Dairy farmers face fifth bad year

NEW ZEALAND - Three-quarters of Waikato dairy farmers are predicted to make a loss for a fifth consecutive year, according to Maf.
calendar icon 28 November 2006
clock icon 2 minute read
"The average Waikato dairy farmer has made a cash loss in the last four years and we are forecasting a loss again in this current year," Phil Journeaux, the ministry's North Island manager, told the Waikato branch of the New Zealand Institute of Agricultural and Horticultural Science.

Mr Journeaux said the only Waikato and Bay of Plenty dairy farmers who made a profit last year were those in the top 25 per cent. Others ran at a $6000-$30,000 loss.  Sixty per cent of the region's farmers are keeping their head above the water with off-farm income. Either a wife worked, they were running a contracting business or they had cash from investments.

According to Statistics New Zealand there are 11,779 farms in the Waikato, 6479 of which are dairy farms. The average dairy farm runs 310 cows on 107ha and produces 95,000kg of milksolids per year.

"At a $4 payout most dairy farms are unsustainable and they are going to hit the wall sooner or later –- there's a lot of stress out there this year.  "There's going to be a real crunch on farms to control their spending.  "Expenses per kg of milksolids are increasing faster than the rate of inflation," he said

He also blamed rising wages and feed costs and the price of land as other factors.  "The price of dairy land throughout New Zealand, not just the Waikato, is out of whack with its productive value. To buy a dairy farm you are spending 10 times its total gross revenue –- five years ago it was around four or five times."

Mr Journeaux said dairy conversions from forestry were going ahead because land suitable for dairy farming sold at three times what it was worth as a forestry block.  Expenses are generally outstripping production.  "The crunch just has to come, but the banks will help people out before it gets nasty."

Waikato Federated Farmers president Peter Buckley was not surprised with the level of debt since Fonterra's predicted payout for the end of this season is currently $4.05.  "I know four farmers that are going to get out of Fonterra this year," Mr Buckley said.

"That's something other farmers have got to look at."  He said many farmers were hoping the Australian drought would continue, driving commodity prices - and perhaps the Fonterra payout - up.

Mr Buckley said Fonterra needed to raise the payout by a further $2.  Fonterra chairman Henry van der Heyden was also not surprised to hear Maf's findings.

Source: stuff.co.nz
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