Much easier to find employees

A year ago dairy farm workers were in short supply because of the sharp increase in the number of conversions and advertisements were lucky to result in a trickle of responses.

This year people advertising for staff are receiving a flood of replies.

Among these are managers who have been told that farm owners are taking over again because banks are putting pressure on them to reduce their costs and doing the work themselves rather than employing others to do it results in substantial savings.

The fall in the milk payout is also having an impact on the wider economy and the ODT reports that there will be considerably less flowing from dairy farms into the New Zealand economy this season compared with last year.

After two years of unprecedented growth, lower international prices this year are predicted to remove more the $3 billion from the incomes of the country’s 11,400 dairy farmers.

The final payout will be announced later, but it appears farmers will receive $5.10 a kg of milk solids (kg/ms), compared to $7.66kg/ms last season.

Some bankers have estimated 40% of farmers will make a loss this year, as many had budgeted on Fonterra’s forecast milk price for this season – $6.60kg/ms – and committed expenditure and investment accordingly.

Had this price been achieved, the southern economy would have been $280 million better off.

Neal Wallace writes that a 500 cow farm will have a potential income drop of $300,000 this season.

Southland farm consultant Alastair Gibson said he made his $300,000 calculation based on a typical 500- to 550-cow farm producing 200,000kg, and on the difference in income from $6.60 a kilo forecast by Fonterra in September and the present forecast payout of $5.10 a kilo.

. . . The Ministry of Agriculture and Forestry estimated farm working expenses last year were $3.31 a kilo, but Mr Gibson said he knew of some farms at $4.40 a kilo, which included some capital expenditure.

For some farms, a break-even point could be $4.70 a kilo, allowing for debt servicing of $1.58 a kilo and working expenses of $2.80 a kilo, and then additional costs such as personal drawings and tax.

When income drops the sensible response is to reduce costs but even small economies on lots of farms will result in a lot less flowing into the wider economy.

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