Video | Agriculture | Confidence | Economy | Energy | Employment | Finance | Media | Property | RBNZ | Science | SOEs | Tax | Technology | Telecoms | Tourism | Transport | Search

 

Farm systems ‘status quo’ despite forecast milk price

MEDIA RELEASE

Friday, 7 October 2016

For immediate release

Farm systems ‘status quo’ despite forecast milk price

Dairy farmers Rachel and Kenneth Short say despite a potential increase in forecast milk price, they won’t be making any changes to their farm budget.

The couple are equity partners with Louis and Barbara Kuriger on a 440 cow, 168ha Taranaki farm run under a very simple, low input system which operates year-in, year-out with farm working expenses (FWE) of $1.90-$2.20/kg MS. Production for 2016/17 is expected to be 140,000kg MS.

“We’ve run the same financial budget since 2010. We never make changes to the budget – even at a high payout, our farm working expenses are identical to what they are this year,” says Rachel.

“This means when payout goes up or down, it affects our profit. The biggest impact at a low payout is in capital expenditure and debt reduction.”

Rachel and Kenneth have put a lot of energy into operating a low-cost pasture-based system which is sustainable at all milk prices.

“We run a fully self-contained farm (no grazing off or bought-in feed). We have been challenged about our system in the past but, having been through the crunch period we’ve had, it’s reaffirmed our belief that we’re doing the right thing.”

Southland farm owner Tim Driscoll agrees the increased milk price won’t change their approach to this season.

The 560 cow, 190ha farm operates under a strong pasture focus, with minimal inputs of PKE and some fodder beet to fill feed deficits. FWE are $3.40/kg MS.

“We have a complete focus on the bottom-line at the moment. When the payout dropped, any costs and farm expenses were questioned and last season we cut spending in some areas of feed, breeding and animal health,” says Tim. “And it hasn’t had any effect, there’s been very little impact without those inputs.”

Tim says the reduced milk price has been good for driving some efficiencies to improve profit and repay debt.

“At least now we know we can operate in a low-cost environment. Two years ago our long-term budget was based on a $6 payout, now we’re at $5/kg MS. And if we use that same low-cost structure, we can generate some reasonable cash surpluses.”

Tim says their pasture focus is paying off and early spring production is up 20 percent on last year.

He says it’s important to acknowledge the banks, which have been good to many farmers. “Now we need to be good to them and repay losses once we come into profit. We will be here in a low payout environment again and we will be more prepared for it.”

Farmers share their stories
The Short and Driscoll farms are two of 18 farmers nationwide who have opened up their books and shared their 2016/17 farm financials online via dairynz.co.nz/tactics.

DairyNZ extension general manager Andrew Reid says farmers who set their budget to perform at a low milk price will find volatility much easier to manage.

“Scaling back a farm system to meet reduced income is much harder than maintaining a consistently low cost of production.”

However, Andrew says there are lessons to be learned from low milk prices.

“We encourage farmers to continue their focus on pasture, set a system that will survive in a low or high milk price, stay financially disciplined and focus on repaying debt,” says Andrew.

“We are going from a deficit situation to farmers potentially being able to return to break-even and pay down some debt they might have accrued. It’s a good time to maintain low costs and recover some ground.”

Farmers are encouraged to prioritise catching up on essential repairs and maintenance, and capital fertiliser applications, with the major focus being on repaying suppliers and paying down debt.

To read the Short and Driscoll farm financials in more detail and listen to audio sharing how other top operators spend their money, visit dairynz.co.nz/tactics.

Find out the top 10 attributes of farmers who have shared their budgets online, visit dairynz.co.nz/top10.

SIDEBAR

Tactics of top dairy farmers

- Routinely operate a farm system which performs at a low milk price.

- Focus on maximum pasture utilisation.

- Focus on profit, not production.

- Farm working expenses don’t change, despite milk price.

- Profit goes toward debt reduction.

-ENDS-

ABOUT DAIRYNZ

DairyNZ is the industry organisation representing New Zealand’s dairy farmers. Our purpose is to secure and enhance the profitability, sustainability and competitiveness of New Zealand dairy farming. For more information, visit www.dairynz.co.nz orwww.dairyatwork.co.nz


© Scoop Media

 
 
 
Business Headlines | Sci-Tech Headlines

 

TradeMe: Property Prices In Every Region Hit New High For The Very First Time

Property prices experienced their hottest month on record in December, with record highs in every region, according to the latest Trade Me Property Price Index.\ Trade Me Property spokesperson Logan Mudge said the property market ended the year with ... More>>

Motor Industry Association: 2020 New Vehicle Registrations Suffer From Covid-19

Chief Executive David Crawford says that like some other sectors of the New Zealand economy, the new vehicle sector suffered from a case of Covid-19. Confirmed figures for December 2020 show registrations of 8,383 were 25% ... More>>

CTU 2021 Work Life Survey: COVID And Bullying Hit Workplaces Hard, Huge Support For Increased Sick Leave

New data from the CTU’s annual work life survey shows a snapshot of working people’s experiences and outlook heading out of 2020 and into the new year. Concerningly 42% of respondents cite workplace bullying as an issue in their workplace - a number ... More>>

Smelter: Tiwai Deal Gives Time For Managed Transition

Today’s deal between Meridian and Rio Tinto for the Tiwai smelter to remain open another four years provides time for a managed transition for Southland. “The deal provides welcome certainty to the Southland community by protecting jobs and incomes as the region plans for the future. The Government is committed to working on a managed transition with the local community,” Grant Robertson said. More>>

ALSO:

OECD: Area Employment Rate Rose By 1.9 Percentage Points In The Third Quarter Of 2020

OECD area employment rate rose by 1.9 percentage points in the third quarter of 2020, but remained 2.5 percentage points below its pre-pandemic level The OECD area [1] employment rate – the share of the working-age population with jobs – rose ... More>>

Economy: Strong Job Ad Performance In Quarter Four

SEEK Quarterly Employment Report data shows a positive q/q performance with a 19% national growth in jobs advertised during Q4 2020, which includes October, November and December. Comparing quarter 4, 2020, with the same quarter in 2019 shows that job ad volumes are 7% lower...More>>

NIWA: 2020 - NZ’s 7th-warmest Year On Record

The nationwide average temperature for 2020, calculated using stations in NIWA’s seven-station temperature series which began in 1909, was 13.24°C (0.63°C above the 1981–2010 annual average). New Zealand’s hottest year on record remains 2016, when... More>>

Quotable Value New Zealand: Property Market Set To Cool From Sizzling To Warm In 2021

Nostradamus himself could not have predicted the strange series of events that befell our world in 2020 – nor the wild trajectory of New Zealand’s property market, which has gone from “doom and gloom” to “boom and Zoom” in record time. Even ... More>>