Cut unprofitable production – DairyNZ CEO
With the continued decline in milk price, DairyNZ chief executive Tim Mackle is calling on farmers to cut unprofitable
production from their systems.
“These are extraordinary times. Open Country Dairy’s milk price forecast is under $4 per kilogram of milksolids (kg MS)
and all indicators show Fonterra will be forced to lower their forecast on August 7. This price dip is lower and longer
than anything we’ve seen in the last decade,” says Tim.
“Assuming a milk price of $4.00 for the average Open Country Dairy supplier, that means a potential deficit of around
$250,000 for the year ahead.”
“It is now a necessity for many farmers to do more than just shave costs. Removing unprofitable production from our
systems is good for individual farm businesses, and will send the market a signal that New Zealand farmers will not
produce marginal milk at a loss.”
Tim says a zero spend policy is not the solution either and outlines three stages to the rest of the season that need to
be considered.
“Between now and balance day – around September/October when feed supply equals feed demand – is about setting up for
spring,” says Tim.
“Animals need to be kept fed and healthy, and pastures need to be kept growing. Cows will need minerals and in some
cases, some supplement to achieve this. Using nitrogen fertiliser and keeping average pasture cover above 1800kg of dry
matter per hectare will maintain growth rates.”
He says between balance date and summer is the time to trust pastures to make milk and get cows back in calf.
“Given where milk price is now and the cost of supplements, it’s hard to see how any supplementary feeding is profitable
through spring. Lower milk production should be easily covered by lower feed costs. The drop in milk production will be
minimal for many farmers as better pasture quality is maintained and less silage is made.”
DairyNZ has an online Supplement Price Calculator which works out profitable supplement use based on milk price, post
grazing residuals and supplement type.
“Dairy farmers can do the maths online, but with milk at $4kg MS, supplements need to be purchased for less than
$100/tonne DM to feed to cows getting adequate pasture,” says Tim.
“As summer arrives, when farms head back into a feed deficit, it’s time to really capitalise on the lower costs achieved
in spring. Unprofitable production at this time comes from cull cows eating expensive feed – this includes maize silage
and wrapped bales grown on farm, as well as bought in supplement.”
“We are likely to see farmers off-load excess cull cows earlier this season, particularly if dry conditions arise and
that is always a risk to manage with an El Niño weather pattern looming.”
The DairyNZ Tactics campaign is providing one-to-one and group support for farmers in August to help them with pasture
management through the critical spring period.
“Farm consultants and other farmers are a valuable second opinion on pasture management,” says Tim.
For more information on DairyNZ’s Tactics campaign and the Supplement Price Calculator visit dairynz.co.nz/tactics.
ENDS