Dairy News 12 May 2015

Nathan Guy confident farmers will cope. PAGE 3 CHAMPION SHAREMILKERS Dairy Awards winners PAGE 6-7

CALVING TIPS For better success rate PAGE 38-39

MAY 12, 2015 ISSUE 334 // www.dairynews.co.nz

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DAIRY NEWS MAY 12, 2015

NEWS // 3

Minister confident farmers will cope SUDESH KISSUN sudeshk@ruralnews.co.nz

Making up with ecologists.

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Tactics for tough times.

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Giving more power to tractors.

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PRIMARY INDUSTRIES Minister Nathan Guy says farmers are resilient and will get through the low milk-price patch.

He says volatility will linger through next season but notes that forecasters are picking the milk price to come back.

Farmers are used to commodity price fluctuations and dealing with droughts, snowstorms, floods and earthquakes, Guy says.

Last month Fonterra lowered its 2014-15 milk price from $4.70/kgMS to $4.50/kgMS; with an estimated dividend range of 20-30 cents per share, this amounts to a forecast cash payout of $4.70 - $4.80 for the current season.

Guy says the drop in Fonterra’s forecast came a bit sooner than expected for some farmers. Now they will be eagerly awaiting Fonterra’s opening forecast for the new season on May 27.

Guy told guests at the opening of LIC’s new herd testing facility in Hamilton that he was confident farmers will get through this season in reasonable shape.

Last year’s record payout $8.40/kgMS has flowed into this calendar year; the focus will be on the next season.

“Let’s not forget last season our record payout of $8.40 was achieved against a very high US dollar; the average last year was US83c and this first five months average this year is around US75c,” he says.

The record payout last year was achieved against very strong headwinds and a challenging exchange rate, he adds.

Guy also put out some average payout figures.

The average milk price for last the 15 years is $5.25/ kgMS; after Fonterra’s formation in 2002 the average payout for the first five years was $4.20.

“So our farmers are resilient and they are used to commodity price fluctuations and used to dealing with droughts, snowstorms and earthquakes.”

Nathan Guy (right) and LIC chief executive Wayne McNee at the opening of the new herd testing facility (story p28).

Guy, who owns a dairy farm in Horowhenua, advised farmers to watch their costs.

“2015 will continue to be a challenging year, so they should focus and work closely with their banks and accountants and do line by line cash flow analysis to ensure they can get through the forecast period.

“Indications are next season will have some volatility but the outlook will be better than the current season; there’s a possibility of a $5.50, possibly $6 opening forecast.”

Last week’s Global Dairy Trade (GDT) auction saw the price index down 3.5%, its fifth successive decline.

Guy says one only has to look at the recent GDT results to get an idea of the volatility.

He says it’s very unusual to have the four big global milk producing regions – North America,

South America, Australasia and Europe – awash with milk.

“Everyone right now has more milk and for those areas to have all that happening at once is very unusual.”

The Russian ban has also seen products displaced; milk used to make butter and cheese for Russia by European processors are being turned into milk powders and sent to our traditional markets.

China is also buying less milk products as a result of building a high inventory; Guy says the inventory is reducing and China will be buying again “very soon”.

He also pointed out that long term outlook for dairy products looked promising. Asia’s growing middle classes want more dairy products and New Zealand is well positioned to supply them.

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DAIRY NEWS MAY 12, 2015

4 // NEWS

Low payout ‘starting to hit home’ PETER BURKE peterb@ruralnews.co.nz

A CRISIS looms in the dairy industry as the implications of the $4.50 payout starts to hit home.

DairyNZ says its modelling shows that for the coming season the vast majority of dairy farmers will have to live in overdraft for the entire twelve months from June 1, 2015 to May 30, 2016 and possi-

bly longer.

Wade Bell, DairyNZ regional leader, says the drop from a payout of $8.50 to $4.50 is massive, so his organisation is focusing on helping farmers sort out their cashflows, as posted on its website. Bell says they have done an ‘average’ cashflow for owner operators and sharemilkers for the next 12 months and the news is not good.

“You would normally

expect farmers to be into overdraft by October-November and come out of overdraft early in the new year. But looking at the cashflows this year, not many, if any, will come out of overdraft for the entire season. This depends a little on what figure Fonterra sets for the payout next season but based on where we think things are at the moment, including the GDT, there is nothing to indicate the

year will be exceptional.

Maybe a few will have positive balances but the majority will still be in overdraft this time next year.”

