Getting the facts on winter options for dairying

10/07/2010

The announcement of a three and a half year study on options for wintering dairy cows in Southland is welcome news.

DairyNZ regional scientist Dr Dawn Dalley said the aim was to measure all parts of the wintering systems, including the impact on feed supply, animal health, finances, and staff, as well as environmental monitoring.

“We want to look at a whole-farm system analysis and get a comprehensive data set on wintering systems.”

The goal was to produce “good robust data” so farmers considering a wintering system could make an informed decision.

. . .  “What we’re not trying to do is say one system is better than the other.

“It’s more about if you’re choosing a system, these are the things you need to be thinking about and to get right to implement successfully.”

This study will provide facts which will help determine what is best for cows, staff and the environment and that could help counter some of the ill-informed criticism of the industry.

Plans to house cows indoors in the Mackenzie basins were opposed for a variety of grounds including animal welfare, environmental degredation and the impact on tourism.

Almost all of the opposition was on emotive rather than factual grounds.

New Zealand is a world leader at converting grass to protein in the most efficient way – by feeding stock on pastures. But that doesn’t mean that everyone here has to do it that way.

The ODT featured Aad and Wilma van Leeuwen who farm at Morven in South Canterbury. They’ve invested $4.5 million in a European-style barn housing 500 cows which are milked by six computer computerised robotic milking machines. One of the features of the barn is back scratchers for the cattle.

It may not be farming as we know it but that doesn’t mean it’s wrong.

Farmers in Southland have been moving to housing cows indoors over winter for the sake of the cows and to safeguard pastures and soil. But they’ve been criticised for doing this because it’s “not natural”.

The study won’t prove housing is natural but it will provide scientific data on which comparisons between various options for wintering cows can be made.


Gender job difficulties work both ways

30/04/2010

Trans Tasman reports the Ministry of Women’s Affairs is seeking tenders for:

a project to explore and develop options enabling it to produce a toolkit to encourage women into traditionally male-dominated trades and trades training. The Ministry aims to improve women’s employment opportunities and choices, including their educational choices, job choices and ongoing training. In 2006, only 1% of all plumbers, electricians, carpenters, builders, fitter and welders, fitter and turners, and motor mechanics were women. Previous work established that the main barrier to women entering trades was women were not exposed to this option and so they didn’t consider it.

 The Ministry may not consider it its business that men’s representation in traditionally female jobs is probably no better.

One unexpected consequence of more dairying in our area  has been a greater number of women involved in farming and farm support.

Many share milkers are partnerships between couples and it’s no longer unusual to have women vets, farm advisors and fertiliser reps.

But it is still not common to find men in what have traditionally been seens as women’s jobs.

Gender discrimination won’t end until society stops regarding particular jobs as men’s or women’s and that will require greater numbers of men in what might have been regarded as women’s jobs as well as more women in what used to be regarded as men’s jobs.

That in turn requires a change of view so that occupations aren’t seen as men’s or women’s but as people’s.


Where will the money go?

28/04/2010

When the Fonterra payout was at its peak three years ago it fuelled inflation on and off farm.

The news of an increased payout  for this season has been greeted with relief but the dairying grapevine suggests farmers will be conservative with the extra money.

The steep drop in payout following the peak taught us all a lesson about containing costs and reducing debt and those will be priorities for most of us.


Cleaning up dairying

19/03/2010

The rise is serious non-compliance with the Clean Streams Accord from 12 to 15% is disappointing.

It is particularly concerning when there’s been so much work put into improving compliance within the industry.

However, the response from the industry is encouraging.

Fonterra announced it will check effluents systems on all its suppliers’ farms every year.

DairyNZ has already done a lot of work on the problem:

DairyNZ CEO Dr Tim Mackle says through this investment over the last two years, they have learned a lot more about why many dairy farm systems are non-compliant.

“The design of many systems is such that they are not fit for purpose throughout the year. We have been working with the effluent industry to develop a code of practice and are strongly advocating a warrant of fitness approach so that we correct this fundamental problem.”

Last week DairyNZ and industry partners released for consultation new standards and a code of practice for the design of farm dairy effluent systems.

“We would like to get our effluent systems on all farms to a high standard within the next five years, or sooner if possible.”

Dr Mackle says many farmers are uncertain about what they need to do to be compliant and DairyNZ is working with regional councils to establish effluent compliance checklists to give farmers greater guidance on what needs to be done on their farm.

“Our aim is by doing this we will come away with a better system design and promote systems that work and have a higher standard of rural professionals advising on these systems which will cut costs. We can then focus our efforts on making sure staff know how to work these systems.

