MEDIA RELEASE
Wednesday, 24 September 2014
For immediate release
Take a long, hard look at your farming systems
Industry body DairyNZ says the latest drop in Fonterra’s forecast Farmgate Milk Price for the 2014/15 season is a signal
to farmers to reassess the costs of their farm system.
Fonterra Co-operative Group Limited today reduced its forecast Farmgate Milk Price for the 2014/15 season from $6.00 to
$5.30 per kg milksolids (kgMS). It also increased and widened the estimated dividend range from 20-25 cents per share to
25-35 cents – amounting to a forecast Cash Payout of $5.55-$5.65 for the current season.
DairyNZ’s general manager of research and development, David McCall, says most farmers should cope with lower prices
this season, provided another drought doesn’t hit the country. However, around a quarter of the country’s farmers, those
with a lot of debt, may have difficulty meeting their farm working expenses and interest payments.
“Our real concern is maintaining profitability across the industry if milk prices remain low for the 2015/16 season.”
He says last season’s high milk prices will deliver a significant deferred payment to farmers into the 2014/15 season,
which will bolster low milk prices this season.
“We expect farmers to make a determined effort to control farm working expenses this season, with an average budgeted
reduction in farm working expenses of around 40 cents per kgMS to $4 per kgMS. That will affect regional economies and
communities the most. We estimate just over a $1 billion loss of income for farmers based on comparisons with the
2013/14 season’s production,” he says.
“Our surveys show that farmers will reduce their spending on bought-in supplementary feed, fertiliser and repairs and
maintenance, which all increased in 2013/14.”
David says the focus for DairyNZ isn’t just about getting farmers through this season.
“We will be urging them to think about the next five years – are they running profitable farming systems that can
survive fluctuating long-term trends in payout? Page 2 of 2
“Our analysis shows we are just within the long-term bounds of the trends for average dairy company total payouts – and
if you can’t survive those, then you need to look at your farm system and what to change.
“We know there are dairy farmers who operate low-cost farming systems that are able to make a profit with a $5 Farmgate
Milk Price. There are lessons from their experience for our industry.
“We know how they do it – those farmers simply focus on growing grass well, using pastures really efficiently and
maintaining a stable production system that delivers a consistent profit every year. They have low-cost farming systems.
That’s always been the way in New Zealand – and we see the future heading that way too,” he says.
“DairyNZ has some farm systems research in its final stages that will help farmers reassess the costs and benefits of
how they farm and we’ll be urging them to look at that work. We need to drive our pasture-based system to its most
efficient and innovative edge.
“We want all farmers to build strength into their businesses – rather than just hold the line in the hope we will be
rescued by a milk price lift next season.”
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
ENDS