Right now many dairy farmers are looking at their costs line by line. Where can they make further savings? The latest reforecast milk price from Fonterra now puts this season’s Farmgate Milk Price at $3.90 per kilogram of milksolids. DairyNZ’s breakeven figure for the average New Zealand dairy farmer is $5.25.That’s a big gap to bridge.
Around 85 percent of the 14,000 owner-operators and sharemilkers affected by the low milk price are not making any money this season. They are having to build up more debt and erode their equity to get through another season of looking after their cows. The situation will impact on the people they employ and the rural businesses they support too.
At times like these DairyNZ has to deliver more value than ever for farmers.
Our industry’s heritage of pulling together and taking a co-operative industry approach to challenges gives us a strong mandate – as did our last levy vote in 2014. But it comes with the need to stand alongside farmers and deliver real and tangible value that makes a difference to their businesses – individually and at an industry-wide level too.
To help farmers we’ve been running our Tactics campaign and other key events for some time now, designed to hone in on cost creep and provide access to tools and support to make changes in their business.
DairyNZ has always maintained that the ability to efficiently harvest pasture is the best determinant of profitability across all farm systems. Pasture still provides the least expensive feed for dairy cows and remains the foundation of our farm systems. That has been our constant message and is at the heart of our advice to, and research for, farmers. It will continue to be our message into the future.
Pasture and the ability to turn off supplement use is also the foundation of how we are able to manage volatility and farmers are using this mechanism strongly at this time. Farmers are using the obvious levers at their disposal to manage volatility in milk price – culling cows instead of using supplementary feed to maintain cow condition.
The next phase of the DairyNZ Tactics campaign starting this month has a renewed focus on pasture as the key driver of farming competitively through both high and low milk price situations. We are excited about the potential that this initiative has to help farmers. It starts with a challenge on whether New Zealand dairy farmers are truly 'pasture first'.
We want to connect with as many dairy farmers as possible and see where we can help or, if we can’t help, put them in touch with those that can. That could mean they receive a phone call or visit from us.
We are also currently running tailored events to support sharemilkers, in partnership with Federated Farmers. These are amongst the most vulnerable groups of farmers in the current situation.
Top budget case studies featured on our website have been updated. These nine top operators have opened up their budgets and made them available to others. The update will detail what changes they have made and how they are placed for next season.
In the coming months GoodYarn workshops are also running, designed to help farmers talk about mental health and recognise the signs of stress and mental health problems.
Advice from farmers nationwide is helping us shape the Tactics campaign. For more information see the Tactics section.
In terms of our long term research and science objectives we can’t just turn off the tap. Two of our most important research projects for example are seven-year investments – one focused around developing forages for reduced nitrate leaching to future-proof our industry.
The other is researching cow fertility and lifetime productivity. Together, current performance in these two farming areas – fertility and productivity - are estimated to cost the dairy industry $1 billion annually. The profitability of dairy farming could be increased by $500 million per year if industry targets for reproductive performance are achieved.
These targets will not be achieved using current knowledge and technologies alone. A biological breakthrough is required. The aim of this project is to accelerate genetic gain in fertility and manipulate the biology that underpins cow fertility.
As stated above, the challenge we have is you can’t easily switch research on and off if you want to keep it delivering for farmers. If we do, the government will also stop investing with us. However, we are certainly looking at what research projects can be pared back for now and reducing our costs.
I am accountable to our farmer-led board on how $67 million worth of levy funds from dairy farmers delivers value for the investments the board prioritises and approves. Farmers are also keen to hear the value they get too for what is a substantial amount of money.
As production drops, so does our own income, although not to the extent of farmers. The levy is not a fixed cost. It is pegged to farmer’s business in terms of milk production, being set at 3.6 cents per kilogram of milksolids.
The board has not relaxed any of our targets. It is expecting more from less as I know farmers are too.