Category Archives: News

Stephen Winter of Nind Dairy Services in Invercargill

Dairy downturn hurts other businesses

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Source: The Southland Times

The flow-on effects of the dairy downturn is beginning to bite in Southland towns, with numerous companies reporting a downward trend in business.

Dairy support companies are feeling the pinch from the low milk price payouts and unrelated businesses have also noticed farmers putting the brakes on spending.

Southland regional manager for Farmlands, Harry Soper, said all Southland towns were rural service towns so the downturn was affecting everyone.

The most important thing was the health and wellbeing of those affected, he said.

Farmlands, which sells goods to farmers, was finding business “challenging”, but having a diverse range of other business interests was proving beneficial.

Invercargill’s Nind Dairy Services director Stephen Winter said the diary downturn had resulted in work and revenue for the company dropping significantly.
“It’s pretty obvious when the payout goes from $8 to under $4 it will have a huge impact, not only on dairy farmers but also on companies like us servicing them.”

Winter believed revenue for businesses servicing the dairy industry was down 25-30 per cent on last year.

However, he said it was not all doom and gloom.

Farming went in cycles and his business had been through such cycles during its 25 years of servicing the dairy industry.

Two years ago the company built 12 new dairy sheds but they only had four confirmed this year,with two pulling out since Christmas.

Winter said they had not replaced any of the tradesmen who had left in the last two years, meaning they had dropped from about 40 to 30 staff.

The longer the downturn continued the harder it would be, but Winter said his company would ride it out.

“It will bounce back at some stage, but we don’t know when that will be.”

Ewan Allan Honda owner Andrew Allan, based in Gore, said new motorbike sales had dropped off in the first three months of this year.

However, their workshops had been busier than normal, with many farmers getting motorbikes fixed instead of buying new ones.

Honda was also sourcing older model motorbikes to sell to farmers, which were cheaper than the new models.

“It’s time to give a bit back to farmers and that’s part of it,” Allan said.

Udy’s Grain and Feed Ltd owner Ross Norman said his Wyndham business, which sells calf feed to dairy farmers, was experiencing a downturn in sales.

“Two years ago we had a great year, last year it was down a good 20 per cent and I am worried about it going down again this year.”

Invercargill Licensing Trust general manager Greg Mulvey said dining numbers in its restaurants were down slightly on last year and forward accommodation bookings had softened, indicating rural sales reps were travelling less.

“Other than that we haven’t noticed anything that would be significant.”

H&J Smith chief executive John Green said one third of its clients in Southland were rural based and there was “definitely an air of caution” in their spending.

Sales had been partly affected in high ticket items such as furniture and hunting apparel, but overall Green was pleasantly surprised how business had stood up.

H&J was carefully monitoring the situation.

Invercargill Hunting and Fishing owner Gerald MacRae said its sales had not declined during the dairy downturn, with farmers still keen to get out hunting and fishing.

The rural community were positive and resilient people, he said.

“Even if things are a bit tough it’s good they get off the farm and do other activities.”

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Fonterra Cuts Milk Price Forecast to 9-Year Low on Global Glut

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Source: AGWeb

Fonterra Cooperative Group Ltd., the world’s largest dairy exporter, cut its milk price forecast to a fresh nine-year low as oversupply continues to depress the global market.

The Auckland-based company dropped its estimate for the 2015-16 season to NZ$3.90 ($2.64) a kilogram of milksolids from NZ$4.15, according to a statement Tuesday. It now expects to pay its 10,500 New Zealand farmers between NZ$4.25 to NZ$4.30 a kilogram of milksolids inclusive of dividends.

“This further reduction in the forecast farmgate milk price is the last thing farmers want to hear in what is proving to be a very challenging season,” Chairman John Wilson said.

Four out of five dairy farmers in New Zealand will operate at a loss this season as the global slump in milk prices enters its third year, hurting economic growth, according to the central bank. Fonterra’s announcement comes two days before Reserve Bank Governor Graeme Wheeler is due to decide whether to cut interest rates to a fresh record low.

