Farmer Focus: What to make of a post-Covid recovery?

It seems a strange old world at present.

Down here in New Zealand, we have been spared, thus far, from the tragedy of Covid that has struck the rest of the world and having a 4,000-mile moat sure has helped.

Largely our economy is being supported by unexpectedly strong primary sector commodity prices and solid demand.

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The unproductive parts of our economy are being propped up by ultra-cheap credit allowing borrowing of questionable quality and massive central government support, but that is another debate entirely.

The situation could have been so different, and many folk wiser than me fully expected commodity price slumps.

Our dairy sector is booming, and that is in turn underpinning support for farms, feed suppliers and the agricultural service sectors.

The arable, beef and sheep sectors are also enjoying time in the sun, apart from wool which is an ongoing disaster.

This recovery post-Covid worldwide has gone off like a coiled spring and is being met with unsatisfied demand, challenging global production, and supply capacity still constricted by Covid restrictions in some parts of the world.

We are all now starting to see the effects of this in long lead times for new equipment, vehicles, parts, and many consumer goods, with many products on back-order with no confirmed supply date whatsoever.

This is then amplified with what appears to be global ships and ports stuck in first gear. Down here, we are seeing shipping times treble and quadruple.

So basic economics never fails. If something is in short supply, the price goes up and we are seeing the inflation bear wake up angry.

For 12 years we have all partied courtesy of low interest rates and endless liquidity. The run up in pricing we are seeing last occurred in 2007-08 when we couldn’t get gear or parts, but things all came a bit unstuck when the global financial crisis hit.

It just makes me wonder whether this is a dead-cat bounce or an enduring recovery. Let’s hope it is the latter, but just in case we are adopting a steady-as-she-goes approach here at Valetta.

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