Df146 dairy focus may 2015 by Ashburton Guardian

Dairy Focus MAY, 2015

Diverse team works Pages 3-4

From left: Debbie and Robert Kingsbury, and Megan Irvine and Juan Cavallotti.

PHOTO JOSEPH JOHNSON 150515-JJ-001

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Farming Dairy Focus

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INDEX

COMMENT FROM EDITOR

Diverse team works

Lower lifestock values

Good quality pasture vital

Matt Jones talks H&S

Residency dilemmas

Benefits from Chinese investment

Genetics in facial eczema war

Off-season refrigeration shutdown

Drought bites hard

Cows in their comfort zone

Dairying in a cooling market

Dairy farming has been making the news for all the wrong reasons in recent weeks. Helen Kelly, from the Council of Trade Unions, has been stirring the pot, resulting in headlines featuring words like ‘stingy’. Ms Kelly has been busy in the twittersphere, naming and shaming employers advertising for new farm staff, exposing low wages and long hours. In some cases she has a valid point – a senior position as a herd manager should be worth more than $14.68 per hour, based on the 55 hours a week the job entails. Many of the jobs exposed are offering less than the minimum wage. Federated Farmers were quick to wade into the debate, revealing the jobs in question were taken from Fonterra’s Farm Source website. It seems Ms Kelly had failed to note the value of housing and the perks which often accompany the job. I’ve met dairy farmers who prioritise staff housing, supply wood and meat, pay power bills, provide a hot meal during calving and offer a solid career. I’m guessing they don’t often have to advertise for new staff. The hoary old dirty dairying debate is also back again, with the recent publication of New Zealand Dairy Farming: Milking Our Environment for All it’s Worth, hogging media

CONTACTS We appreciate your feedback. Editor Email your comments to michelle.n@theguardian.co.nz or phone 03 307 7971.

Advertising Email emma.j@theguardian.co.nz or phone 03 307 7936. Post Ashburton Guardian, PO Box 77, Ashburton.

Michelle Nelson

RURAL EDITOR

attention. Report writers say it would take $15 billion to clean up the environment, more than the dairy industry is worth to the economy. Once again mainstream media has concentrated on just one side of the debate. There’s no doubt there is a debate to be had – so do the job properly and get the story from the other side as well. There are farmers going above and beyond the call of duty to protect and enhance the environment, spending thousands of dollars to do so. The one-sided reporting has also failed to account for the numerous jobs the industry generates – directly and indirectly, including the nurseries which have sprung up all over the country to provide seedlings for riparian and shelterbelt plantings. I’m not saying some farmers couldn’t do better; I’ve met a few of them too. There have always been poor farmers, but it’s a lot harder to get away with shoddy behaviour and a careless attitude toward the environment these days.

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Diverse backgrounds – great team

Side-by-side in the quad, first time dairy farmers Debbie and PHOTOS JOSEPH JOHNSON 150515-JJ-002 Robert Kingsbury.

How did a hairdresser/ chocolatier, and early childhood teacher and a tyre fitter end up contract milking on a Mid Canterbury dairy farm? The link between these three unlikely candidates is Juan Cavallotti – and his story is equally interesting. Juan is from Uruguay and he’s the only one of the group with any real experience in the industry. Although he met his partner Megan Irvine on a dairy farm, her background was largely devoid of farming experience. All that has changed now – Megan’s as at home in gumboots as she once was with a pair of scissors or a spatula. Just 12 short months ago Juan and Megan were offered a job contract milking on Greg and Wayne Meadows’ farm near the Rakaia Gorge. They invited Megan’s mother Debbie and her husband Robert Kingsbury to fill the other two vacancies. Debbie was teaching at the Dorie preschool at the time and Rob wound up a 10-year

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stint with Neumanns Tyres to take on the job. He spent his childhood on his parents’ farm, but that was sold when he was 10 or 11 years old. The farm is also home to Juan and Megan’s three-yearold daughter, Priscilla, and Rob and Debbie’s five-year-old son Izrael. When offered the chance to change codes, Debbie said she

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Zealand in 2008, to look at farming systems here, while employed by PGG Wrightson in Uruguay. He returned home, but a year later took up the offer of a job on a dairy farm in the Pendarves district. Heading into their second season on the Meadows’ farm the quartette are milking 870 cows through a 60-bail rotary shed on 260 hectares and a

We had a lot of support from the Dorie community – people said we should just do it

had a lot of encouragement. “Megan and Juan were offered the contract milking position and we had the chance to go with them,” she said. “We had a lot of support from the Dorie community – people said we should just do it.” The job also offered more flexibility, in terms of time to spend with Izreal. Juan first visited New

45ha leased block. An Afimilk system installed in the shed monitors production, volumes, cow weights, heat detection and conductivity. The largely friesian herd produces an average of 460kg milksolids per cow per year, although the dry summer has resulted in a drop of about 20kg/MS this season. continued over page

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Farming Dairy Focus

from P3 The dryland property receives a generous annual rainfall, but Juan said it was getting very dry in January. Pasture is supplemented with grain throughout the year, but less grass growth in the summer has taken its toll on supplement supplies, and like many others in the same position, Juan made the decision to cull some cows earlier this year. “If the payout is $8.70 it’s easy to make money on supplements – but on this rate we’ve replaced it with more PKE,” Juan said. About 70 per cent of the herd is wintered over on fodderbeet on the milking platform, and the remainder join the replacement heifers on the nearby runoff block. It’s dairy farming on a scale Juan had never imagined on his family farm in Uruguay, where a big farm would milk 200 or 300 cows. On the other hand, the country is home to huge beef units, some comprising 50,000ha, satisfying a significant amount of the world’s demand for beef. Juan is also impressed by the support services available to the dairy industry in Mid Canterbury.

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Juan Cavallotti and Megan Irvine in the shed.

“Sometimes I think everything is set up for dairying here – all the suppliers are right here, and the support people,” he said. While contract milking on a fixed rate has proved a bonus in the face of falling dairy

150515-JJ-004

prices, both couples remain optimistic about the future of the industry and have their sights firmly fixed on farm ownership in the future, and are slowly starting to build up their own herd. The plan is to carry on

milking twice a day until the end of the season, then it’s off to Uruguay for Juan and Megan who are taking Priscilla to meet the other half of her family. At the end of their first season working together

everyone is satisfied they made the right choice. “We all get along and work as a team,” Megan said. Juan agrees. “Rob and Debbie didn’t have any experience but they’ve learned a lot, I really enjoy working with them.

