Farming within limits poses challenges for dairying
The dairy industry faced a huge challenge if it was to remain profitable and competitive while farming within limits.
Helping farmers to achieve those goals would take an enormous amount of effort, DairyNZ chief executive Tim Mackle told industry professionals at a New Zealand Institute of Primary Industry Management breakfast in Hamilton.
It would also take the help of the wider industry working with farmers on an individual basis to make changes, he said.
Operating profit per hectare had driven a lot of land use change from drystock farming to dairying.
This was seen most dramatically in the South Island where, as a percentage of total milk production, it had jumped from 10-42 per cent from 1992-2012, and is expected to rise to 48 per cent by 2022.
In contrast, North Island production declined from 90-58 per cent over the same period and is expected to decline further to 48 per cent in 2022.
"There's about 11,900 farms in New Zealand and almost 9000 in the North Island. We're heading towards 50 per cent of the milk in the South Island," Mackle said.
One of the challenges facing the industry was how to ensure Waikato could continue to thrive as a dairy centre.
"It's still 27 per cent of milk production and it's got 30-something percent of the farmers."
A central and upper North Island view of this was needed to map out a sustainable future, he said.
It's because of that position and we don't want to lose it."
Farmers had also changed from low to medium or high-input farms over the past decade. Some of the system change was due to drought, aspirations from farmers around growth and nutrient cap issues. That is what DairyNZ had introduced their sustainable milk plans as a way for farmers to assess their current system before looking at intensification.
That meant more work on what were appropriate farm systems going forward because there was not enough information available for farmers to make an informed decision.
"We have to be in a strong position to help guide, not tell [farmers]," Mackle said.
Farm working expenses and interest costs were the two biggest risks DairyNZ monitored and costs had jumped after the 2007-2008 season.
It followed a period of high inflation and expenses had never lowered to their levels following that season.
Feed-related costs had jumped from $0.80-$1.40/kg MS on average and farm debt rose by 60 cents/kg MS over that time and sat at around $1.40, he said.
New Zealand produced about a third of the milk exported on the world market and there was little space between the bottom of the global price band of what customers were paying for milk and the cost of milk production, Mackle said.
"If we lose that gap then we are entering the death spiral." Fairfax NZ