“We are serious about getting this right, and are working closely with Fonterra and Federated Farmers on the issue. It’s crucial to our industry’s reputation both nationally and internationally, as well as being essential for the environment,” he says.

Federated Farmers dairy chair Lachlan Mckenzie said the results present a challenge for farmers, but he’s accentuating the positive:

“Yet while our news is disappointing, the dairy industry is fronting it publicly. Disclosing our environmental footprint, good or bad, is all about being open and accountable because our performance is out there for all to see.

“Wouldn’t it be encouraging, for once, if the vast majority of dairy farmers actually got positive reinforcement for the big strides we’ve made.  Farmers may have a right to farm but the good ones, the majority, swear by their environmental obligations.

“We mustn’t lose sight of the fact that 85 percent of New Zealand’s dairy farmers are either fully compliant or guilty of no more than an administrative breach.  This Report really highlights need for greater consistency with the way farms are inspected.

“To take the dairy industry forward, Fonterra, DairyNZ and Federated Farmers want to work with regional councils to develop what may resemble a dairy farm ‘warrant of fitness’ (WoF).

“The concept is just like that for a car WoF.  It’s about setting consistent standards and methodologies that take into account regional variations in soil, climate and topography.  You would never test vehicles the way our dairy farms are currently tested.

Agriculture Minister David Carter isn’t impressed by the results:

“The data from this year’s snapshot tells a totally unacceptable story of effluent management. Regardless of whether this is because farmers don’t have the right tools, don’t know how to comply, or simply don’t care, behaviour has to change.”

Mr Carter says the dairy industry as a whole will suffer through the damage caused to its national and international reputation, unless New Zealand can back up its claims of sustainable dairying with tangible action and evidence.

“You can argue the merits of dairy to our economy until the cows come home – but until every farmer takes responsibility for improving effluent management, the environment and dairying’s reputation will suffer.

“I am putting non-complying dairy farmers across the country on notice. You need to take individual responsibility for this issue and work more effectively with your neighbours, your regional councils and your industry body.

“I am also calling on regional councils and partners of the Dairying and Clean Streams Accord to lift their game. They need to work harder at identifying those farmers who want to comply but need some help, and support them toward compliance. Regional councils also need to be more consistent in their monitoring, and be more rigorous in their application of existing regulations to penalise those flouting the law.

Any non-compliance is unacceptable and recent successful prosecutions by the Otago regional Council have provided salutary lessons for dairy farms in our area.

However, there ought to be some leeway to differentiate between a one-off accident, for example a sprayer breaks down when some leniency could be shown, and deliberate non-compliance which ought not to be tolerated.

Farming families drink the water from rivers and swim in them which provides us with a very high motivation ensuring they are clean.


Dairying & the environment

01/02/2010

Phillipa Stevenson left a comment on last week’s post about the proposed dairy development  in the Mackenzie Basin.

In case you didn’t see it, she’s taking part in a panel discussion on dairying and the environment on National Radio at 7.15 this evening:

You can take part too by emailing the programme on nights@radionz.co.nz or texting 2101. Also on the panel is Parliamentary Commissioner for the Environment Jan Wright, soils scientist Doug Edmeades, organic farmer Jamie Tait-Jamieson, and Fonterra sustainable production manager John Hutchings.


Their land, our water

28/01/2010

The paddocks on the side of the road between Tarras and the bridge over the Clutha near Luggate used to be dry and barren for most of the year.

Some of them still are, but others are green and productive, thanks to irrigation.

Which looks better is a matter of opinion but I prefer the green and admire the increased productivity farmers are getting from it.

Some of the irrigated farmland which would have struggled to support a few sheep is now able to feed bulls. These bulls no doubt have the same sort of outputs as dairy cows, but there is a major difference between the Upper Clutha farms and the dairy operations proposed for the Mackenzie Basin and that’s scale.

The bulls grazing paddocks beside the Tarras-Luggate road number in the low 10s. The Mackenzie dairy proposals are for nearly 18,000 cows.

In announcing that he’s calling in the consents for these big operations, Environment Minister Nick Smith said that stock will produce effluent similar to the amount produced by a city of 250,000 people.

That’s an awful lot of waste and helps explains why Environment Canterbury received around 5,000 submissions on the applications for resource consent.

Some were about animal welfare which do not come under the Resource Management Act and I’d be very surprised if any of the concerns were valid. Keeping cattle indoors may not be the way we’re used to farming here but it doesn’t by itself constitute any welfare issues.