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Opportunity to lower livestock values The release of the national average market values (NAMV) for livestock this week presents an opportunity for dairy farmers to reassess the valuation method they are using for their livestock. This is according to Crowe Horwath’s Tony Marshall, who says the valuation highlights the relative strengths and weaknesses of the different industry sectors. “The release of the 2015 values has seen a substantial fall in the market value of dairy cattle, a slight dip in the value of sheep and a significant increase in the value of beef cattle. These changes mirror closely the changes in the associated commodity prices,” Mr Marshall said. “The substantial fall in herd scheme values for dairy cattle presents an opportunity for dairy farmers to enter the herd scheme valuation method. “This scheme is often seen as the best method over time as it ensures that inflationary gains are not subject to tax.” In general livestock is

valued using either the national standard cost (NSC) or the herd scheme (HS) method. The key difference between the two is that movements in value under the NSC method are on revenue account (taxable income or deductible expenditure). Movements in value under the HS are on capital account (non-taxable or nondeductible). “When there has been a substantial fall in herd scheme values, as there has been this year, the cost of moving livestock from the national standard cost scheme to the HS generally diminishes,” Mr Marshall said. “This is often seen as the best time to enter the HS, particularly if livestock values are expected to increase again in the future.” For herds purchased in the past couple of years, a change from NSC to HS may also result in a deductible loss arising on transfer, Mr Marshall said. “A word of caution however;

once you have elected to value a type and class of livestock using the herd scheme, you must continue to use that method and any further reduction in value will be a capital loss rather than a deductible one.” Mr Marshall said at the very least now is an opportune time for dairy farmers to be discussing livestock valuation methods with their accountants or business advisors so that any opportunities can be acted upon before they disappear. The values for friesian dairy cows and wapiti deer have also been affected by a change in the tax treatment of those types of livestock, whereby the value of friesian, jersey and other milking breeds have been combined, as have the values of red and waipiti deer. These types have been combined due to a perceived tax advantage previously existing, whereby owners of mixed breeds could pick and choose the valuation method that gave them the best tax outcome, Mr Marshall said.

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Farming Dairy Focus

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Good quality pasture vital Reining in operating expenses while spending to remain profitable under the current payout may seem like a contradiction in terms. But cost-conscious dairy farmers finalising their budgets for 2015/16 can do both, says a Canterbury pasture expert. “We know budgets are tight on dairy farms this year. The answer lies in tackling the low payout on two fronts – reducing operating expenses while investing in the right things to dilute costs/kg milksolids and stay profitable,” Agriseeds pasture systems specialist Graham Kerr said. Recent comments from leading dairy scientist, John Roche, reinforce the importance of strategic budget decisions for the year ahead, particularly in terms of pasture renewal, which is his area of expertise, Mr Kerr said. “John pointed out that because of rising feed costs, the average New Zealand dairy farmer is milking 100 more cows than six years ago, yet making no more money. This in turn has eroded

our competitive advantage and undermined farmers’ resilience. “It doesn’t matter what system your farm is, it’s been shown time and again the amount of pasture eaten per ha is a key driver for profitability. Profitability

leads to resilience and resilience is the key to continued prosperity in the face of highly volatile world markets.” Under-performing pastures left as they are act as a financial handbrake, he says. “This is particularly so

in the South Island where pasture renewal was well back in spring 2014/15, largely because of difficult seasonal conditions. “So in the coming spring we are in ‘catch up’ mode with renewal. The danger we see is farmers not investing in the

right amount of renewal for their business, then getting caught out with declining DM growth and facing an unpalatable choice – reduced MS/ha, or having to spend more on imported supplement to maintain production. Neither of which is as profitable.” Spending $1000 for 3-4t of PKE that is fed once then gone cannot financially compare with spending the same $1000 to renew a hectare of poor pasture. “That pasture can be grazed again and again, typically providing 10-20t DM over the coming years, which means extra feed for around 5-10c/ kg DM – provided you do it right.” That means budgeting for a good job, not a cheap job, and following some key steps. “The challenge I put out there to farmers while finalising budgets for 2015/16 is: How much more profitable would they be if they could renew an extra paddock or two to grow 20-30 per cent more high ME pasture than they are now?”

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The importance of transitioning By Dairy Business Centre (nZ) LimiteD When cows are dried off we can’t take a step back. It is important to keep the cows healthy and balanced over the dry period. Transitioning the cows onto and off the dry cow ration is an important part of the dry cow management. Transition is all about the conditioning the cows rumen to be able to use the dry cow ration optimally with minimum losses. It takes about three weeks for the rumen bacterial population to adjust fully to the new ration before the population is multiplied in such a way that the rumen can optimally convert the available nutrients and not waste any feed. After cows are dried of traditionally the farmer moves them to their run off, where they eat their daily allocation of feed, which can be kale- or more recently fodder beet crop and feed out straw and / or silage when needed. This diet is so different

from what the cow was eating on the milking area that in the first couple of weeks the cows are going backwards in condition. The cows are unsettled and that is not good. This behaviour from the cows can be contributed to the lack of transition. Fully feeding a cow is important. A full cow is an efficient cow, absorbing the nutrients over the whole area of the rumen wall, keeping the natural buffering capacity to its maximum, minimising the risk of potential rumen health

issues. A dry cow with a calf only has about 80 per cent of her full rumen available because the calf pushes out 20 per cent of her maximum fill capacity. Cows with their rumen filled to its natural capacity have the ability after calving to stretch it quicker back to its full size then cows that had to let the rumen shrink due to a low fibre diet (like fodder beets). Minerals are another important supplement that is left out during the dry period. Although it is true that the

requirement for calcium is met without supplementation on most dry cow rations, there is nothing left to keep building the mineral reserves. It is always good to keep building the reserves, leaving more for the early lactation. The more minerals the cow can release from her own reserves, the more milk the cow can produce in early lactation. Then there is the mineral imbalance risk for a few crops. We know that when on kale the cows need extra iodine and when the cows are on fodder beets they need a whole range of minerals, due to the natural lack of minerals in the beet. Feeding calcium and phosphorus is important to build up the reserves in the bone. Without magnesium in this mix, the cow can’t take up the other minerals as efficiently, which makes it important that you have a mix available that contains at least these three minerals in the right ratio. Having these minerals ad-lib available will let the cow self-medicate on the

levels they need and only the level of total intake needs to be monitored. Having the mineral mixes in the right ratio is therefore important so the cows can’t over-consume one mineral when looking for the other in the same mix. Minerals in loose form are easier taken in and less time is wasted ‘dissolving’ the hard blocks, minimising congregation damage around troughs. With DBCs Dairy Loose Lick and Fodder-beet Loose Lick, you provide the cows with adequate levels of minerals and allow the animal to have easily access and intake. With our water proof formula there are no issues during wet periods, keeping the product loose and palatable. For more information on our mineral lick range or a free mineral assessment of your dry cow ration, please contact the Ruminant Nutrition Consultancy team at Dairy Business Centre (NZ) Limited on 03 308 0094, email office@dairybusiness.co.nz. Advertising feature

