Monthly Archives: December 2014

New Zealand Dairy Statistics 2013-14

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Source: Dairy NZ

New Zealand Dairy Statistics 2013/14 is a report that shows historical information up to and including the 2013/14 season. The purpose of New Zealand Dairy Statistics is to provide statistical information related to the New Zealand Dairy Industry. Funding is provided by Livestock Improvement Corporation (LIC) and DairyNZ Incorporated (through the dairy farmer levy). Contributors include New Zealand Animal Evaluation Limited.

Quick stats on the dairy industry

We have put together the following fact sheets with some handy numbers on dairying in New Zealand. Click on the links to view.



Dairy Growth Leads To LIC Subsidiary Merger

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Source: Waikato Times

LIC chief executive Wayne McNee is not ruling out redundancies when two of the farming co-operative’s subsidiaries are merged next year.

Details of the integration between Protrack and Dairy Automation Limited (DAL) will be decided in January and McNee expected the review to be finished by February.

Until that detail was thrashed out, it was impossible to rule out any job losses among the 50 staff who work within the two businesses, he said.

McNee said the merger was initiated by the staff of the two companies after LIC decided to launch an international version of Protrack and DAL into Ireland and Britain next year.

“They approached us and said we think we should be put together. It’s been received very positively.”

It has also been approved by LIC’s board of directors.

He expected the merged businesses to grow substantially over the next two years and the bulk of that growth would be in the international market.

This anticipated growth meant the new company would need a new building that would house at least 80 staff.

“Overall it’s going to grow and we will need more people and more resources, but until we actually sit down and go through the process, we don’t know exactly what it’s going to look like.

“What I can categorically say is that we see this as a growing business. We will be adding more people to it.”

LIC bought DAL last year and has since increased its staff from 12 to 20.

Protrack is a dairy shed automation system launched by LIC in 2003 and is installed on more than 1500 dairy farms. Some integrate with the co-operative’s herd management software, MINDA.

DAL provides milk testing sensors that measure fat, protein, somatic cell counts, lactose, conductivity and volume, and present real-time data while a cow is being milked.

McNee said it was business as usual for farmers, but he expected they would see improved service delivery once the move was completed.

LIC is a co-operative owned by 10,500 dairy farmer shareholders across the country.

Shareholders Council chairwoman Jenny Morrison said feedback she had received suggested there was widespread support among farmers for the merger.

“What we hear from farmers is that they want integration. They want all their automation to work together so it makes it simple for them.”

This was what LIC was trying to achieve with the merger, she said.

Waikato Times


Generating Wealth From Dairy

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Source: Sunday Star Times

OPINION: The current dairy downturn is inevitably turning attention to the wisdom of having so many eggs in the same basket. When times look rough, it can be helpful to look back and remind ourselves of the journey we have travelled to get where we are.

The driving forces that have led to the present have had very little to do with industry policy. Rather, the outcomes we are now experiencing are the consequence of thousands of individual farmers and rural investors deciding that dairy was where the profits lay. And to a large extent they got it right.

Taxation policy is the one key area where governments have influenced investor behaviour. The longstanding taxation policy of all governments has been to not tax capital gain.

New Zealand is particularly unusual in the developed world in having no capital gains tax on rural land and other investments. Australia, Britain and the the United States all tax capital gain on farm lands.

This absence of capital gains tax is part of the reason that rural land is so expensive in New Zealand. It has made rural land a very desirable investment. However, it has also encouraged farmers to re-invest profits back in the land, build up their assets, and increase their productive capacity.

In essence, there are two parallel businesses on dairy farms. There is the cash business that comes from production. And then there is the capital gain business, which comes from owning the land, undertaking development when the cash allows, and then waiting.

For survival, farmers must first focus on the cash business. In difficult dairy years like right now, it means trimming the sails, eliminating all investment, deferring non-essential maintenance, and keeping a close watch on personal expenditure. Phosphorus fertiliser can commonly be foregone for a year, but nitrogen has to be maintained or production will quickly slip.