Some were about what irrigation and dairying would do to the views. That is entirely subjective, what some regard as beautiful productive paddocks, others will see as blots on the landscape.

Although, it’s not just about how the landscape looks but what’s happening to it. Those travelling through at 100 kilometres an hour don’t appreciate the environmental damage that unrelenting heat and wind can do.

In the January 2-8 Listener, Simon Williamson of Glenbrook Station, was asked about the cost to the landscape of irrigation. He replied:

“I don’t see how it detracts. A green foreground and brown hills. Before it would have been a brown foreground and a dust storm.” *

Many of the other submissions were on the potential threat to water quality and these  submitters are on stronger ground.

Housing the cows as is proposed in the applications allows the farms to have much more control on the dispersal of effluent than if the stock was grazing pasture. But systems are only as good as the people who operate them and can never be fool-proof.

Besides, whether inside or out, these cattle will produce a lot of effluent. The Minster’s appointees will have to be satisfied that there is no danger to water quality from it and that may be very difficult to guarantee.

It is the applicants’ land but their right to do what they will with it doesn’t extend to polluting our water.

* The Williamson quote isn’t online, but the rest of the feature from which it came, Mainland dust-up, is on line and well worth a read.

Update: Federated Farmers media release on the calling in is here.


MacKenzie dairy development applicant responds

17/12/2009

Environment Canterbury has recieved more than 3000 submissions on the application for intensive dairy operations in the Mackenzie Basin.

Richard Peacock, a director for two of the companies applying for resource consent for intensive dairying operations in the Mackenzie Baisn has responded to my post on the issue.

Since the post is a few days old and his comment may be missed, I have copied it in full:

Fonterra utilise this farming system in China and believe it to be appropriate there, 75% of dairy farmers in Europe and USA utilise this farming system. If it is environmentally sustainable in these countries why not in that part of NZ that most closely replicates these continental climates. Having travelled widely I encounter reference only to sheep when NZ is mentioned. There is total surprise when it is advised that NZ is one of the largest exporters of dairy products in the world. This farming model works. It reduces feed requirement (30% less in winter). There is total control of effluent discharge. Wet ground, no grass growth, no spreading of effluent on ground. No urine patching (the biggest cause of nitrate leaching, methane can be collected economically and re-utilised on farm to drive plant, equipment (tractors and trucks, surplus power can be fed into the National grid, research is being undertaken to collect CO2 and Nitrous Oxide in the barns, scrub it and store it in the effluent management system. Self sustainability in emissions is potentially achievable and this system should be encouraged. The financial model works at $4.50 per kg of milk solids as cows can be milked during winter to capitalise on winter milk premium, production is 25-30% higher due to less energy expended walking to and fro and the capital cost of the stables are paid for largely by not having to send cows off farm during the 10 week winter period ($300-350 per cow including freight).
The Greens have focused on negative by attacking this farming system as a way to get some oxygen (albeit that it answers all their environmental concerns), people are encouraged to think that free stall stables similar to pigs in crates (nonsense), 3000 submissions have been lodged against the applications on the back of the Greens generated hysteria but Environment Canterbury advise that of those who have submitted only 130 have bothered to view the applicants submissions to understand just what is proposed. I know these things because I am the project director for Southdown Holdings Ltd and Williamson Holdings Ltd, 2 of the applicants.

I encourage all those with genuine interest to view the ECan website and in particular the Farm Environmental Management Plans of SHL, WHL and 5 Rivers prepared by Melissa Robson of GHD. Informed submissions in support are welcome.


The bull still has a place

10/12/2009

I wouldn’t normally presume to advise either Cactus Kate or Roarprawn on anything to do with sex but I’m entering the debate between them this time because the sex is of the bovine variety.

In a post supporting the proposed dairy operation in the Mackenzie Basin Cactus Kate wrote:

Their whole purpose is to be impregnated by a bull who engages in random group sexual acts with the entire herd in a fashion only an NRL team could understand.

Roarprawn responded with a great cartoon and said:

She also misses on one critical point and stunningly its about sex and cows or sex with cows and bulls.
There is no one time coupling with a rampant bull – nope.The closest a cow gets to the bovine hanky panky is a brief encounter with a sterile straw of semen. The poor cows don’t even get to have a bit of natural nooky.

Both are only half right.

Dairy farms use artificial insemination but not all cows conceive that way and those which don’t get to play with the bulls.

Most of the AI semen is usually from dairy breeds like Jerseys or Friesians and the heifer calves which are produced will be kept as replacements for older cows.

