More Southland dairy farms expected
Low sheep returns and high milk prices have contributed to a rise in dairy farm conversions in Southland.
New dairy farm conversions totalled just seven for the 18-month period to July. But a recent spike in new conversions comes after Fonterra announced its record forecast payout of $8.30 per kilogram.
Environment Southland consents manager Stephen West said there had been more dairy farm conversion applications in the past four months than there had been in almost two years.
The surge in conversion numbers also coincides with the plan change 13 deliberations drawing to a close.
Plan change 13 has required all new dairy farms to obtain a resource consent before becoming operational since April last year, and the decision on whether the rule will become permanent will be made in December.
Under the interim rule, there had been only seven new dairy farm conversions from April last year to July this year.
But the council has since approved four conversions, was processing eight applications and expected another 15 applications to be lodged before Christmas, Mr West said.
There could be more, he said.
DairyNZ senior economist Matthew Newman said the increased payout was likely to create a surge in the number of new dairy farms milking by next spring.
There could be up to 50 new milking herds in Southland by August - double the annual increase during the past few years, Mr Newman said.
BTW South graduate planner Megan Hands, a planning and resource consent service, said the high dairy payout and low sheep returns was behind the spike in conversions.
"I think definitely the driver is the payout."
Converting were existing dairy farmers wanting to expand, and sheep and beef farmers, Ms Hands said.
Gore farm consultant Graham Butcher said he had worked with a handful of sheep and beef farmers who were "seriously considering" converting to dairy in the past six months.
"Certainly with the latest payout, we can anticipate more conversions. It doesn't surprise me at all," Mr Butcher said.
Agribusiness consultant Ivan Lines said he had more conversion inquiries in the past six to nine months, but the decisions were not yet set in stone.
It was more due to the low returns in the sheep industry than the dairy payout, he said.
Rabobank regional manager southern South Island Jeffrey Morrison said more farmers, particularly existing dairy farmers, were looking at their options.
"There's a definite increase in activity this spring compared to the past two to three years.
"There's a lot more people looking for opportunities and expansion. It's definitely due to the higher payout and favourable weather conditions for grass growth," he said.
Southland Federated Farmers dairy chairman Allan Baird said optimism in the dairy industry had returned because of stronger cash flows this season and more certainty about how the plan change 13 worked and what it means for farmers.
Beef + Lamb NZ southern South Island economic service manager Jenny McGimpsey said she had not noticed an increase in dairy farm conversion inquiries in the past few months.
There were other reasons, not just the payout, such as farm succession, that encouraged farmers to convert to dairy, Ms McGimpsey said.
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