Reducing supplementary feeds is a dangerous ploy, as hungry cows always penalise their owner. The key is careful feed budgeting and minimising waste. Farmers now understand these principles much better than even 10 years ago.

In the long run, most farmers who borrow heavily end up profiting from those borrowings. As long as they can survive the down years, then financial leverage ensures high overall returns when the returns are averaged out over the commodity cycle. It is the capital gain that generates the wealth.

DairyNZ publishes an economic survey each year which includes data on both operating returns and capital gain. In the 10 years leading up to and including 2012/13, the return to owner operators, measured as the operating return on dairy assets after deduction of working expenses but before finance charges, ranged from 1.6 per cent to 6.9 per cent. The capital gain on total assets ranged from 15.1 per cent down to -8.2 per cent a year. Total returns to equity capital, ranged from 25 per cent in 2004-05 down to -14.6 per cent in 2008-09.

The overall return on equity capital over the 10-year period was 152 per cent. On a compound basis, the annual increase was 9.7 per cent. Although this does not sound spectacular, the power of compounding means that considerable wealth has been generated. Savings from salary are additional.

The comparable ten-year equity returns to 50/50 sharemilkers, who own the cows but not the land, ranged from 169.3 per cent in 2007-08 down to -62.4 per cent in 2008-09. The average compound return on equity was 25.7 per cent a year but with massive variability and hence also massive risk.

There is no survey data yet for the last 18 months, but we know that 2013-14 was a stellar year with record payouts and considerable capital gain. However, in the current 2014-15 season the gold has turned to dust. The better farmers will weather these tough times and still be there when the sun shines again. The farmers who deserve sympathy are the ones who got their timing wrong and by misfortune are in their first year of ownership. For them it is truly tough. However, many of them will have other farms to cushion the blow.

Much more sympathy should go to first year 50/50 sharemilkers. There will be several hundred of them. Typically, they will be a couple who have worked for five to 10 years in the industry building their asset base. They will then have bought a herd for about $1 million dollars with equity of perhaps $600,000 and borrowings of about $400,000.

They will almost certainly end this current year with a large cash loss, and could easily lose much or all of their equity. These are the young people who are aspiring to be the next generation of dairy farmers. Life is not always fair.

Within the dairy industry, there is still great confidence about the long-term future. But there is increasing concern about how far away those good times might be. Commodity prices cycles are inherently volatile and impossible to predict. If we could predict that volatility, then we could dampen it with counter cyclical behaviours.

* Keith Woodford is honorary professor of agri-food systems at Lincoln University. He combines this with project and consulting work in agri-food systems. His archived writings are available at

Fonterra Backs mymilkTM For More Milk

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Source: Fonterra News

Fonterra has today launched a separate milk sourcing subsidiary to grow market share in its New Zealand milk pool, and provide a new pathway to membership in the Co-operative.

Called mymilkTM, it will initially invite applications, from farms in the Canterbury, Otago and Southland regions that are not currently supplying Fonterra, for one year contracts, renewable for a maximum of five years, without the obligation to purchase Fonterra shares. At any time mymilkTM suppliers can apply to join the Co-operative, purchase shares and supply Fonterra directly.

Fonterra Chairman John Wilson said: “It is good for the Co-operative and the country for Fonterra to be the first name on the list for farmers considering their supply options. We know there are farmers who support the co-operative model, but are at the stage of development where sharing up is currently beyond their financial reach.

“Providing a different pathway of supply through mymilkTM to farms not currently supplying Fonterra enables farmers to ultimately weigh in behind the Co-operative model.

“We are committed to delivering strong returns to our existing farmers and mymilkTM will contribute to these returns. Every additional kilogram of milksolids will generate improved cost synergies and we currently have large scale, efficient plants in the South Island with spare capacity.”

Mr Wilson said it was important in an increasingly competitive milk sourcing environment that farmers could support Fonterra and then apply to become shareholders in the wholly owned New Zealand Co-operative in time.

“Taking a flexible approach supports our Co-operative’s strength and ambition to grow. We stand firmly by the co-operative principle that supply should be backed by shares which is why mymilkTM volumes will be limited to five per cent of Fonterra’s total volumes. Contracts will also be limited to five years in total and will only be available to farms that don’t currently supply Fonterra.

