Inside Dairy spoke to key people in the sector - from farmers to industry leaders – about how we’ve become stronger and smarter. Here are their insights.
It is concerning that this downturn has taken longer than others to right itself, and that’s largely due to the influence of the European Union, which now has no caps on production.
DairyNZ has put a lot of resources into getting farmers through their immediate needs and to really focus on utilising pasture as their key feed input.
Now the goal is to ensure gains made over the past 12-18 months are carried into the next 12-18 months. We’ve seen substantial declines in imported feed use, but only about a 1.5 percent decline in milk production, so the lessons are being learned and maintained. DairyNZ is also maintaining research work, supporting the likes of the Lincoln Hub and Southern Dairy Hub.
We are urging farmers to keep a close eye on costs, look at productivity improvements that can be made, and think hard about the best places to invest any additional income that may come from an increased milk price – either into debt reduction or repairs and maintenance delayed last season.
Hawera dairy farmer, owner-operator
Our sector’s strength in getting through the past couple of tough years has come from determining our ‘wants’ versus ‘needs’ in farm budgets.
We were already doing budgets, of course, but now we’re really analysing every part of our costs. I think farmers have collectively learned to manage our farm businesses more tightly. We probably got a bit sloppy, putting too much focus on production rather than profit. We are also learning that lower cost systems can sustain themselves through these payout periods.
For the remainder of this season and next year, I think farmers need to question the system they’re in and whether it needs to be changed. If they’ve already done that and things have got better, they need to ask themselves if they really should be returning to the system they used before. Volatility is here to stay and we have to be able to manage with that.
Fonterra chief operating officer, Farm Source
The sector’s strength to get through this downturn has come from a remarkable ability to stick together. DairyNZ, Federated Farmers and Fonterra, together with the banks and our shareholders, have united to ensure farmers have the options and tools to get through.
Being a co-operative, Fonterra has worked to get as much cash back to its shareholders as early as possible, including paying the dividend early. The strength of the co-op means we could offer a basket of solutions to farmer shareholders through our Farm Source network, including supplier loans and significant discounts on farm essentials.
The industry has learned to be leaner, and to make more use of lower-cost pasture for production. This has proven a ‘win-win’ for farmers and processors whose customers want a pasture-sourced milk supply.
Our advice is to exercise cautious optimism for the rest of the season. We are witnessing a decline in global supply which is encouraging for supporting prices. However, the volatility of global markets is here to stay.
Primary ITO training advisor, Central Plateau
During this tough period, partnerships and collaborations have played a major role in ensuring the industry survives.
Primary ITO strengthened its relationship with DairyNZ and promoted key services offered by DairyNZ to farmers, particularly the financial review and Dairy Connect projects. Primary ITO was also able to offer a discount on its Level 4 qualification, of which feed budgeting is a major focus.
I think the industry has learned about the real level of volatility in global dairy markets and exactly how low the ‘downside’ can be. Farmers are learning to make their businesses robust enough to manage the hit that goes with that. Going forward, farmers should think carefully about undoing changes they’ve made in the tough times, knowing they may come again.
Federated Farmers Waikato president
The sector’s ability to survive the past two years comes from our shared experience of past adversity. Younger farmers like myself got a dry run in 2008 when milk prices dropped steeply and quickly. We learned then the value of communicating with people that matter, such as our advisors, bankers and accountants. Meanwhile, older farmers have seen these tough periods before and know they’re cyclical.
Federated Farmers has helped lift communication between farmers and banks. Our farm banking survey offers a clearer idea of how those relationships are going and where the stresses are. Quarterly banker meetings involving DairyNZ, dairy companies and Federated Farmers have also proven valuable in keeping financiers informed about where things are heading.
Collectively, the industry has learned to watch its underlying costs and really know the break-even price for individual farms, as everyone is different.
My advice for next season is to keep on top of feed and cost budgets, and incorporate some modelling for the future that factors in environment plans.
Editor NZ Farmer, former Agricultural Communicator of the Year
The dairy industry’s strength lies in its strong history of co-operative work, despite a few corporates now being in the sector. Thanks to that co-operative spirit people tend to help each other out, share information, and view the rest of the world, rather than one another, as competition.
New Zealand’s rural media has generally done a good job of highlighting the past season’s difficulties, and profiling the many support services available, including FarmStrong, Resilient Farmer and Rural Support Trusts. Rural journalists tend to mix closely with farmers so have been keenly aware of how this downturn has affected them, and they’ve attempted to highlight the issues responsibly and accurately.
In my view, farmers should be more prepared to open their farms to the media and to the public. They should also become more active on social media, speaking out against misconceptions of their industry and promoting good practice, with the focus on good animal care. This way, hopefully, they can build on the already good impression I believe most New Zealanders have of them and stop attempts to undermine their good name.
Zelda De Villiers
Dairy Women’s Network chief executive
A number of things have helped farmers get through this tough time. Many dairy women have taken on roles previously being done by their staff, including milking, calf rearing and other farm work. More women have also gone out and worked off-farm to help with cashflow, and that includes working for DairyNZ.
They’ve also been instrumental in ensuring costs are cut by referring constantly to budgets and reassessing spending.
Women have often helped keep morale up by organising social events with friends and neighbours.
Dairy Women’s Network has leveraged DairyNZ funding to hold more social days, taking members off-farm for a variety of interesting activities to get their minds off day-to-day farming issues.
The Network’s Facebook pages have also proven popular among members, helping them discuss everything from managing stress to dealing with finances and staff.
Through this period, I believe farmers have learned the value of not going it alone and they’ve realised just how adaptable and versatile they can be under adversity.
Equity manager Canlac Holdings, Canterbury
The sector’s strength in getting through this latest tough period is in part thanks to the banks’ support. In the hope things will improve, bankers have been prepared to sit down with clients and work with them to help them get through this period.
For some it has involved relinquishing assets but it’s also been thanks to farmers’ ability to pull costs back. The industry has learned to do more with less, after a period where it possibly got a bit lazy with costs. Farmers have learned to focus again on pasture-first for feed input, and pushed back some maintenance.
Most farmers will know they have to pay back some of the debt accumulated over the last couple of years. The good news for many has been that interest rates have been low while beef prices have been quite firm.
Into the rest of this season and next, I think farmers should take a ‘steady as she goes’ approach and not spend the money they need to spend until it is in the bank.
This article was originally published in Inside Dairy December 2016