The bulls are usually beef breeds and the offspring sold as bobby calves or, if like us you have beef cattle too, they’re kept and raised for the meat market.


We can’t have it both ways

07/12/2009

New Zealand’s argument to counter the food miles fallacy is that we convert grass to protein in the most efficient way possible.

Our soils and climate which enable us to grow good pasture and leave stock outside all year rounds give us a natural advantage over farmers in other countries where pastoral farming isn’t possible.

It’s less expensive and has less impact on the environment to let animals graze pastures than to harvest feed and take it to the stock.

Why then would anyone want to copy the more expensive methods farmers in other countries have to use by putting cows inside, if only for part of the year?

No doubt the people applying for resource consent for stabling dairy cattle for eight months of the year have done their sums and are confident the business case is sound.

The environmental impacts will be addressed through the resource consent process and any animal welfare issues will have to be settled before the projects can proceed.

But I’m concerned about the impact this will have on our credibility.

Either we make the most of our natural advantage and use that to promote our pasture raised produce or we start copying less efficient producers overseas.

We can’t have it both ways.


Increased payout will help farm sales – updated

09/11/2009

A rural real estate agent in South Canterbury said when Fonterra’s forecast payout went up 55 cents in September his phone started ringing.

People who had been holding back for the bottom of the market started showing an interest in buying.

Today’s announcement of a further 95 cent increase in the forecast payout will confirm the belief that the market has bottomed out and attract more buyers.

It may also result in more farms listed for sale as potential vendors who have been holding back see an opportunity for a better price.

Farm sales and conversions slowed markedly with last season’s lower payout. The latest increase will widen the gap between dairy returns and those for sheep, beef and cropping which might result in more farmers considering a change to dairying.

However, the sharp drop in last season’s payout and the volitility in the market have made farmers more cautious.

The big payout in the 07/08 season encouraged a lot of spending. This included more intensive systems to boost production which were found to be unsustainable when the milk price dropped.

The most efficient way to convert grass and water to milk is to let cows graze pastures. Our climate and soils allow us to do that very well and relatively inexpensively in terms of both money and the impact on the environment compared with other countries where the feed is taken to the cows.

The decrease in payout gave a reality check and reminded us that our natural advantage is pasture based production.

The increased payout will boost farm sales and it may boost conversions. But those who’ve learned from the volatility of the last couple of season won’t be rushing to boost production with expensive inputs.

UPDATE:

Adolf at No Minister puts some figures on the impact the increase will have on the wider economy.

BK Drinkwater does a payout for dummies translation of the figures.


It’s the systems not the size

06/10/2009

The announcement that Crafar Farms has been put into receivership is not unexpected.

Bernard Hickey has a good analysis on the problems with the operation  and he wants an inquiry into large herd dairy farms.

However, it’s not the size of individual farms or operations that’s the problem, it’s the rapid growth of dairying which has led to a shortage of good staff.

If you’ve got a bigger farm any problems you have will be magnified but problems aren’t confined to bigger farms and bigger operators. 

We talked to the CE of a very large dairy operation last year. They have very good systems which include regular visits, the timing of which depends on how each farm is running. He said that was everything to do with the manager and staff and nothing to do with size.

They’d had 400-cow farms where the wheels fell off and 1500-cow farms which were model operations.

Big isn’t bad by itself. But the bigger an operation gets the more important it is to have really good management systems and processes; and no matter how good they are, they depend on good people to make them work well.

Bigger operations need regular checks to ensure they do. In smaller operations it’s much harder because often only the people on the property know what’s going on.


You can’t just shut a farm down

29/09/2009

One of the questions being asked about the farm where animals were starving to death is why didn’t they shut it down?

You can’t just shut a farm down because that would endanger the stock.

If calving is still underway, cows need to be monitored and looked after; cows which have already calved need to be milked and calves have to be fed.

Another question being asked is why it took MAF three days to react to complaints. They say they don’t operate a 24/7 service which is correct, but they could have asked a vet to go to the farm as soon as the complaints were received.

A third question is why don’t neighbours intervene?

It’s possible that neighbours don’t know what’s happening next door, but in this case one did and it was him/her who reported concerns to MAF.

This is, as DairyNZ chief executive Dr Tim Mackle says, a good demonstration of the farming community’s high awareness of animal welfare standards.

 “Poor management practices are not acceptable. The industry has been working in this area since the late 1980s. We’ve taken an extremely proactive approach in communicating best practice guidelines to farmers, via our consulting officers, the dairy companies, the processing companies, the transport companies and the media. New Zealand’s standards are based on the Animal Welfare Act and our Welfare Code documents and are internationally regarded as world-class,” says Dr Mackle. 