Bell says this is based on the proposition that the average cost structure on a dairy farm is about $4.30/kgMS. But he says if a farmer has an average level of debt of about $20.00/kgMS that will add another $1.20 of debt servicing, putting the cost

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up to $5.50/kgMS. Even if farmers can trim their costs they will still need $5.00/kgMS or slightly more to break even.

“This is just to pay the farm working expenses and interest – there are no living expenses or anything else. It’s a crisis and that’s why a lot of commentators are saying farmers can possibly manage one year with the banks being supportive. But if it goes beyond that it would become a major concern.

This is a very serious situation and it will obviously have flow-on effects into the wider community and the nation as a whole.”

Bell says it’s hard to tell whether dairy farmers on high input systems are more vulnerable than those on low input sys-

tems. But he says it’s well known that farm profit is closely linked to farm working expenses and what typically happens is that higher input systems have higher farm working expenses. It’s likely that those on high input systems will respond to the lower payout by cutting out expensive items and perhaps changing their type of feed to cut costs, Bell says.

“But there is a limit to what they can do given the infrastructure they have, the stocking rates and the machinery they

own. But I don’t think we are going to see farmers chop and change from one system to another. Irrespective of the system a farmer is running, if he has a high cost structure he is very vulnerable at the moment.”

Wade Bell, DairyNZ

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ASB’S RURAL economist Nathan Penny agrees with DairyNZ’s view that cashflows for dairy farmers over the next year will be ‘pretty tight’. And he predicts Fonterra will initially pitch next season’s forecast payout low.

Some farmers may have to exit the industry if low

returns persist, he says.

“This season the one group doing it tough will be those new to the sector. If you have come into the sector in the last year you’re going to be struggling. The same will apply to those who run higher debt or are higher leveraged than the sector average. The one counter to that is that interest rates are very low and have the potential to drift even lower over the next year or so.”

Penny says farmers are already cutting spending onfarm and looking at things they can control like fertiliser spend, feed, maintenance and capital expenditure.

“Obviously that has implications for the wider rural sector and we expect to see less activity in the rural supply businesses around the country.

We also expect land prices to reflect that.

They came off the boil towards the end of last year and we expect that to continue into this year.”

Penny says retail sales in rural areas are likely to be “softer” as the spending power of dairy farmers declines.

This has implications for the whole country: lower export receipts and tax take.

“Finance minister

Bill English has announced they will not hit their surplus target in this fiscal year.

And the dairy story is part of, but not the only reason for tax revenue being down $4.5 billion over the next five years.

So it does have wide implications and we are expecting a tough period ahead for the sector as whole.”

Penny says he believes many farmers paid off a lot of debt when the payout was $8.50 and that they were “restrained” in their spending. He says ASB will work with farmers to manage cashflows, set budgets and discuss their requirements.

“Our medium and long term view of the dairy sector is very positive. This is based on emerging markets’ demand for protein and the growing incomes in those countries. We see this as a long term positive story. We don’t think anything has changed there so in that regard it’s about managing proactively with farmers over the next 12-18 months.”

Penny says the present situation is quite similar to what happened when there was a good payout in 2008, then a huge drop in the following year then a price recovery.

DAIRY NEWS MAY 12, 2015

NEWS // 5

LIC rules out public listing to raise money SUDESH KISSUN sudeshk@ruralnews.co.nz

FARMER CO-OP LIC

will hold meetings nationally next month to brief shareholders on its ambitious growth strategy.

The update will include a timeframe for possible capital requirement to deliver on the strategy; the co-op aims to achieve $1 billion in revenue by 2025.

LIC chairman Murray King says the co-op has a strong balance sheet to

fund growth.

He ruled out any plans to list the co-op.

“We reaffirm that LIC will remain a co-operative,” he told Dairy News.

“That is sacrosanct; a public listing is not on my agenda.”

King and LIC chief executive Wayne McNee will address the nine farmer meetings, allowing the board and management to meet shareholders face-to-face.

“We haven’t done a roadshow for a long

time; the last one was in 2008 when genomic was launched. The business strategy is ambitious and we will give farmer shareholders an update of where we are, especially our international business plans.”

In his letter to shareholders, King said the co-op wanted “an early discussion with you, our shareholders, on the service and solutions we have in development, progress with acquisitions which fit our strategy, and funding

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options for LIC over the next few years”.

“There is no ‘burning issue’. However, we do want to give you this opportunity to join us in discussing the direction

of your co-operative in an open session,” he told shareholders.