Wheeler will keep the official cash rate unchanged at 2.5 percent on March 10, according to 15 of 17 economists surveyed by Bloomberg. Two expect a cut.

New Zealand’s dollar fell after the Fonterra statement. It bought 67.73 U.S. cents at 9:05 a.m. in Wellington, down from 68 cents.

Milk prices have been falling amid increased European production and weaker demand from Russia and China. Prices at GlobalDairyTrade auctions fell to a 12-year low in August and haven’t recovered significantly as the supply imbalance persists.

“The time frame for a rebalancing has moved out and largely depends on production reducing -– particularly in Europe — in response to these unsustainably low global dairy prices,” Chief Executive Officer Theo Spierings said in today’s statement. “Our forecast is based on no significant changes to either supply or demand globally before the end of the year. However, a reduction in the supply available for export before then could mean prices recover earlier than currently expected.”

eight_col_MILKING

Sharemilkers, farmers urged to work together

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Source: Dairy NZ

DairyNZ and Federated Farmers are holding a series of meetings for sharemilkers as dairy farmers come under further pressure from lower forecast payouts.

A sharemilker typically owns the herd and milks the cows on someone else’s property for a share of the farm gate milk price.

Federated Farmers dairy chairperson Andrew Hoggard said a meeting was held in Southland yesterday and more were planned for the Cantebrury, Manawatu, Taranaki, Waikato and Northland regions in the coming weeks.

The meetings were to provide advice and information on sharemilking and show the options available.

“Progression pathways, what do they look like?

“We’ve also got guys from our sharemilker employers and sharemilkers sub-sections that will be there talking about contracts and just offering hints and advice.”

Mr Hoggard said the meetings were trying to stimulate discussion between sharemilkers and farm owners on what they should be thinking about and working together on.

“In that situation you’ve got one farm and two businesses, and if both of those businesses aren’t rowing in the same direction it will spell bad news, especially in times like this.”

He said the industry still had a positive long-term outlook and that also needed to be a focus.

“The opportunities are there.

“Things will change…and keep on evolving, like they always have, but I don’t want everyone to get too wrapped up in the negativity and doom and gloom.

“It is a short-term thing, it has gone on a little bit longer than we expected it to, but things will come right.”

eight_col_Cows_up_close_16x10

Dairy industry needs to stay competitive

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Source: Dairy NZ

DairyNZ says it is time to look at how the dairy industry can stay competitive in the wake of a record low Farmgate Milk Price and mounting debt.

It is stepping up its support to farmers and is running workshops across the country this week focussing on sharemilkers and farm owners working with sharemilkers.

Chief executive Tim Mackle said Fonterra has done well since it formed in 2001, and the main challenge for farmers – compared to other tough years – was the mountain of debt that had grown.

“Ten percent of the highest indebted farms have 30 percent of the total dairy debt – that’s $11 to $12 billion or $10 million each. But that doesn’t mean all those farms are at risk,” says Dr Mackle.

“Twenty percent of the highest indebted farms have 45 to 50 percent of the total debt – $15 to $38 billion. But again these bald figures don’t necessarily spell doom and gloom for all. While many in this group will be facing extreme pressure, it is the combination of high debt and high farm costs that will require urgent action. As we feared, milk price has been low for too long. We’re keen to see interest rates come down after last week’s OCR cut. That will help all farmers. Many are also looking at other income they can bring in off-farm or through diversification.

He said Fonterra had done well, but the focus needed to shift.

“It’s been a fairly good period I’d say, but we need to re-set our competitiveness”

Mr Mackle said Dairy NZ was making more effort to see farmers in person.

He said one focus was on pasture to maintain competitiveness.

“We’ve always been shut out of many of the worlds markets, and really our ability to source pasture has always been our competitive advantage.