“While we await the outcome of the MAF investigation into the Benneydale farm, DairyNZ would not stand in support of any farmer found to have breached animal welfare standards. It’s bad for the animals, farmers, the industry, and for our country’s image.”

DairyNZ, is the industry good organisation for dairying and it correctly points out that farmers have no excuse for ill-treating animals.


Fonterra to write-off Sanlu

27/11/2008

Fonterra admitted at the company AGM that it has lost the $200 million it invested int he Chinese company San Lu.

The Fonterra board openly concedes that it has had a difficult time and that San-Lu will going to go down in history as a bad investment for them.
 
When Fonterra’s top brass fronted before the country’s dairy farmers there was not a lot of good news to deliver.
 
Firstly, Fonterra is now admitting it has lost all of the $200 million of investment in the San-Lu joint venture.
 
“For this reason it is increasingly likely that we will have to write off the remaining $62 million of value in our San-Lu investment,” stated Fonterra’s Chairman Henry Van Der Heyden.
 
Fonterra had a 40 percent stake in San-Lu, which collapsed due to the contaminated milk-powered controversy.
 
Fonterra’s management says it is reviewing what went so badly wrong and concedes it had limited control.
That lack of control was the problem. New Zealand leads the world in dairying and one of the reasons for its reputation is strict quality control in every link of the porduction chain.
That wasn’t possible in China which has been a very expensive lesson for Fonterra and its shareholders.
Just a year ago most people thought that the growing demand for milk in developing country would continue to result in high returns for dairy products. But demand is droppping everywhere and while Fonterra’s forecast payout of $6 a kilo is still above the long term average, the white gold rush is over at least in the short term and very possibly for longer.

How bad will it get?

07/10/2008

Adolf Fiinkensein over at No Minister  thinks the dairy industry’s a bit off colour and it’s going to infect the rest of the country.

He bases his diagnosis on five symptoms:

1 Sliding world commodity prices for dairy products

2 The melamine scare in China and other Asian countries.

3 The world wide credit crunch caused in the first instance by the Democratic Party’s drive for ‘affordable housing’ for indigent blacks and the subsequent sub-prime fiasco.

4 Most of our major farm banks are Australian owned. (Australians don’t understand NZ agriculture)

5 Our trading banks’ attitude to risk and their habit of re-rating individual client risk from time to time.

I agree dairying is not at the peak of health it was a few months ago, but my prognosis is more positive than Adolf’s.

To address his points:

1. World prices for dairy products are going down but this is a correction after hitting a record high. They’re still well above the historical average and while they’re likely to be volatile in the short term they’re unlikely to go right back to where they were before the boom and the medium to long term outlook is positive. As Adolf notes the dollar is going down and that will help off-set any decline in commodity prices.

2. The melamine scare may actually help us because although Fonterra is a minority shareholder in San Lu, more than 30 companies were also victims of the poisoning. Because of that it’s regarded as a Chinese problem and companies which had used Chinese milk, in China and other countries, will be looking for suppliers whose milk they can trust – and one of the first they’ll come to is Fonterra.

3. The credit crunch is already having an impact. Mataura Valley Milk has put construction of its new plant near Gore on hold; planned dairy conversions are on hold and farmers are closing their cheque books. That will have a negative impact on the people who supply and service them but as long as the farmers have reasonable equity they’ll weather the storm.

4. Regardless of who owns them, the banks employ people who understand agriculture here and they’re not going to want to threaten their equity by doing anything which will put a farming business at risk if they can avoid it.

5. If banks are worried about their debtors, and they have reason to be, I think those who’ve borrowed for houses will have more to worry about than dairy farmers.

People who converted for this season or are in the process of converting for next season, who budgeted on a higher payout than is now expected and have little equity will be overstretched. However, one good thing about dairy farming is the cash flow. Unlike sheep, beef and cropping where you get one or two large payments a year, dairy farmers get paid each month and as long as the banks get their share of that they will probably be prepared to watch and wait.

As well as that, interest rates are likely to come down and providing the banks are reasonably confident of farmers’ performance in the medium term they will probably give them a bit of leeway in the short term to allow them to farm their way out of trouble.

That doesn’t mean everything on the farm is rosy, but it’s nowhere near as bad as it was in the 1980s.

Then we’d been dependent on subsidies which were stripped away but the economy was still highly regulated; inflation was over 20% and interest rates were higher still.