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Farming Dairy Focus

Milking Systems feature

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The Centrus rotary system BY NADINE PORTER For Kiwi innovation and leading design and manufacturing of dairy technology you can’t beat Waikato Milking Systems. And although the name suggests the company has more to do with the North Island than here, the reality couldn’t be further from the truth, according to marketing manager Jane Burton. “We have 32 dealers nationwide including Ashburton Milking Systems.” Waikato Milking Systems lead the world in new dairy technology that saves farmers time and money and is easy to use. Part of their world beating technology includes the world’s first composite rotary platform that is 80 per cent lighter and fives time stronger than traditional concrete alternatives. The Centrus rotary platform offers massive power savings to farmers and the superior strength deck has significantly

less maintenance costs. It has been described as the biggest breakthrough in platform design in over two decades. The deck sections are formed in a multi-layer laminated process that includes Kevlar, a material offering five times the strength of concrete. All steelwork is hot dip galvanized – a process that extends the life of the platform and cow comfort has been enhanced with

the addition of specially formulated and replaceable rubber mats inserted into every bail. But the innovation doesn’t stop at the platform, with the company developing leading automation products in their Smart range to save farmers time, money and manpower. Leading technology means international growth has sky rocketed with the company exporting to more than 20 countries including China, Australia and the UK.

With a large number of global staff including a nation-wide network of sales and field service technician representatives the company offers outstanding service. Although Waikato Milking Systems is a large international and domestic player in the dairy industry, the design and manufacture remains strongly ‘in house’, ensuring that staff know all about their products, down to the last bolt. The company remains

strongly 100 per cent owned by New Zealanders’ and has come a long way from its humble beginnings. Current owners include Tainui Group Holdings, Ngai Tahu Capital, Pioneer Capital and members of Waikato Milking Systems’ senior management team. Now it has grown to take on a life of its own, but the passion for dairy farming and improved technology for farmers has not weakened. A new purpose built 8000 square metre site in Hamilton is testament to their commitment to farmers with the merging of manufacturing and administration and is designed to foster synergies and create a seamless production. For all your dairy system requirements talk to Waikato Milking Systems. Email info@waikatomilking. co.nz or call 07 849 8755 or contact your local dealer, Ashburton Milking Systems on 307 6030. Advertising feature

Milking Systems feature

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A one-stop shop Too hot to handle Stocker Dairy Services has your milking supplies covered. From milking liners right through to heavy industrial equipment, they have everything to help keep you milking. From their prominent location on West Street, they have a fully stocked retail shop offering dairy consumables and milking machine replacement parts. Stocker’s are a GEA Dealership specialising in Milfos equipment, and have been involved with Milfos equipment for 20 years. They also stock the other main brands of milking equipment such as Waikato, DeLaval, Reads and Westfalia. You also have the peace of mind knowing that if your plant or equipment does fail, Stocker’s has the ability and knowledge to fix any type and brand of milking equipment. Stocker’s also specialises in industrial equipment such as compressors, steam cleaners, water blasters, and generators. They stock the Italian made Air Command compressors which are proven for their strength and reliability. Air Command compressors come in various shapes and sizes from a portable battery operated compressor right through to an Industrial 7.5hp three-phase machine. Hyper Lavor steam cleaners are Stocker’s brand of choice for your high pressure cleaning needs. The machines are great

for round home use, through to the heavy duty cleaning needs found in a dairy shed. If you don’t feel the need for steam, they also stock Powershot Water Blasters which are powered by a Honda motor, which have the ability of running from any water source. And if you happen to find yourself having to use the machines away from a power source, Stocker’s can also supply you with a generator to keep you running. Stocker’s are not just about supplying consumables and industrial equipment. They also have a fully qualified team of engineers ready to undertake any job. From dairy shed maintenance, through to a ski pole for your boat, they are ready to help you out. Even that leaky exhaust that you’ve been driving around with can be fixed by Stocker’s experienced welders. Even stainless steel and aluminium welding is no trouble, and they are always willing to help out with any type of job you may require. So give Stocker’s a call today to find out how they can help you out. Or you can pop down to their showroom and have a chat with one of the friendly team while enjoying a barista coffee or hot chocolate. Advertising feature

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Being too hot to handle, is a contradiction to Stocker Plumbing’s usual range of work. The dairy plumbers have seen a deficit in some areas of domestic plumbing and have branched out to cover this void. Stocker Plumbing, is now offering full domestic installations, and they are also qualified to install your new wood burner. Most of Stocker’s plumbing team have originally come from a domestic background, so it’s only natural for them to start offering domestic services. The majority of Stocker Dairy Plumb’s customers have been utilising this facility since the conception of the company, but the main focus has always been on creating the best water reticulation systems in the Canterbury region. Anything from preventative maintenance to leaks and burst pipes through to installing hot water cylinders and fires, Stocker Plumbing have got your pressure needs handled. Stocker Plumbing, also have solutions to be able to make your domestic water taste just that little bit nicer. They have been finding in rural town supplies especially, that sediment and mineral deposits in your water can leave a bit of a yucky taste in your mouth. As such, they are able to come and assess your needs and supply and fit a water filtration system on your supply line

to remove that yucky taste. A filtration system is also a great move if anyone in your house suffers from skin conditions as it removes common irritants. If your filtered water has also turned a little cold, Stocker Plumbing can also help you out with fixing your existing hot water cylinder, or by supplying a new one. They source new cylinders direct from the manufacturer, allowing the cost savings to be passed on directly to their customers. Clients can also have peace of mind in knowing that Stocker Plumbing uses quality products alongside their quality workmanship. Grundfos pumps are used in nearly all applications where a pump is needed due to their proven longevity and reliability. There are a number of different pumps on display in the showroom located on West Street. From small rural house pumps, through to twin set multistage pumps to run your farm’s water supply, you can rest assured that you will have a constant water supply. With the water reticulation designs that Stocker Plumbing create, you can also rest easy knowing they create backup options in the rare case something goes wrong, or general maintenance needs to be carried out. So give Stocker Plumbing a call today, and let them handle your domestic or rural plumbing needs. Advertising feature

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Dairy Focus

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Make sure health and safety up to sc Does your farm’s winter health and safety procedures need a good thaw out? At this time of the year we are approaching a highrisk period for vehicle and machinery-related injuries. Conditions become more challenging once the rain and sleet kick in, so what can we do to ensure our workplace doesn’t become a death trap? A chill is in the air, our days are shortening and our first decent snow won’t be too far away. Changeable seasonal conditions breed extra risk for your staff and I remind farm owners and managers of their obligations to provide a duty of care regarding workplace safety. In autumn and early winter a farmer’s workload tends to ease up so it’s an opportune time to get the farm tidied up and focus on getting less urgent jobs done. This coincides right at the time of less predictable weather patterns which increases potential H & S hazards on our farms. Now is the time to assess possible risks associated with accomplishing these tasks as the rougher climate approaches.