“We need to go back and look hard at challenging ourselves, are we doing everything we can to grow and harvest as much as we can of what is our cheapest feed – there really are a lot of reasons why right now we have to focus hard on utilising pasture and taking more expensive options out of our systems for now.”

A milking buffalo at Whangaripo Buffalo farm, north Auckland.

Water buffalo make a splash as rewarding all-rounders

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Source: Stuff

Getting started in farming water buffalo in New Zealand today will be about as exotic as a trip to the gas station compared with the Wills-Armstrong family’s journey of discovery to these endearing great grey creatures.

The family, who operate Whangaripo Buffalo in north Auckland, started farming water buffalo eight years ago after a quest which took them to Germany, Italy and Africa.

While water buffalo are still not exactly thick on the ground here, you could, if you fancied cashing in on the growing demand from restaurants and discerning and health-conscious food buyers for their milk, cheese and meat, buy some without taking on a tangle of import red tape. (Whangaripo Buffalo has enough animals now to sell you a complete herd.)

But when Chris and Pam Wills, their daughter Annie Wills and husband Phil Armstrong, and then-toddler son Marin, set off overseas about nine years ago, few Kiwis had ever seen water buffalo unless they happened to pass AgResearch’s Ruakura campus in Hamilton while a trial was under way.

The back story to the family’s travels and subsequent importation of 17 in-calf buffalo heifers and two bulls from Australia starts with Waikato-born Annie, (birth name Andrea) who has an agriculture degree from Massey University and worked for some time with big tented safaris in Botswana.

Her husband Phil grew up on a dairy farm at Maketu, on the Bay of Plenty coast. He went to sea straight from school and spent 17 years on deep sea trawlers and two-man fishing boats, meeting Annie in 2000. Buying the boat Phil was working on then was a stretch for the couple, so he went into the building trade.

Meanwhile Chris, an engineer in the waste industry and wife Pam, who had long farmed cattle on a small scale, were looking for a retirement business that could support the family in future.

Urged by Annie to see Africa, they set off initially for Europe where they saw buffalo being milked for Italy’s famed mozzarella cheese industry. Later it was on to Mozambique where they had thoughts of buying land and establishing a fishing business. But Chris became ill and without confidence in that country’s health system, the family came home.

Unable to afford a viable dairy or sheep and beef farm, they bought 20 hectares in the postcard-pretty Whangaripo Valley between Matakana and Wellsford, and started thinking hard about the buffalo they’d seen in Italy.

With Annie’s mantra “how hard can it be?” and a bit of research spurring them on, the family imported buffaloes from Queensland.

This involved a five month quarantine rigmarole but the rest has been easy, and the returns rewarding.

“We don’t advertise, but we sell everything we make,” says Phil.

The family’s original intention was to sell milk, recognised for its higher levels of crude protein, fat, calcium and phosphorous, and slightly higher level of lactose, compared to cow’s milk, to a local dairy company. The high levels of total solids make the milk ideal for processing into value-added products such as cheese and it can be tolerated by people allergic to dairy cow’s milk.

But they also had an eye to farming buffalo for meat. The animals don’t store fat in their meat (marbling) which has about one-third the fat content of chicken, says Chris.

What the family didn’t plan to do was make cheese – now a significant part of annual revenue.

This side of the business came about when the initial milk sales plan fell through and the family had to learn to make cheese – fast.

Today the company sells a large range of buffalo cheeses, including Marin Blue (named after Marin, now 10) and a hard cheese called St Malo, named for youngest son Malo, (who isn’t a saint, says Phil) and a brie rolled in ash called St Benedict the Black.

The company produces 6-8 tonnes of cheese a year for sale around the country as well as bottled fresh pasteurised milk and milk for other cheesemakers.

Whangaripo Buffalo prime meat – sold mostly as burgers from the herd’s R2 year bulls killed at Ruakura, Hamilton – is in demand at north Auckland’s Matakana market, organic shops in Wellington and Auckland, and top restaurants, selling for up to $40a kilogram.

While the family’s aim is never to lose the artisan food production touch, this is no cottage business.