We’ve adjusted to life without subsidies and are stronger because of it; and  in spite of Labour’s scorn for the “failed” polices of the 80s and 90s, they’ve left them more or less alone so the economy is freer and stronger. Interest rates are higher than desirable but they’re likely to come down and while inflation too is above the comfort level, it’s still well below the levels we faced in the 80s.

Dairying accounts for about 25% of our exports so Adolf is right that if its off colour the rest of the country will catch the bug. There’s no doubt the economy is sick,  and dairying will be affected, but because it was fitter to start with it’s better equipped to withstand the infection than most other sectors.


Rolls down, schools to close?

05/10/2008

The wholesale closure of rural and provincial schools by then Education Minister Trevor Mallard was a major contributer to the Labour losing so much support in the provinces at the 2005 election.

By then the government had put a moratorium on school closures, but it was too late. Children were having to travel much further to school, classrooms were overcrowded, communities which lost schools also lost their focus and those affected made their feelings clear at the ballot box.

Because of that the ODT headline Southern school rolls to plummet  will have been greeted with no enthusiasm at all by the government.

The story which follows shows Ministry of Education roll projections based on birth numbers from Statistics New Zealand:

. . . the number of 3 to 4 year-olds will decline in the Waitaki (-0.4%), Dunedin (-2%), Southland (-2.7%), Clutha (-5%) and Gore (-8.8%) territorial authorities between June this year and 2011 . . . 

The drops contrast with a predicted nationwide rise of 9.4% in the number of pre-schoolers.

A decline in pupil numbers of up to 8.8% will impact on schools. However, this time the suggestion that some might have to close isn’t coming from politicians or bureaucrats:

New Zealand Principals Federation president and Balclutha School principal Paddy Ford said Otago and Southland schools needed to take heed of the figures.

“They might need to look at amalgamation. It doesn’t go down well with schools to say this, but we do have to look at ways of providing the best education we can deliver.”

Talk of school closures usually produces more heat than light and it is often those who no longer have pre-school or school age children who protest most strongly. Those whose offspring are at or nearly at school tend to look at what’s best for the children and sometimes that means school closures and amalgamations.

Schools can reach a tipping point because when the roll drops so does the number of teachers. Parents then decide their chidlren are better off at a bigger school even if it means longer on a bus to get there and the roll drops further until the school is no longer viable.

The concern in rural areas though is that roll projections based on birth numbers don’t necessarily reflect the reality, especially if there is a lot of dairying which has a big change in staff at the end of one season and start of another.

Some schools have more than a 30% change in their rolls over Gpysy weekend at the end of May and a few families moving in or out of a school catchment can have a big impact on pupil numbers.

While schools can provide a focus for a community that’s not a reason to keep a school open if a roll decline means its no longer meeting the educational needs of its pupils. The difficulty is that the Ministry has to work on historical figures and projections which don’t always paint the whole picture.

However, if the projections are accurate, Paddy Ford says declining rolls wouldn’t be all bad news because there is a shortage of teachers.

And while the projections for some southern districts are for falling rolls, huge increases are forecast for the Queenstown Lakes (29.7%), Central Otago (14.2%) and Invercargill (11.4%) areas.


Keeping waterways clean

03/10/2008

A report by Fish and Game and Forest and Bird concludes that the Dairy and Clean Streams Accord:

 has failed to achieve its major goal to reduce the impact of dairying on the quality of New Zealand’s streams, rivers, lakes, goundwater and wetlands.

Susie McKeague, Otago Regional Council  manager of land resources said that in South and West Otago there was a declining trend in ammonia as a result of fencing and planting along waterways, the Clutha River was clean because the volume of water diluted contaminants but water quality in small streams and tributaries was deteriorating.

She put this down to intensive farming on wet soils. Fencing and planting along waterways to keep animals away from them helps prevent run off, but dung and urine move through the soil structure and leach into waterways. One solution to this would be more use of feed pads, particularly in winter when it rained more, so that animals weren’t on the paddocks when they were soaked.

North Otago waterways are cleaner than those further south and Susie put this down to a drier climate and the Environmental Farm Plans which are a requirement for every farm which gets water from the North Otago Irrigation Company.

“The EFPs are the best choice for environmental protection and they are driving good practice more than anything in other areas,” she said.

Susie said that it would be impossible to protect waterways from pollution during floods but at other times it was necessary to capture everything on farm or have remedies if more nutrients than desirable leached into water.

“For example, if phosphorus makes algae grow then we need something to reduce any concentration of phosphorus.”

Susie believes that the best way to solve any problems is to tell farmers what the issues are and leave them to find solutions.

“They have the best ideas to achieve what’s needed. Farmers are switched on, well networked and they know how to find answers.