“It is also important that we protect the future of our industry and allow farmers to grow. We do not want a fragmented industry, as this would not be good for NZ dairy farmers and not good for the country.”

Fonterra CEO Theo Spierings said Fonterra had the ability to reach millions of consumers and customers around the world through its broad product portfolio spanning ingredients, consumer and foodservice.

“We have a clear ambition to be a globally relevant Co-op, generating the highest sustainable returns at the farm gate, topped with profits from our consumer and foodservice businesses in strategic markets. Milk growth is fundamental to that. mymilkTM sends a signal to our current and potential competitors that we really value the milk from New Zealand farmers and we are out to secure it.”

Contract prices paid by mymilkTM would be competitive, but Mr Spierings said they wouldn’t be more than the Farmgate Milk Price paid to Fonterra shareholders.

mymilkTM suppliers will have the opportunity to experience first-hand a number of the benefits the Co-operative has to offer and we are confident this will encourage them to become shareholders during the five year period.”

Mr Spierings said mymilkTM would deliver value to existing Fonterra shareholders in five ways:

  • Increase volumes of milk to support Fonterra’s global ambition
  • Help improve asset and supply chain utilisation
  • Achieve transport efficiencies by targeting milk near factories
  • Provide incremental milk for capacity investments
  • Attract potential new shareholders for the future

“Ultimately mymilkTM will return profit to the Co-operative’s existing farmer shareholders through capturing these benefits,” Mr Spierings said.

Farmers who sign up to supply mymilkTM will be required to meet the same supply terms and conditions as Fonterra shareholders with regards to milk quality, safety and sustainability. mymilkTM suppliers will not be eligible for Farm Source benefits from Fonterra.


No Time To Bottle Out Over Milk Cooling Rules

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Source: Rotorua Daily Post

A Reporoa dairy farmer has cautioned colleagues to be familiar with proposed new milk cooling regulations.

Dairy farmers are being urged to plan ahead in order to meet the new proposed milk cooling requirements as part of the anticipated regulatory review being championed by the Ministry for Primary Industries (MPI).

MPI animal products director Matthew Stone said there had been more focus internationally on milk cooling with a move towards more stringent requirements.

“MPI believes that tightening the milk standard, even though a relatively minor change, will ensure we maintain our position as a producer of premium quality milk.”

Reporoa dairy farmer Colin Guyton said many farmers might not be aware of the new rules.

” It will be best for farmers to get on top of this as there is quite a bit to get organised – despite some long lead times being discussed.

“The beauty of the new milk cooling systems is that they make life a lot less stressful.

“Milk quality is better as the chilling is more immediate and the chiller cools water over the day to maximise cost effectiveness.”

The proposed new requirements would introduce strict cooling timeframes of 10C within four hours of the commencement of milking, and cooling to 6C within two hours of the completion of milking, and within six hours of commencement of milking.

Farmers may need to log their milk profile cooling data within a minimum of 30 days storage.

Taupo Refrigeration and Air Conditioning director Lawry Bidgood said farmers shouldn’t think of leaving any upgrade of existing equipment or new installation until the last minute.

“Each farmer will face a different scenario, however, the sooner they make contact the easier it is to schedule the upgrade or installation/commissioning work and to make certain the appropriate unit is ordered.”

There are only a handful of manufacturers of cooling units in New Zealand. There was a shortage of experienced, qualified refrigeration and service engineers here, he said.

2013-14 Dairy Season One Of The Best

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Source: Dairy NZ

Good grass growth, high production and a record payout will see many of New Zealand’s dairy farmers look back on the 2013-2014 season as one of the best in history – and now the statistics prove it.

The New Zealand Dairy Statistics 2013-14, released by LIC and DairyNZ today, show the country’s 4.92 million cows achieved a new record in milk production, surpassing 20 billion litres in the 2013/2014 season. The milk contained 1.83 billion kilograms of milk solids, worth $15.5 billion with the season’s $8.47 average dairy payout.