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The winter period sees us demanding more use from our farm vehicles and machinery. While quad-bikes are often leading the way with farm vehicle incidents, tractors and other machinery are also involved in a large number of injuries and deaths on New Zealand farms. With around four out of five work-related deaths in agriculture happening as a result of machine or vehiclerelated incidents, the wet, icy, cold weather won’t help matters. In the last six years an unbelievable 10,000 people suffered farm vehicle and machinery-related injuries! Many of these incidents can be easily prevented by you and your staff when good procedures are in place. continued next page

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cratch during higher-risk winter from P10 Incidents can range from slips and falls to serious injury or loss of life. Workers can be crushed when a tractor rolls, be struck by a mobile plant or front loaders, or get caught in equipment such as an uncovered power take-off shaft. As the temperature plummets please enforce the matter of staff wearing their appropriate wet weather gear. Having workers compromised with hypothermia isn’t ideal! When light levels are declining also make sure adequate lighting is provided (or available) to avoid accidents relating to poor visual acuity. Chilly weather and slippery conditions only increase the risk of these detrimental events further. It is imperative that your workers are wearing the correct attire and footwear to help combat the ground conditions and potentially cold and weak limbs while operating dangerous equipment. When commencing any task stop and consider what you need to watch out for and how to complete it safely, despite the

fact you may be able to do it with your eyes closed. Yes, even you’ve done it so often before! Unsurprisingly accidents and injuries often happen when people are performing routine tasks they have done all too often, especially when they are under time pressure and in volatile weather. We know farmers make important decisions every day, and the ones that involve which vehicle to use for each task are even more important when lives could be at risk. Also don’t forget to remind your team at regular meetings about taking extra care with slippery tracks and icy conditions whether they’re on foot or operating farm vehicles. It’s your duty of care to point out even the obvious, we all have those ‘brain freeze’ moments especially in winter! Let’s keep everyone safe on our farms prevention trumps cure every time! Have a question about this issue or about hiring staff for the new season? Phone the good buggers at 0800Agstaff today. Matt Jones is managing director of Agstaff

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2 12

Farming Dairy Focus

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Why is residency difficult for farmers? One of the hardest industries to gain residency in New Zealand is that of the farming industry. This seems particularly odd as we have seen that obtaining skilled, willing and able farmers in New Zealand is quite difficult and there is a large demand for international workers to boost up this industry. Immigration New Zealand (INZ) is aware of this shortage and has listed it on the immediate skills and shortage list but continues to make the residency process for a skilled farm manager very difficult. If you are considering applying for residency under the skilled migrant category as a dairy cattle farmer it is essential that you do your homework first or seek the services of a professional. The first most vital part of this process is to ensure that you have a good employer that will help and assist you in getting the required skills and experience needed to be classified as a dairy cattle farmer.

Nils Macfarlane

RURAL IMMIGRATION

This role is highly skilled and considered a skill level 1 which is in the same category as that of a doctor and lawyer. Therefore INZ takes a very strict approach on who they consider to be performing this role and want to ensure that the applicant is performing all the tasks needed. INZ determines if someone fits into a particular category by assessing their job description and duties by the Australia and New Zealand Standard Classification of Occupations (ANZSCO) descriptions. Therefore before going through the

residency application you should sit down with your employer to ensure that you are doing these tasks. Once the residency application is in with INZ you will be assigned a case manager who will look over your application and will verify everything that you have stated that you do. This means that the case manager will contact your workplace and interview your employer to ensure that what you have stated to do is true. It is important to show that you have the responsibility and autonomy to make decisions on

the farm. Nils Macfarlane is an adviser with Heartland Immigration, a team of immigration advisers who also come from a legal background

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www.guardianonline.co.nz

Decision ‘reasonable’ but not practical Every month brings something new in the irrigation industry. A week ago, we received the Board of Inquiry (BoI) decision on the Tukituki catchment which has implications for irrigating farmers everywhere. While IrrigationNZ accepts it is a ‘reasonable decision’, we are also very aware that it is a far from practical outcome for farmers in the Hawke’s Bay and the regional economy. The nutrient limits that have been set for the Tukituki system remain unrealistic for a working, productive, agricultural landscape. The BoI decision had positive aspects. It excludes some hill country farms, forestry, orchards and lifestyle blocks from having to gain consents, but the reality is the majority of commercial enterprises in the area will still require one. The outcome also gives farmers signing up to the dam some headroom as land use can now be managed to achieve the nutrient limit of 0.8mg dissolved

Andrew Curtis

IRRIGATION NZ

inorganic nitrogen per litre of water (DIN limit) by 2030, compared to 2020 previously. Additionally instead of nutrient levels being measured at the bottom of the catchment, nutrients can now be measured on an individual farm basis. While it is good that the measuring point can be better related to the individual farms, it will still create issues for those further down the catchment who end up with compounded impacts of the upstream farms. It’s not the end of the story however. Our hope is that once the BoI process finishes, the limits will be revisited in the pragmatic context of the 2014 version of the National Policy Statement for Freshwater.

That may bring some relief. On a more positive note, it was fantastic to see a large crowd turn out for the official opening of Mayfield Hinds Irrigation Scheme’s storage ponds at Carew recently. These ponds will allow Mayfield Hinds Irrigation Scheme to move to the next

level of efficient water use and reliability for its shareholders. Water storage is the essential complement for a run of river supply that is subject to seasonal river restrictions. As this summer has shown, dry periods can be weathered if farmers have access to a reliable and secure water

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2 14

Farming Dairy Focus

Gypsy Day

www.guardianonline.co.nz

Update NAIT if you’re moving Don’t put your livelihood at risk when moving or selling stock over the Gypsy Day period; make sure you update your NAIT and TBfree details and record all animal movements. “This will help protect New Zealand’s reputation as a producer of high quality, safe food and maintain access to valuable international markets,” OSPRI group manager Dr Stu Hutchings said. Up-to-date NAIT data allows farmers to get back to business sooner in the event of a biosecurity incursion or food safety concern and is already being used to contain existing animal diseases like bovine tuberculosis (TB). “By keeping their NAIT and TBfree details up to date farmers can have peace of mind that livestock – not animal disease – will be the only thing they move around the country on Gypsy Day,” Dr Hutchings said. NAIT data is used to trace the movements of potentially infected stock, both on and off farm, so

Gypsy Day is on the way.

the source of the disease can be identified and special TB testing programmes established to contain the infection.

010612-KG-045

As long as your contact details and location are up to date, OSPRI can call you when your herd is due for a TB test. Updating your details

is quick and easy and a pivotal part of keeping TB under control. To protect your farming business, herd-owners should

follow these simple steps when moving or selling stock this Gypsy Day. • Update your contact details with OSPRI’s NAIT and TBfree programmes. • Check the TB status and testing requirements of the area into which you’re moving cattle. • Correctly complete an animal status declaration (ASD) form when shifting stock and do not accept any animals onto your farm if they’re not accompanied by a correctly filled out ASD form. • If you’re in a movement control area, all animals must have a pre-movement TB test within 60 days of being shifted off farm. • Record all animal movements in the NAIT system, including movements both off and onto the farm. • Farmers can complete all of these steps by simply calling OSPRI on 0800 482 463. OSPRI helps protect and enhance the reputation of New Zealand’s primary industries. It currently runs the NAIT and TBfree programmes.