“EFPs are making a difference in areas we didn’t anticipate and are leading change. Farmers are monitoring soil moisture, irrigation scheduling and effluent disposal and have a real desire to get it right.”


Dairying could save south?

22/09/2008

The dairy boom should insulate the south from the worst of the fallout from the international credit crisis.

. . . top economists at Westpac and the BNZ said they expected Southland’s rural-based economy would be relatively sheltered from the storm, which has been widely predicted to have a knock-on effect on every saver, pensioner, investor and home owner in New Zealand.

But dairying and those downstream who benefit from it won’t be immune.

Fonterra will announce the final payout for last season on Wednesday and will give an indication of what this season’s will be.

There had been an expectation that we might get more than the $7.90 a kilo we’re getting at the moment. But the international price is dropping and the poisoned milk scandal in China will also have an impact.

One thing is sure, if as some are predicting this season’s payout drops as low as $5.50 a kilo the costs that have shot up with the increased pay out will not come down as far or as fast.


Land price lifts 209% in 6 years

12/09/2008

The price of farmland has risen 209% in the past six years accroding to Westpac economist Doug Steel.

Prices were expected to peak in 2007-08, as they did in previous cycles, in 1989-90 and 1995-96, followed by a trough in 2001-02.

It was not surprising that land suitable for dairying had led the increase given the rise in dairy prices, but Mr Steel said product prices, as they related to land prices, ignored the influence of productive capacity, future returns and the cost of production.

But the two did correlate, evident by Fonterra forecasting the milk price well ahead of the season and the impact that had underpinning land values.

“Fonterra’s early forecast of $7 a kg milk solids has given confidence to the market that high dairy payouts are going to be around for the next 12 months.”

Elevated land prices also reflected confidence in the dairy sector.

Mr Steel said dairy production had increased considerably in the past decade, and milk solids per hectare had increased by a compound rate of 2.6% a year, reflecting more more cows per hectare and also more milk solids per cow.

But Mr Steel said research showed that the top 10% of dairy farmers in the 2006-07 season were producing 25% more milksolids per hectare than an average operator.

Similarly, sheep production had improved markedly.

Lambing percentages had risen from 105% in the mid 1990s to over 120% now.

Looking ahead, Mr Steel forecast a milk payout for the coming year of $7.10 a kg m/s but revised down to $6 from $6.30 his predicted payout for 2009-10.

. .  . The return of US beef to Asia had also put pressure on prices, but growing demand from Russia was supporting prices.

Mr Steel was optimistic about prospects for the medium term.

He was equally optimistic with lamb prospects, saying prices this season should be “considerably better than the dismal returns of the past few seasons”.

He picked prices to be 50c a kg higher than they were in 2007-08 and $1 a kg better than 2006-07.

Sheep numbers were falling all around the world and meat prices in Europe were 30% higher than they were a year ago, while prices for co-products were also improving.

“While growth in demand in the EU and US may ease with economic growth, reducing supply is likely to keep prices firm.”

Chris Nixon an economist with the New Zealand Institute of Economic Research analysed the price of farmland and its reflection of economic activity for Agmardt. He presented his findings at the AGmardt breakfast during the National Bank Young Farmer contest and you can read it here.


White gold not so golden

10/09/2008

A fall in world prices for dairy products is making potential investors increasingly shy about putting their money into the sector.

With whole milk powder prices retreating significantly in the past couple of months, market participants are saying demand for rural land suitable for dairy is lessening and linking it to new production investment.

Global Dairy Network director John Shaskey said the latest price being paid for whole milk powder was about US$3000 a metric tonne, a significant retreat from recent peaks.

One set of University of Wisconsin data showed whole milk prices peaking at more than US$5800 about a year ago.

“In the last two months they’ve dropped by about US$1500 … Demand has really softened in key markets, in developing markets,” Mr Shaskey said.

There were also now expectations of “a pretty normal supply year” from Oceania markets, including Australia and New Zealand, where Fonterra was expecting about 10 per cent more production compared with last year’s drought-ravaged supply.

Mr Shaskey, whose company trades and exports on behalf of New Zealand and overseas producers, said the Kiwi dollar would need to retreat even further from its existing levels of US66c-US68c to support Fonterra’s payout plans.

Another industry insider said the price falls had created uncertainty in terms of investment in land and the development of infrastructure for processing milk. “This will have an impact on the payout price by Fonterra- the banks are talking somewhere between $5.50 and $5.80 [a kilo of milk solids].”