The buffalo herd currently numbers 115 which includes 50 milking cows, 20 in-calf heifers and the remainder bulls and calves. Cows are milked once a day all year round and are producing about 6000kg of milksolids annually.

The business is operated over three properties – a leased 50ha block at Dairy Flat, on leased 20ha at Leigh Road, Matakana, and at the family-owned land at Whangaripo Valley.

The bulls and calves are farmed at Dairy Flat, where the family is living until a new house is built at Whangaripo Valley, and where cheese making is done in a converted container.

When heifers are a year old they go to the Matakana property and then on to Whangaripo Valley to join the milking herd. A bull is run with the females year round and Phil is expecting 70 to calve in the next 12 month cycle. He’s currently milking 26 cows every evening for about 80 litres of milk.

Bulls are sent for processing aged 18 to 22 months and when hooked, can weigh up to 300kg. Ruakura is one of only two buffalo processors in the country approved by the Ministry for Primary Industries.

There’s nothing not to like about farming water buffalo, says the family.

The animals are good natured, smart, easy calving and very hardy. Phil says he’s had the vet out only twice in eight years. They’re great converters of what dairy farmers would call “unimproved pasture”, says Annie, and clean up the rushes on the properties.

They’re long-lived – a cow can be expected to milk for 20-25 years. This means herd numbers build up fast and Phil says he could easily spare up to 30 cows today for someone wanting to enter the industry.

The family sells week-old calves for about $400-$500 and would expect to get up to $6000 for a milking cow, which can produce up to $3000 worth of milk in their first year plus a calf annually.

Water buffalo can be run with any other animal except for sheep and goats, which carry a disease fatal to them, he says. They don’t get facial eczema, probably because of their tropical origins which condition them to heat and humidity.

They can jump a standard wire fence but are very respectful of a single or two-wire electric fence.

“They’re a big solid, well-grounded animal and a little bit of electricity goes a long way,” says Phil.

“They’re easy to handle, you can pack them into the yard for milking and walk through them and never get a knock. We tie a foot down in the milking shed because they take the cups off. They don’t kick at you, and most will lift a foot for you (to tie). They can get very protective with a new calf.”

Phil milks in half a herringbone shed but is building an old-style walk through dairy shed.

“I know it means getting up and down, but it will be good particularly at this time of the year when I have new cows coming in which take a while to milk out while others that have been (milking) in for a while milk out quickly.

“The walk-through will mean they each have their own stall and can’t play with the neighbour.”

Phil milks with an old duo-vac system which starts at a low pulse and vacuum rate and builds pace.

“They hold their milk differently to a dairy cow. They hold it right up so it looks like they have a very small udder. When they start to let down it (the duo vac) changes to a higher pulse rate and higher vacuum. It gives them that time.”

The herd is fed entirely on grass. The family cuts about 70 bales of baleage a year. In the new dairy shed cows may get molasses “as a treat”, Phil says.

The herd is not drenched or vaccinated because with their broad diet of rye grass and clover, tropical-type grass, some plantain and rushes, it’s unnecessary, says Annie, a passionate advocate of the nutritional value of “unadulterated” buffalo milk and strongly critical of the dairy industry’s use of palm kernel extract as a cheap feed supplement.

Mum Pam agrees: “If cows were meant to eat PKE they’d be born with sharp teeth.”

Early lessons about farming buffalo included not offering them large water troughs – they climb in – and to make sure trees are protected.

“We always offer trees for shelter but they need to be on a fence line because they sharpen their horns and ring bark them,” says Phil.

Water buffalo need wallowing space. They will dig their own in wet ground, and in winter Phil makes available to them areas that are too wet to graze.

He’s been subdividing paddocks for easier break fencing so that in winter the big heavy animals can be moved daily to limit pugging. A stand-off pad is planned.

Chris says the family has invested about $300,000 so far in the business, including the cheese making facility. Annual revenue is $120,000 to $150,000, he says.