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Gypsy Day

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Plan ahead: keep the roads clear The message couldn’t be clearer this Gypsy Day – stand your cows off feed for at least two hours prior to sending them down the road. Ashburton District Council roading manager Brian Fauth reminded farmers to follow the rules regarding discharging

effluent onto sealed surfaces. The same bylaw applies to effluent as it does to litter, he said. Farmers who make a mess, have to clean it up. Federated Farmers Sharemilkers’ Section chairperson Neil Filer advises farmers to have plenty of staff

on hand, and to wear helmets and high visibility clothing if operating quads and bikes. “We’d also like to ask motorists to be patient if they do encounter a herd on the road. Please do not use a car horn as that will spook the stock. Farmers want to get the

move done quickly so please follow their instructions.” Mr Filer advised members to make a detailed plan before moving stock. “It isn’t a good look to leave roads covered in effluent when it can be minimised by planning ahead.”

Overall thousands of farm animals and hundreds of households will be on the move during Gypsy Day through-out New Zealand as farms change hands and sharemilkers take up new contracts. Advertising feature

Federated Farmers top tips for Gypsy Day Selection of stock: • • • •

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2 16

Farming Dairy Focus

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Benefits from Chinese investment The benefits of Chinese investment extend beyond the farm gate and into the New Zealand economy, according to the CEO of Pengxin International, Gary Romano. Mr Romano made these comments when Shanghai Pengxin subsidiary, Milk New Zealand Holdings, was named the supreme winner at the 2015 HSBC NZCTA New Zealand China Business Awards. The company also took out the DLA Piper category ward for Inward or Outward Investment with China. The awards follow success earlier this year when Milk New Zealand Holdings won the Emerging Business Award and then the overall Supreme Business Award at the BNZ New Zealand Chinese Business Awards. Shanghai Pengxin first came to public attention in New Zealand when it purchased 16 farms in the North Island which previously belonged to the Crafar family. “It was controversial at the time but the results we’ve achieved prove that we’ve

Pengxin International CEO Gary Romano (left) and DLA Piper corporate and commercial partner Martin Wiseman . PHOTO SUPPLIED

added a considerable amount of value to the farms and environment, to the families working on those farms, to the local communities and to wider economy,” Mr Romano said. “Since that initial purchase we have also purchased a significant stake in Synlait farms in Canterbury and currently have a number of applications with the Overseas

Investment Office to buy more dairy land. “A contributing factor to the success we have enjoyed, in business awards and on our farms, is our desire to partner with people recognising that we are not good at everything and there are people out there who can provide those skills. “A case in point is Landcorp with whom we have enjoyed a fantastic partnership since

they took over the running of our first set of farms in the North Island. “On the consumer side we have had good initial success with UHT milk and have plans for the future which include developing other dairy products. “We would also like more direct investment in processing factories. While Miraka has been a fantastic

partner we would like to be able to consider further capital investment in our own name.” Romano said that it is easy to see the direct benefits of Shanghai Pengxin’s investment in New Zealand. “We buy farms which are under-resourced and invest in those properties improving production and environmental outcomes, along with the working and living conditions of our staff. “The farms are not ‘just’ productive units – they are part of our brand story which reassures the New Zealand public and consumers of our UHT branded milk in China that we are responsible custodians of the land. “The indirect benefits of our investment are tangible and significant. “Money has come into New Zealand and been invested in land and that investment is having a flow-on positive impact on local and wider communities – creating businesses and employment. “Our involvement and investment in New Zealand is good for New Zealand Inc.”

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Soil testing

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Neal Kinsey - Introductory course Neal Kinsey of Kinsey Agriculture Services, Inc. returns to Ashburton. What a great opportunity to find out for yourself about the soil fertility system that’s revolutionising New Zealand agriculture. Neal Kinsey’s book, Hands on Agronomy, has had record sales. Neal was trained and certificated as an agronomist by Dr William A. Albrecht; Professor Emeritus of Soils, at the University of Missouri/ Columbia. The principal goal is to help those who use the service to achieve an ideal level of productivity and quality in terms of the soil and the crops grown. This involves utilising specific soil tests to determine nutrient needs, and recommending the appropriate types and amounts of fertilisers to fill those needs. The soil audit (soil test) is used to determine any mineral surpluses and / or deficiencies the soil may have; Helping to understand the problems this may cause, and to find a solution.

This includes evaluating soils and crops and recommending the proper fertilisation for each specific situation. The Kinsey-Albrecht system of soil fertility is getting real traction in NZ. Quite simply, recent independent conducted trials in Ashburton are showing that the system is producing

“

in nitrogen, producing more kilograms of higher nutritional-value dry-matter and greater profitability. While this result is from only several years of research here, farmers from New Zealand and indeed all around the world, are experiencing similar outcomes. This is proven science and true science is repeatable.

Quite simply, producing more Kgs/DM with less applied nitrogen

more Kgs / DM, with less nitrogen, higher MS/cow, big increases in animal health outcomes with greater profit and return on investment than conventional fertiliser practises. The results are promising, and the future potential of the farming system even in tough economic conditions and low pay out. are exciting. The goal this year is a continuation of improving the soil quality and a further 25 plus per cent reduction

So let the results speak for themselves, not by some reasoning that our situations and soils are different that, “it cannot possibly work here”

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degrading soil system that is currently being promoted and practised? We have to change to a soil fertility system that gives farmers some resilience, and start considering the biological aspect of the soil. There is a need to understand the consequences of what synthetic fertilisers are doing to the soil and its production; unknowingly farmers are creating all their own problems. We are promoting synergistic outcomes, connecting people that are already practising our balanced soil fertility programmes, and that are profitable and productive, with others who need reassuring or haven’t considered a different approach. Farmers have a tremendous body of knowledge, but what we can bring to the table is our knowledge of biological farming and soil fertility problems, to solve the social, financial and environmental issues with sound proven science. Advertising feature

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2 18

Farming Dairy Focus

www.guardianonline.co.nz

Cow housing – Environmentally hard DAIRY NUTRITION AND MANAGEMENT SOLUTIONS

A recent review of housed systems led the authors to question the value of cow housing concluding that housed systems were good either environmentally or economically, but seldom both. This raised some perceptions that need to be addressed.