In spite of the encouraging propsects of increased demand and diminishing supplies, I knew that the milk payout wasn’t going to keep going up. I didn’t however, expect it to come back down so soon and so far.

The concern is that while the payout has gone up so too have costs and they won’t come down as far or as fast as returns do. That will mean taking a more conservative view on budgets for established farmers and even more serious re-budgeting for new entrants who have paid an inflated price for land based on higher returns than will now be achievable.

In May, Fonterra increased the farmer payout to a record $7.90 for the 2007-08 season, and announced an initial forecast for 2008-09 of $7 a kilo. “This is certainly affecting the economics of people who are looking to enter the dairy industry, and those who have bought land at high prices with an expectation that the high payout prices will continue,” the industry insider said.

Financial players who knew the dairy sector well and knew that demand would continue were now in a wait-and-watch mode, the insider said.

Mr Shaskey said that in the longer term there could be a significant realignment of high land prices, given retreating commodity prices and the probability of more overseas supply coming into the market.

But the creation of new processing facilities and land conversion would probably continue, given prices were above historic levels.

“People need to be cautious around their numbers, and not budget on $7 [a kilo] plus payouts … because they’re not the norm.”

Another view in the market was that a US dairy herd expansion had driven up supply but that now some of those farmers were leaving the business – a positive for New Zealand producers.

Conversion to bio-fuels has led to an increase in the costs for US dairy farms which use grain to feed their cows. It’s possible some of those farmers will find more lucrative uses for their land than dairying which will provide a gap in the market for us.

But the short term outlook isn’t nearly as good as it was and if the Emissions Trading Scheme passes its third reading then more of the shine will go off our white gold.


Farmers & CTU debate pay

03/09/2008

Farmers and growers need long term strategies  for developing their own workforces to counter labour shortages, Councils of Trade Unions president Helen Kelly says.

Her comments follow reports that short-staffed dairy farmers were being exploited by southern farm workers demanding “ridiculous” wages.

Peter Macfarlane, director of dairy farm workers recruitment company Greener Horizons Workforce, said some southern farm workers with little experience were demanding up to $50,000 a year plus free accommodation from farmers struggling to attract staff.

This was about $15,000 a year more than would normally be paid, Mr Macfarlane told the Southland Times.

The farm workers, who industry sources said worked between 50 and 60 hours a week on average over a year, were attempting to cash in on the booming dairy industry and record dairy payouts.

I’m not sure that 50 and 60 hours average over a year is correct. Dairy staff work longer hours during the milking season but have much shorter days over winter and farms use relief milkers to take the pressure off fulltime workers.

“There are people out there exploiting the situation because of the staff shortage,” Mr Macfarlane said.

“They are asking to get paid way more than their skills and ability deserve.”

But Ms Kelly said the admission by Southland dairy farmers that they were paying New Zealanders $35,000 per year for 50 to 60 hour weeks was shameful, particularly at a time when they were pressuring the Government to relax immigration requirements.

I’ve already disputed the hours and she’s not taking into account the value of the accommodation which comes on top of wages and is worth at least another $10,000 a year.

Yesterday wine growers were also complaining about the cost of labour while harvesting record crops, she said.

“The dairy farmers are openly admitting that New Zealand workers are available but that they turn them away because they are expecting $50,000 per year – hardly great riches for the long hours and hard work expected of them.

“We are also concerned to hear that it is apparently easy for farmers to replace these workers by employing foreign workers simply to reduce wages.

“Our immigration policies exist to fill genuine skills shortages, not to replace New Zealanders seeking work and not to cut wages and conditions.”

There is a genuine skills shortage on dairy farms – unemployment is very low and it’s extremely difficult to find New Zealanders with the desire and ability to milk cows.

Ms Kelly said New Zealanders were paying huge prices for dairy products and farmers were making more money than ever.

“It is an irony that farmers are happy to accept market demand as an excuse for higher and higher costs to consumers but don’t accept it when it has the same impact on labour costs.”

Ms Kelly said it was time some of this money was committed to building a sustainable industry, including decent wages, training, prospects and conditions of work.

The market has pushed up the cost of all farm inputs including labour. We don’t object to paying people a fair wage. The objection is to paying people with no skills or experience far more then they’re worth – where else could someone without qualifications or experience start on $35,000 plus a house? We’re also mindful that the costs won’t drop when returns inevitably do.

There is good training for farm workers from AG ITO, to universities.  Those with ability and application have good prospects and, while their will always be bad exceptions, there isn’t generally a problem with conditions.

The problem is supply and expectations – too few people willing and able to do the job for a fair wage.


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