrigating many of his cereal crops, vegetable seed crops like radish, spinach and red chard, are now at risk as they require regular water over the next few weeks.

Senior Economist from Westpac, Michael Gordon, last week released a note saying that “the current drought is likely to take a significant chunk out of total GDP growth over the first half of this year.” He said that Fonterra’s forecast of a 3.3% drop in milk production this season does not fully convey the “severity of this downturn”, and that “production was already up 3.7% on a year ago over the first seven months of the season (Jun-Dec), so Fonterra's forecast implies that production over the remaining five months (Jan-May) will be down 13.4% on last year.”

IrrigationNZ is calling for the government, business and communities to focus on fast tracking water storage projects, particularly those replenished by alpine fed rivers which have more regular and reliable rainfall during summer.

“Water storage and irrigation is essential for New Zealand to survive these climatic variations which will only increase,” says Andrew Curtis, CEO of IrrigationNZ. “It’s quite simple: more needs to be done with less interference to get these infrastructure projects funded and off the ground.

“Despite being a water rich country we are in fact a land of extremes. We have water but it is in the wrong place at wrong time. We need to better harvest and distribute a small percentage of the abundant water resource to the benefit all. As a food producing nation, we need to mitigate the impact of weather as much as possible.”

IrrigationNZ is the national body representing irrigators and the irrigation industry. Its mission is to promote excellence in irrigation throughout New Zealand.

ENDS

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