The aim is to utilise every part of the animal, and the next challenge is to find a New Zealand processor for the thick hide, valued overseas for handbags and shoes.

The horns are popular with bone and knife carvers and for jewellery, especially earrings.

After eight years the family can start to think about consolidating the operation.

Phil says that means focusing on genetics and being able to cull animals.

“At the moment we’re bringing a lot of young ones through. It would be nice to have four or five replacement cows a year to deal with instead of 20.”

There are two types of water buffalo – swamp and river.

The family’s herd foundation imports were a mix but breeding now leans to the river species.

Expanding the farming operation is not on the agenda.

Finding good sized pieces of land in the highly subdivided district is challenging and more animals would mean establishing a second herd just for milk production, says Phil, who is aiming to be in the milking shed less, not more.

“I don’t want to milk more than 40 at any one time. That’s a good amount of milk for cheese while remaining artisan.”

The family is keen to move more into high quality meat production which means a greater focus on bull genetics, the possibility of importing semen instead of using sire bulls, and less cheesemaking.

The aim is have calving only three months of the year. The family is keen to see Whangaripo Buffalo meat stocked in supermarkets.

They’re committed to encouraging and supporting new entrants to water buffalo farming.

“They’re an amazing animal,” says Annie.

“Buffalo milk is the way of the future, the export potential is huge including for milk powder.

“The meat is good and lean, and totally organic. You get a lot of bang for your buck.”

ABOUT WATER BUFFALO

  • Contribute 72m tonnes of milk and 3m tonnes of meat a year to world food supply
  • More than 130m domestic animals
  • Depended on for food more than any other domestic animal
  • Recommended by conservation scientists to manage uncontrolled vegetation and open clogged waterways for wetland life
The a2 Milk Company's managing director Geoff Babidge expects the significant growth in Platinum formula to continue.

The a2 Milk Company profit and share price soars on infant formula growth

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Source: Stuff

Shares in the a2 Milk company have rocketed 24 per cent after it announced huge growth rates in infant formula sales.

The NZX-listed company hiked its guidance for the full year after turning in what it called an “outstanding” result for the six months to December 31.

The record half-year profit of $10.1 million in the six months to December 31 compares to $125,000 previously.

Shares immediately climbed 24 per cent to $2.51.

The company’s share price is now five times higher than it was 12 months ago, with investors taking a keen interest in opportunities to export to China.

Its latest market capitalisation of $1.8 billion puts it in the same ballpark as market stalwarts such as Sky TV, Infratil or Xero.

Total revenue of $139.1m was up 86 per cent compared to the same time last year.

Sales of a2 Platinum formula across Australia, New Zealand and China contributed $73.9m to that figure, a growth rate of 340 per cent.

The company said it now expected full-year operating profit to be in the range of $45m to $49m, with revenue of $335m to $350m.

The China and Other Asia business unit made an operating profit for the first time, with significant growth in formula sales.

Managing director Geoffrey Babidge said the company expected the Platinum infant formula to continue as a driver of growth.

The majority of sales took place in Australian grocery and pharmacy stores, while direct sales into China increased significantly.

The company said the infant formula business was being well supported by New Zealand manufacturing partner Synlait Milk.

After experiencing stock shortages, the company had increased its production schedule with Synlait to meet demand.

It said it was in the process of further building milk supply in New Zealand to prepare for increases in infant formula production.

Besides the Platinum product, Babidge said there positive prospects for growth of a2 whole milk powder, which was launched in the last financial year.

In Britain,the company said its fresh milk business was improving after repositioning into specialty milk.

A Federated Farmers poll shows worrying levels of stress over mortgages.

More dairy farmers under pressure from banks as prices fall

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Source: Stuff

As world dairy prices continue to slide, dairy farmers are increasingly feeling the pressure from their banks.

World dairy prices at the overnight GlobalDairyTrade auction fell 2.8 per cent to an average of US$2235 a tonne, after a 7.4 per cent fall at the last auction two weeks ago. New Zealand’s major export, whole milk powder (WMP), fell 3.7 per cent to US$1890.

