Get back to basics, says economist
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With rising costs and volatile milk payouts, New Zealand dairy farmers need to get back to the basics, DairyNZ economist Matthew Newman said.
He talked to 70 rural professionals, including bankers, accountants, fertiliser reps, vets and educators at a DairyNZ seminar on farm profitability at Massey University last week.
"Get back to the basics that New Zealand dairy farms do well, that is low-cost production based on natural resources [pasture and weather], genetics and the knowledge-based industry," Mr Newman said.
He said the milk price is fluctuating and farmers should expect a possible payout of $5/kg of milk solids.
"Not this year, or next, but it could easily happen and dairy farmers need to be aware of it."
He said that in the past 10 years, more New Zealand dairy farms have intensified, running more cows, adding feed inputs, needing more skilled labour and having to change the way they think about farming.
"That's made them more vulnerable to the sorts of cost rises happening now."
Mr Newman said contrary to some banks' suggestions of lending criteria remaining the same, he believes many are tightening credit lines.
"The big banks are being more careful about who they lend to now, because some of their money comes from overseas, where the credit crunch is having a big impact."
He spoke of some major deals that hadn't gone through due to the international economic meltdown.
"New Zealand Farming Systems Uruguay is postponing plans to raise capital to buy more land, The PGG Wrightson- Silver Fern Farms deal, the Mataura Valley Milk dairy factory have been put on hold. They were all expecting finance, which fell through," Mr Newman said.
"And I have heard of dairy farm expansions that are not now going ahead because the banks have tightened up."
DairyNZ is funded by a dairy farmer levy. It is an industry-good researcher, developer and distributor of technologies.
- © Fairfax NZ News