Environmental sustainability

Comparing the N leached of farms pre-housing and post-housing, is not a fair comparison if there is any other system change. Cow numbers, management practices and production often differ considerably before and after housing making comparison meaningless. Similarly, comparing N-leaching of a 10 month on-farm system with the problem 2 month winter period “exported” to someone else, with a 12 month on-farm system, is not comparable. Using Overseer to compare two identical farms, except

for the wintering system, one with traditional winter cropping compared to silage grown on the cropping area and fed in a wintering barn, showed the housed system leached more than 30% less N over a 12 month period, depending on soil type. In reality, farms with cow housing will use the housing during wet periods in early spring and autumn and not only for 60 days, further reducing leaching and reducing pugging and pasture damage. There is no question that housing cows during winter and storing effluent for later use reduces leaching significantly, making it considerably more environmentally friendly than a traditional winter cropping system.

Financial viability

The very sound investment tool, Net Present Value (NPV), was used to show most housed systems in the review to be financially nonviable. NPV is influenced by 3 factors, extra cash generated, expected lifetime of the

project and the cost of capital or discount rate chosen. For a projected cash benefit the NPV answer will be negatively affected if a short lifetime and high discount rate is chosen. Depending on the input values, NPV can “prove” what you want it to prove. There are many barns overseas that are over 30 years old and still going strong, which raises questions around the choice of a 20 year life span and the higher 8% cost of capital. Using a 30 year life span and 6% cost of capital can give a totally different answer.

Added benefits

Consideration needs to be given to future environmental constraints about to be imposed on farmers and the impact this can have on future profitability. Councils are setting leaching limits and if housed systems reduce the leaching of a farming system by 30%, it will be able to carry more cows and generate more cash, potentially making the NPV answer more favourable. If wintering dairy cows on crop

uses up a substantial amount of a graziers “N-leaching quota”, limiting the graziers ability to generate other income, the cost of wintering cows will likely increase when limits are imposed. N-leaching will therefore come at a financial penalty. Any savings in wintering costs will naturally add to the extra cash advantage of housed systems and will affect current NPV answers. The extra control housing provides, also reduces the environmental risk around wintering. Entrepreneurs, farmers or businessmen in cities, evaluate risk in conjunction with returns before making any decisions, lower risk requiring lower returns. High levels of intensification can however also increase the amount of effluent produced and exceed environmental constraints unless the effluent can be “exported” or traded with a cropping farmer.

Economic risks

Investing large amounts of capital in housing has continued page 19

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to beat encouraged some farmers to make radical changes to their farming systems. Using a barn throughout the year with total mixed rations, as opposed to being used primarily for wintering, is a possibility but does require a considerable increase in production per cow to be viable. Moving away from pasture based systems can increase the financial risk considerably, especially in years with low milk prices and high volatility. Systems that purchase a large percentage of the cows’ diet have a greater exposure to changes in the milk/feed price ratio, similar to pig farming. Farmers need to focus on maximising profit by undertaking an economic analysis of their system. This will ensure that their chosen system produces at an optimal level that maximises profit.

Resilient housed systems

Farmers with cow housing still need to be pasture based and maximise the use of home grown nutrients. The appropriate stocking rate is

important in maximising cows’ pasture intakes. This will ensure the maximum amount of pasture is converted into milk. Supplements need to be used strategically to increase production per cow rather than carrying more cows. Carrying too many cows uses silage to replace pasture. The ensiling process comes at an energetic cost and to “reconstitute” good quality grass silage of 11 MJME and 17% protein back to 12 MJME and 20% protein pasture will require roughly 50% good silage, 25% barley and 25% canola oilcake, at a cost much higher than the cost of pasture. Farming out of season and using silage instead of pasture can be costly, requiring a significant premium on the milk price. When considering the cost of feeding supplements, all associated variable costs must be included, not only the cost of the feed. There are considerable financial benefits to farming in harmony with nature having cows’ maximum demand coinciding with the

pastures’ maximum growth period and maximising the use of pasture, making supplemented pasture-based systems financially hard to beat.

Conclusions

Housed systems are environmentally hard to beat. Building a capital intensive barn may not be a feasible alternative for all farmers in the short term, as current high debt levels are arguably one of the biggest threats to the NZ dairy industry’s ability to withstand lower milk prices and international competition. Housed systems do require some new skills but need not be overly complicated. Experienced farmers and consultants are available to assist. Choose the system that produces the most profit and not simply maximising production. Using the most appropriate hybrid system can be profitable and is arguably the most environmentally sustainable system devised so far. Advertising feature

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2 20

Farming Dairy Focus

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Eczema genetics ‘essential tool’ A well-known and respected dairy farmer, who was one of the first in New Zealand to introduce facial eczema (FE) tolerant genetics into his dairy herd, says they are an “essential tool for the dairy farming toolbox”. Managing director of Sisam and Sons in the Eastern Bay of Plenty, Richard Sisam, has spoken out in support of these genetics, following an especially bad season for FE across New Zealand. This season is the fourth year Sisam & Sons have used CRV Ambreed’s FE tolerant genetics on their four herds and replacement heifers. “We now have over 1700 heifers over two generations from this programme showing a degree of tolerance to facial eczema. “FE tolerant genetics allow New Zealand dairy farmers to produce herds less susceptible to FE in the long-term. I consider these genetics to be an essential tool in the dairy farming toolbox.” Richard’s initial faith in FEtolerant genetics came from his many years of success using

Richard Sisam has introduced facial eczema tolerant genetics .

FE-tolerant genetics for sheep. “Back in the 1980s, when we farmed over 12,000 ewes, we would lose over 1000 sheep in a bad FE season. Rams were sourced from the Wairarapa where FE was almost unknown and sheep had no natural tolerance to FE. “We introduced FE-tolerant genetics, and now, farming 5,500 ewes and in a moderate FE challenged season, the most we lose is 50 lambs and have very few ewes showing signs of clinical FE. We don’t have the

intense and immediate loss we used to have. “Always at the back of my mind was ‘if you can do it with sheep, surely you can do it with cows’. So when CRV Ambreed offered the product, I supported it 100 per cent.” Sisam said although it’s too early to see the results fully yet, he has faith in these genetics. “It’s based on science. It’s wise to have FE-tolerant genetics in the background, working alongside other preventative measures,” he said.

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FE is a disease that causes lowered milk production and even death from liver damage. Humid conditions increase the number of toxic spores in pastures, which when ingested by cattle, damages the liver and bile ducts. The damaged liver cannot rid the animal’s body of wastes and a breakdown product of chlorophyll builds up in the body causing sensitivity to sunlight, which in turn causes inflammation of the skin. Clinical cases of FE are easy

to spot; skin loss and lethargy are clear signs that the animal is suffering from FE. However, subclinical symptoms, which are not noticeable, cost more to the dairy industry through the loss of milk production. Research and development completed over the past four years by CRV Ambreed and its research partners resulted in the ability to identify FE-tolerant bulls. Targeted genetics for dairy cattle are now available that will typically breed off-spring that are 25 per cent less reactive to a facial eczema challenge, compared to the average bull, helping farmers beat facial eczema long-term. CRV Ambreed has jersey, friesian and crossbred bull teams available and once again, will be identifying the very latest FE-tolerant sires from its 2015 progeny test bulls to breed cows with a degree of resistance and more resilience to facial eczema than the progeny of the average bull. For more information, visit www.crv4all.co.nz.