A recent poll of members by Federated Farmers showed more than one in 10 dairy farmers (11.1 per cent) are now under pressure from banks over their mortgage. That is up from 6.6 per cent in August and 7.6 per cent in November.

Prices fell for the fourth consecutive auction.

Prices fell for the fourth consecutive auction.

Dairy chairman Andrew Hoggard said that while banks were continuing to support farmers, it was a “worrying statistic” that one in 10 farmers were feeling the squeeze.

The poll was conducted at the beginning of February, with a sample of 1225 members representing all 24 provinces and seven industry groups.

“There’s now a question over the viability of lower order workers such as sharemilkers. I know of some who are switching to contract milking,” Hoggard said.

Commenting on an analyst’s description of dairy prices presenting farming with the worst crisis since the 1980s, Hoggard agreed that expansion had put pressure on farmers.

“We were leaner and meaner in the days when I entered the industry in the late 90s,” he said.

Hoggard called on the Government to hold European farmers to account for the subsidies they received, which were fuelling production.

“This is something our government needs to take up through direct diplomatic channels and the World Trade Organisation, and if next season is going to be any different to this one they’re going to have to move quickly,” he said.

“It’s concerning that some European countries are wanting to move backwards to more regulation. Instead they need to keep moving forward to more market orientated structures. The more farmers around the world live with the economic realities of the decisions they make, the more stable a market we will get for all farmers.”

Rabobank analyst Emma Higgins said the price fall was not surprising and “could have been worse”.

“All eyes will now be on whole milk powder and skim milk powder. This is where the bulk of the volumes are sold and they are the key indicators of the farmgate milk price.

“We’re sitting in a bit of an ugly mix at the moment where there’s modest powder demand combined with high inventory levels as well as strong global growth, especially from Europe,” Higgins said.

Rabobank was preparing to do its forecast milk price but that would not be ready until March.

Westpac economist Anne Boniface said the auction result was “broadly in line with our expectations and leaves us comfortable with our recently updated payout forecasts”.

The bank was now forecasting a Fonterra farmgate milk price of $4 this season and $4.60 in 2016-17.

Agri HQ’s Susan Kilsby said prices were higher than anticipated, judging by futures market indications, which had foreseen a drop of 4 per cent in WMP.

“Overall market sentiment still remains very bearish meaning a sustained price recovery is unlikely to occur until the later part of 2016,” Kilsby said.

There were 151 bidders trading 22,021 metric tonnes of product.

Dairy farmers may lose $1.50 for each kilo of production capacity they have over the next two seasons.

ANZ forecasts more pain for dairy farmers

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Source: Stuff

ANZ is forecasting a longer, deeper trough in dairy prices.

The bank has dropped its forecast price for milk solids this season by 30 cents to $3.95 a kilo.

It now “tentatively” expected a price of $5 a kilo in 2016-17, which is 50c to 75c less than it had previously been predicting.

Farmers would be losing about $1.50kg on their production over the two seasons, it said.

The bank said there appeared to be “simply too much supply for the market to handle”.

Milk production in Europe was increasing and the cost of production was coming down, it said.

“Both these factors are expected to continue to supress prices and delay expectations for a rebound.”

Chris Lewis, the Waikato chairman of Federated Farmers, said the ANZ report was probably correct but it wasn’t good reading.

“You can’t argue with where the market is and what it’s telling you,” he said.

However, it cost farmers about $5 to $5.50 a kilo just to break even, and they needed more than that for capital such as new fencing or replacement stock.

“You need to be earning well above $6, to be fair.”

The saving grace had been that the predicted drought had not been as bad as expected in his region.

“We’re still having to spend money feeding cows but it’s not as bad. Our crops of maize are looking fantastic at the moment.”

ASB lifted its New Zealand milk production forecast for the season by 3 per cent earlier this week saying fears of a summer drought had largely receded.