DairyNZ senior economist Matthew Newman says the past season’s record milk production and prices have helped put farmers in a better position to cope with the rapid decline in milk prices this season.

“Sixty-five per cent of the increase in milk production last season came from the North Island, following the drought in 2012-13, so the increase reflects greater production of milksolids per cow up 30 kilograms to 357 Kg MS/cow. In the South Island there has been new milk in the industry from extra cows (+103,000).

“It has all added up to a great combination for farmers – the best season many can recall. We had good pasture growth, a high payout and farmers responded by making the most of the opportunity to produce a lot more milk.”

Across the country, the national herd grew by 138,600 cows (2.9%) and production from each cow was up 7.2%. Genetic merit also improved, with the average cow’s breeding worth (BW) and production worth (PW) increasing 14% and 10% respectively.

BW and PW measure profitability of livestock, to help farmers identify their best animals and the best genetics to mate their herd.

Dr Steve Harcourt, LIC commercialisation and industry relations manager, says the statistics confirm the progressive attitudes of New Zealand dairy farmers and the value of good genetics to improve productivity and prosperity.

“It’s no accident that the increasing trend of production correlates to the increase in Breeding Worth.

“Around three-quarters of the national herd are sired by an LIC bull. They are bred to deliver high quality offspring that will perform and produce in New Zealand conditions, with each generation bred to be better than the last.

“Combined with the proactive attitudes of farmers, their willingness to adopt new solutions that drive efficiency gains on-farm and their ongoing commitment to the fundamentals of herd improvement – that’s what has delivered this season’s great results.”

Dr Harcourt believes “it’s those attitudes that will help farmers get through this season with the lower payout, and continue to set new benchmarks in the future.”

The New Zealand Dairy Statistics document provides a review of the industry for the 2013-14 season, with statistics from the LIC database, Animal Evaluation database, NZ dairy companies, TBfree New Zealand, NZ Real Estate Institute and Statistics New Zealand.

The Dairy Statistics represent all New Zealand dairy farmers and include cow production and population, operating structures, breed breakdown, herd testing, artificial breeding, calving, milk prices, land prices and disease control.


  • Dairy companies processed 20.7 billion litres of milk containing 1.83 billion kilograms of milksolids
  • 10.1% increase in milksolids processed
  • Production per cow increased by 7.2% to an average of 371kg milksolids (comprising 210kg milkfat and 161kg protein)
  • Average milksolids per cow was 371kg, compared with 346kg last season
  • Average milk production per hectare was 1,063kg, well above last season’s 988kg

Cow numbers

  • Cow numbers increased by 138,600 to 4.92 million cows, an increase of 2.9%
  • Total number of herds increased by 36 to 11,927
  • Average herd size was 413, up 11 cows on the previous season
  • 12% of herds have 750+ cows
  • A little over 50% (6,243) of herds have 100-349 cows

Operating structures

  • 65% of all herds are operated as owner-operators
  • 54% of all sharemilkers are on 50/50 contracts

Breed category

  • Holstein-Friesian is the prevalent breed category in Northland, Bay of Plenty/East Coast and Manawatu/Wairarapa
  • Holstein-Friesian/Jersey crossbreed is the prevalent breed category in Waikato, Taranaki and South Island regions
  • Tasman/West Coast has the highest proportion of Jerseys (19%) followed by Taranaki (18%)

Herd testing and Artificial breeding (AB)

  • 3.29 million cows were herd-tested, down on the previous two seasons
  • A record 3.6 million cows to AB
  • The number of yearlings to AB increased to 226,800, from 198,700

Herd Reproduction

  • Herds with detailed Fertility Focus Reports, from early aged pregnancy testing, increased to 3,170
  • 50% of herds had an actual 6-week in-calf rate of 67% or higher, 10% had an in-calf rate of 75% or higher
  • 10% of herds had an in-calf rate of 55% or lower

Regional highlights

  • 74% of dairy herds located in North Island
  • 61% of dairy cows located in the North Island
  • 58% of the milk produced in the North Island
  • Largest average herd size (815) in North Canterbury
  • South Island average herd sizes increasing faster than North Island