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Synlait suppliers hear from experts Synlait Milk’s recent Lead With Pride Focus Day in Methven was well attended by a large number of suppliers wanting to hear from expert dairy farm service providers. The third event of its kind, it offered Synlait suppliers a chance to learn about dairy farming best practice and discuss some of the latest onfarm trends. “The day is a chance for our suppliers to hear from a range of experts who can offer insights and advice around their dairy farm operation,” Synlait Milk’s Lead With Pride manager Mark Wren said. “We have a number of suppliers working through our Lead With Pride programme, which recognises and financially rewards certified suppliers achieving dairy farming best practice. “Performing at that level is a big effort, so it’s helpful to hear what the experts have to say and the day helps suppliers to connect with them for that reason.” To start the day suppliers heard from Synlait’s general manager - supply chain

Synlait suppliers learn to lead with pride at a workshop in Methven.

Matthew Foster, about how to successfully manage relationships with providers to get the best outcomes for your business. From there, they rotated between the five stations to

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hear from third party service providers. The nationwide issue of farm waste and management of plastic wastes was addressed by Plasback’s Geoff Taylor and James Getty.

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They provided some useful tips on disposing of and recycling plastic waste streams responsibly. Storing dangerous substances on farm was covered by Dave Chambers

from Allied Petroleum and Ed Harrison from Sebco. They also reminded suppliers of the need to bund diesel tanks storing more than 2000 litres of fuel and to pressure test underground storage tanks. Several representatives from Primary ITO discussed the impact of good staff training on a business’ bottom line with suppliers. Emphasising the benefit of renewing knowledge and upskilling staff resonated with many Synlait suppliers as there is a requirement to manage staff in a sustainable way to achieve Lead With Pride certification. The increasing use of farm technology to make more informed decisions on effluent, irrigation and fertiliser use was also discussed, as was maximising productivity and managing a farm’s environmental footprint through sophisticated soil testing. To find out more about supplying Synlait or their Lead With Pride programme, visit www.synlait.com.

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Off-season refrigeration shutdown Milk silo refrigeration units These are best to be switched off at the milk silo controls only and it is important the main power is left on the refrigeration units over the winter period. Keeping the power on the refrigeration unit will allow the unit to start for a short time periodically and maintain the refrigerant in the high side of the system and out of the milk silo and compressor. Also, a small heater on the compressor crankcase will stop refrigerant migrating to the compressor sump over time. Serious damage can result by simply switching on a compressor with liquid refrigerant in the crankcase and also doing a hot silo wash with refrigerant in the silo refrigeration pad causes extremely high pressures possibly causing serious damage to the milk silo

Water chilling systems

In this editorial we will look at the correct shutting down of refrigeration and heat recovery equipment. There are several dos and don’ts and this can have a dramatic affect on the lifespan of the refrigeration units. Generally water chillers are OK to be switched off at the unit as the system design is somewhat different; although some later chillers have a frost circuit build into them to start the water circulating pump when the temperature of the water at the unit is below 2°C. The pump runs for a short time until the higher temperature tank water reaches the chiller and this temperature is again above 3°C. This system is not foolproof however as it relies on the power being on and we recommend where possible to drain the water from the water chiller circuit during the coldest two to three months of the winter. Water chillers will handle fairly good frosts although if they do get damaged the result can be expensive. All Plug and Play systems should be drained.

Glycol chillers These are the most robust of fluid chillers as the glycol solution will generally handle a 12 to 15°C frost before it will start to solidify. In our climate, it is best to leave the chiller on and it will look after itself. Be careful if it has a desuperheater heat exchanger fitted to heat hot water as this will be a weakness and should be drained over the winter period.

Hot water heating systems Mahana Blue The Mahana Blue has proven to be the more robust of heat recovery hot water heating systems although they are still capable of being frost damaged. Generally this damage has been limited

to a water valve requiring replacement and is noticeable as water will weep from the valve after severe frost and mosts systems have an automatic drain emptying the heat exchanger of water when the system is not in use. It is, however, a good idea to switch the Mahana off on the main unit isolating switch and drain the water from the hot and cold connecting pipework over the winter period. Desuperheater (heat exchanger) The desuperheater heat exchanger is quite sensitive to frost and while light frosts are unlikely to cause any problems, a series of severe frosts will put strain on the heat exchanger and in some cases may actually split allowing water to enter the refrigeration system. The likely result of a large quantity of water entering the

refrigeration system is severe damage to the refrigeration unit, normally requiring a new refrigeration unit to be installed and some down time to rid the milk silo refrigeration circuit of water. Our recommendation is to drain all water based chillers and heat recovery systems over the coldest three months of the season. If you have any questions give your refrigeration company a call, they will be only too happy to advise you on the best procedure for your own refrigeration equipment. Dairycool is a locally owned and operated firm specialising in dairy farm milk cooling products and services

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Extra support for drought-affected water storage and irrigation projects. “As a Government we have invested $120 million in the last two budgets towards Crown Irrigation to invest in major projects. “We also have the Irrigation Acceleration Fund (IAF) which is investing $28 million in 18 projects around New Zealand. “The Sustainable Farming Fund and Primary Growth Partnership are also helping fund important research to improve the skills and resources available to farmers and growers. “The Ministry for Primary Industries is keeping a close watch on the ongoing impacts of the drought throughout the country and is in close contact with local communities.” Cheviot farmer Dan Maxwell and Primary Industries Minister Nathan Guy.

We suggest •

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More information

Contact Environment Canterbury Customer Services on 0800 324 636 or email ecinfo@ecan.govt.nz. For information on farm environment plans, including approved templates, visit www.ecan.govt.nz/ lwrp-farmers

For information on the Canterbury Land & Water Regional Plan: www.ecan.govt. nz/lwrp. Separate rules apply in Hurunui-Waiau: www.ecan.govt.nz/hwrrp

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North Canterbury now has the highest soil moisture deficit in the country and has recorded the lowest rainfall for January to March since 1972. The entire east coast of the South Island is classified as being in a “medium scale adverse event”. Recovery measures and funding will remain in place until later this year, depending on conditions over autumn and winter. This classification triggered additional Government support, including funding for rural support trusts – organisations that work closely with farmers and rural communities to provide support and guidance. Inland Revenue can also offer flexibility with tax obligations. “With these extreme conditions, it’s important that affected communities know there is additional support still available through their rural support trusts, including rural assistance payments for those facing extreme hardship.” Mr Guy said the Government has a number of initiatives under way to address the need for more

100907C4595

Drought-affected farmers in North Canterbury have been offered extra support. Primary Industries Minister Nathan Guy met with farmers in Cheviot, North Canterbury last week and said they’re still feeling the impacts of drought. “North Canterbury – and the Cheviot area in particular – has missed most of the recent rainfall and continues to face severe drought conditions,” Mr Guy said. “Because of this, an additional $20,000 is being allocated to the North Canterbury Rural Support Trust. This will help them with more intensive activities, including individual visits and community events. “The major concern from farmers and community leaders I’ve met today is feeding livestock through the coming winter, so it’s important that farmers revise their feed budgets now. “While farmers are often reluctant to ask for help, I would urge people to make use of the good advice and support available.”