But Lewis believed that if prices were as ANZ forecast next season, there would be casualties.

“There’s 12,000 dairy farmers all in the same boat as me. If it gets any worse, it’s a national issue.”

Manawatu/Rangitikei dairy chairman Mat Hocken says farmers will try to keep going.

Dairy payout hits farm and regional businesses

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Source: Stuff

Dairy farmers have tightened their belts as the impact of the lower milk payout hits.

Manawatu, Whanganui and Tararua economies have lost $42 million as a result of Fonterra’s latest farmgate price plummeting from $4.60 to $4.15 a kilogram of milksolids for this season.

The lower payout has put a dampener on an already subdued dairy industry.

Blair Worsley from Gary Worsley Motorcycles in Feilding said dairy farmers were bringing in quads bikes for repairs.

“They are not buying new machines, they have no money, but fixing the existing machines.”

He was unsure whether that was cost effective as buying a new machine was sometimes cheaper in the long run.

Worsley said about 70 per cent of the company’s work was maintaining quad bikes and at least five staff worked as mechanics in the workshop.

He said the company was busy selling side-by-side all terrain vehicles and could not get enough. As a result of the additional work the company, which had nine fulltime staff, was thinking about putting more people on.

“About half our clientele are sheep and beef farmers, and half dairy farmers. The sheep and beef people are buying side-by-sides to comply with health and safety regulations”

He said the company had done a deal on side-by-side all terrain vehicles for AgResearch, and was looking at contracts with Fonterra, Landcorp and the Department of Conservation (DoC).

“People want to have seat belts and roll protection. The vehicles we sell have those things and people want to have that under the new health and safety laws.”

Adding more staff was not on the minds of dairy farmers.

The latest announcement of the fall in farm gate milk prices was expected, but unwelcome news.

DairyNZ regional manager James Muwunganirwa said farmers were doing cashflows to try to see what the lower payout would mean for them.

“They look at income and costs, and costs are the only thing they can influence.”

He said farmers were cutting feed costs by getting rid of cows (sending cull cows to meatworks) that were not in-calf, or producing well.

“That will reduce feed demand as things become even tighter.”

Farmers were also concentrating on using pasture, as it was the cheapest feed available, Muwunganirwa said.

“And some people are switching from twice-a-day milking to once-a-day. It allows them to put more condition on cows and get them in good nick before calving.”

Farmers were keeping staff, but they were talking to them to make sure everyone on-farm was on-board and aware of the cost cutting, he said.

Muwunganirwa said farmers were feeling that the industry had more volatility now and were thinking and planning long term.

“Farmers have become more resilient and they think about keeping their business more sustainable now.”

Federated farmers Manawatu/Rangitikei dairy chairman, Mat Hocken said many farmers had made decisions earlier when the payout was $4.60/kg.

“Even that was hard, now it is lower price. In the meantime, dairy farmers just have to be patient and keep going.

“But we had a hard start to this season, after a wet winter and spring. It took a long time for the soil temperatures to come up and for spring growth. I think the milk production in this region is down about 10 per cent this season.”

Hocken said farmers were now looking ahead to next season’s production and they were thinking about what next season’s payout might be.

“I think farmers are optimistic about the future. New Zealand dairying is a lower cost producer. And long term, the dairy price should go up internationally. We just have to ride this low price out and keep cool heads.”

He said dairy farmers remained confident with some farmers building new dairy sheds.

Taranaki organic dairy farmers Stephen and Janet Fleming say the new payment system should encourage more farmers into organics.

Fonterra to pay organic milk farmers at market rates

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Source: Stuff

Fonterra’s organic farmers are set to cash in on potentially higher prices for their milk amid a “dramatic rise in interest and commitment to organics”, according to an industry rival.

The dairy co-operative has announced that from June its organic suppliers will be paid by one of two different systems: through an independent organic milk price linked to market returns, or – for possibly only the next two years – the current top-up system.