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Are your cows in their comfort zone Are your cows in their “personal cow zone”? Are they happy? I have been going on about causes of lameness now for quite some time. I talk to many people about their lameness issues and it still strikes me how ingrained the stone bruise theory is, and the conviction that white line separation is caused from twisting and turning on concrete. Even when all the evidence is stacked up against these theories, people are reluctant to let go of their long-held beliefs. I appreciated recent comments from some people who admitted that it doesn’t make sense to hang on to their old beliefs, but they were just not ready to let go yet. That is very honest and also helpful for you to realise that about yourself, and it has also helped me to have more appreciation for the struggles that people can have to change their management on the farm because it still “does not feel right”. This comes out particularly

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VEEHOF DAIRY SERVICES

in the way cows’ hooves are trimmed. Even though I can appreciate some of those struggles, I do want to emphasise the importance of basing your decisions on facts and logic rather than basing them on gut feelings. We recently ran some seminars with Marloes Levelink, of Cows 101, on cow signals. It came out very strongly again how a lot of the issues we are dealing with are, in essence, cow comfort issues. When a cow cannot behave as she normally would she is more prone to stress and therefore to problems.

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e? Left – Do you know why your cows act the way they do? It pays to find out for a better-run farm.

From P25 We can often look at our cows and think that they are happy with their environment, but it is very easy to overlook things because we are looking at our farms from a human perspective and that may not be how a cow experiences the farm. As Marloes was saying in the seminars: We have to look, think and act – “Why do cows do what they do? Why are they standing by the gate even if there is plenty of grass in the paddock and it is still an hour or so before milking? “Why do cows not clean out the meal trough? “Why do they not walk back to the paddock after milking? “Why are there parts of the track covered with cow muck?” And so on ... One thing we can say in response is that “this is just the

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way it is”, and leave it at that. This way of reasoning, however, is not acknowledging a problem and certainly not eliminating a problem. There is always a reason why cows do things. If we don’t know why certain things happen, we need to investigate. Ask other people, look on Google or use whatever other research options we have. A good way to start looking at behaviour is by asking the question, “Would a cow show this behaviour in the wild where she has access to everything she wants (water, food, shelter, resting place etc), and if not, why not? Therefore, what can we do to improve the situation for the cow? This is the key to better-run farms, increased productivity and less lameness.

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NZ dairy industry is ‘friesian’ in a cooling in Farmers often hear the phrase, “Make hay while the sun shines”; unfortunately for the New Zealand dairy industry they’re in the middle of a supply and demand storm. The dairy industry has been suffering from depressed milk prices since the boom of 2013/14 when the price of a kg of milksolids (kgMS) was selling for $8.40. There are a number of factors that have led to the fall in dairy prices; these include political events, geographic factors, and trade. Political events that have led to a fall in the price of milk include Russia’s ban on imported dairy products from the EU, US, Australia, Canada and Norway. Russia was the second largest importer of dairy products after China, importing 3 billion litres each year. Russia’s main dairy import is cheese, of which 90 per cent came from banned countries. The effect of banning value-added dairy products is that producers either scale back production to meet demand, or focus on exporting to other markets. It would appear that most are choosing the latter option. The second political factor leading to falling dairy prices was the European Union (EU) removing milk quotas on March 31. The quota system was initiated after subsidised milk production consistently outstripped demand, such as that from 1984 member states that

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A BROKER’S VIEW

produced too much milk were fined. The EU is the largest milk producer in the world, producing 151,450 million tonnes of dairy, milk and fluid for the 2013/14 year, an increase of 4.6 per cent on the prior year. Following the EU is India, the United States and China. For the 2015 year, overall milk production in the EU is expected to increase at a decreasing rate, growth of less than 1 per cent, which is in line with other producing countries. To provide perspective from a New Zealand standpoint, we experienced growth in milk production in 2014 of 7 per cent, falling to an expected 1.7 per cent for the 2015 year. The current trend is for milk-producing countries to continue increasing production, but at a decreasing rate. Geographic factors leading to lower dairy prices relate to the ability of some of New Zealand’s trade partners to produce a kg of milksolids at a significant discount to our less intensive

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nternational market Left – Political events that have led to a fall in the price of milk include Russia’s ban on imported dairy products from the EU, US, Australia, Canada and Norway. Russia’s main dairy import is cheese, of which 90 per cent came from banned countries.

Written by Tom McBride and Grant Davies, advisors at Hamilton Hindin Greene Limited. This article represents general information provided by Hamilton Hindin Greene, who may hold an interest in the security. It does not constitute investment advice. Disclosure documents are available by request and free of charge through www.hhg.co.nz

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Global demand for dairy products is expected to be met by China; however, this point of view seems rather optimistic and narrow-minded when China’s GDP growth is expected to cool from 7.4 per cent to 7 per cent for 2015, leading to an expected decline in the volume of whole milk powder (WMP) imported by China. New Zealand is the largest producer and exporter of WMP, with a significant reliance on China’s demand, previously assumed to be insatiable. Continued weakness in Chinese demand for WMP sounds like a warning bell; signalling further headwinds for milk prices. Per discussions with local farm advisers there is consensus that for the 2015/16 season dairy farmers across North Canterbury will be tightening their belts. The average farm milks 650 cows, with average operating costs at $4 per kgMS, and an average debt servicing cost of $1-$1.20 per kgMS. For the average farmer, the Fonterra forecast milk price of $4.50 per kgMS is less than the cost of

operating, raising questions over the potential for farmers to cut costs further to manage cash flow. To provide perspective on debt levels, the RBNZ announced that approximately 30 per cent of the dairy debt was concentrated amongst the most indebted 10 per cent of farms. Looking forward to the 2015/16 season, we can expect the price of milk to increase under the following scenario, Russia’s one-year ban on imported dairy products is lifted in August, the EU’s growth in milk production tracks domestic demand, the US doesn’t experience another year of cheap supplementary feed, and China works through their WMP stockpile and their demand comes back to the market. It’s unlikely these events will occur concurrently and it’s reasonable to predict that the price per kgMS will remain low for the coming season. Australian banks have started forecasting the 2015/16 season opening price, with ANZ forecasting a price between $5 and $5.25, and ASB expecting the price to open at $5.70. These forecasts are extremely early, and there are a large number of factors at play before the 2015/16 season. The reality of the situation is that prices are likely to remain under pressure in the short to medium term and there is every chance ANZ and ASB will lower their forecasts.

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