At present they receive the Fonterra price that all other farmers receive plus a bonus premium.

In the case of this season, that equates to $1.75 added to the farmgate forecast of $4.15 for a total of $5.90 per kilogram of milksolids.

It will be up to farmers to choose which payment system they want.

Fonterra’s global business manager for organics, Craig Deadman, said the price would be announced in late April-early May, at the same time as the farmgate price for conventional milk was announced.

He said there was increasing demand for organics and prices were higher and more stable than for conventional milk.

Per tonne, organic milk powder sells on the international market for more than NZ$14,000. By comparison, conventional milk powder prices languish at NZ$2900.

Fonterra launched a new organic policy last March and offered incentives for farmers to convert to organic systems, reversing a 2011 decision to concentrate its organics business in the Waikato.

Since then, it had achieved above its target for growth, although Deadman would not say what that was.

The company was hoping to process an extra 600,000 kg/MS during the next year.

The new payment system had come at farmers’ requests.

Fonterra’s decision to introduce a separate organic milk price is likely to prompt more Taranaki farmers to convert to organic farming, says one organic dairying champion.

Janet Fleming, a member of the new Fonterra Organic Farmers Advisory Group which provides feedback to the co-operative, has received lots of inquiries in the last three months from farmers considering adopting organic farming.

“This decision means the top level of Fonterra is recognising the importance of organics to the co-operative,” she said. “Organic milk creates profit for the whole co-operative, not just for organic farmers. The whole co-operative benefits.”

Organic farmers had been seeking a separate milk price for some time and she said it could be as much as double the price paid for conventional milksolids.

Fleming said Taranaki was one of the fastest growing regions for organic farming. About 15 Taranaki organic farmers supplied Fonterra and another five were converting their farms. Organic milk was collected daily in Taranaki and transported to the Waikato for processing.

Fleming said products to assist organic farmers were more readily available now than when she and husband Stephen started the conversion process in 2004, before there was an organic milk premium.

The couple milk 540 cross-bred cows on their two organic dairy farms comprising 184 effective hectares in the Pihama-Oeo area. They turned to organics because they wanted to be proud of the milk they produced and because it brought benefits to the environment, to their own health and to the health of their herd.

“Supplements are harder to get because we can’t use PKE, proliq or urea. But there are good options available for fertiliser. We still use fertiliser,” she said.

The chairman of the rival Organic Dairy Hub Co-operative of New Zealand, Bill Quinn, congratulated Fonterra on the move.

He said it would not take suppliers away from the hub because it was giving them a per kg price in the “mid-$7 mark” and critically that was paid in full the month following production.

“In the event Fonterra gets markets we haven’t got access to and end up paying a higher value, that’s good competitive growth,” Quinn said.

The hub is the principal supplier of organics to Lewis Rd Creamery. Its farmers are throughout the North Island and it does not operate any plant itself but uses contractors.

While Lewis Rd does not manufacture milk powder, the hub was in negotiations with a number of powder processors for the international market.

There had been a “dramatic” rise in interest from farmers.

“The hub has projections of in excess of 3 million kg of milksolids export grade product over the next three years, and we have in excess of 1 million kg of MS currently lodging paperwork with certificating agencies which also want to supply the hub,” Quinn said.

He said many of New Zealand’s farmers operated as system 1 or 2, which with minimal change could become organic.

To achieve full international market access, it usually takes three years to convert from conventional, but if farmers have not used palm kernel or urea, or other prohibited practices they can make the switch sooner.

Different markets also had different entry requirements for organic products “so we can target milk to processors that meets their requirements”.

Deadman said by linking the organic milk price to organic market returns, more farmers would become organic.

Fonterra had undertaken a series of measures recently to enhance the attractiveness of organic farming for current and prospective organic farmers.

“A recent initiative is the establishment of the Organic Farmers Advisory Group, a representative group of organic farmers who provide an additional feedback channel between organic farmers and Fonterra. They also had provided feedback on the new organic pricing system,” Deadman said.