The roadshow will also include an update on the Minda and Farm Performance Software.

More financial pain – Hoggard PETER BURKE peterb@ruralnews.co.nz

THE FINANCIAL pain for dairy

farmers will hit home early in the coming season, according to the head of Federated Farmers dairy section Andrew Hoggard.

He told Dairy News it’s going to be a challenging season, likely extending well beyond this time next year because retrospective payments will be low. He says many dairy farmers will never have experienced a situation where the payout has gone from

such a high to a massive low.

DairyNZ’s forecasts that most dairy farmers will be in overdraft for all next season and beyond resonates with his own situation, he says.

“For next season we had done our budgets on the basis of a $4.70 payout and based on that we were able to get through next season budgeting on what we guessed was a $5.50 final payout.

That got us through without any borrowing, having looked at various things to cut and at management strategies for how we were going to change things. But when

we did the budget after they took 20 cents off the payout, that effectively meant for us $57,000 out of the budget in the coming spring and added a lot more complexity to it. Obviously we will need to get short term borrowing or look at other options for reducing costs. It changes things for us and it makes next season even more challenging than it already was.”

Hoggard says at the start of the current season farmers received some large retrospective payments which helped their balance sheets. But this won’t happen later this year and that’s when

the pain will hit. He says a lot of people believe things might come right towards the end of the new season, but he says the market is so volatile that anything could change overnight.

Many farmers new to the industry haven’t experienced sustained financial problems like those that exist at present, he says.

He recalls that as a young single sharemilker he lived on baked beans and worked hard when the payout was at a low of $2.70. But now he has a young family whose expectations are not geared to the tough times ahead.

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DAIRY NEWS MAY 12, 2015

6 // NEW ZEALAND DAIRY AWARDS

Planning, fine tuning take s PAM TIPA pamelat@ruralnews.co.nz

“WE ARE willing to keep

learning, evolving and growing.” Those words from 2015 Sharemilkers/ Farmers of the Year, Justin and Melissa Slattery, are perhaps a key to their success.

They were praised by the Dairy Industry Award judges for driving profitability despite the low payout, their exceptional on-farm presentation and detailed analysis of their farm business.

Although “in shock” the morning after winning the top honour at the industry awards, it was obvious to Dairy News that the couple are meticulous planners of every aspect of their business.

Yet they have an overall strategy “to be flexible and

to adapt”. They are 50% sharemilking 550 cows on the farm of Norm and Sandra Williamson at Culverden in Canterbury.

“We want to run our operation so we can take advantage of a high payout and still make money in a low payout,” Justin says.

“Every year, even every month, we are slightly changing our systems.

To maximise a higher or lower payout, you can’t just stick to one system.

You’ve got to be flexible; that is what farming is about.”

The couple, in their late 20s, both brought up on dairy farms in Te Aroha, were dairy farming in Waikato when they researched the best area to move to grow their business.

“We moved over a 1000km from Waikato to the South Island to take

on the opportunity that would help us achieve our goals,” says Melissa. “We looked at lots of things when we chose the region.

The area is the highest producing per cow and per hectare and for sharemilkers that is a good return on investment.”

They looked at the contract and the farm owners.

“Norm is a legend in the area. He has a very good reputation and he has lived up to it – he has been awesome,” says Melissa.

The Slatterys, who have one son Ryan, aged 13 months, aim to buy a 100ha dairy farm in five years. “We are working with the conditions we’ve got to try achieve our goal. It’s a bit slow at the moment (with the low payout) but it’s a big picture thing,” says Melissa.

Entering the dairy awards was “absolutely

Justin and Melissa Slattery

great”. With the merit awards evenly distributed, Justin and Melissa say it seemed on the night to be “anyone’s game” to win the top prize. To bring it home is “unreal”, says Justin. “I didn’t lose my smile all night,” says

Melissa.

The awards helped them better understand their operation. “Just the whole process of analysing our business – going through it with a fine toothed comb. There are definitely areas we needed

to improve on and we’ve seen our strengths and our weaknesses,” says Justin.

With moving to a new area Melissa says the awards made them “really analyse the year and what’s happened and hopefully it will give us

a step forward for next season as well. We’ve got a greater level of detailed knowledge of what’s gone on.”

But the Slatterys say they would not have taken the top prize without their staff and the farm owners.

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DAIRY NEWS MAY 12, 2015

NEW ZEALAND DAIRY AWARDS // 7

e sharemilkers to the fore “It is not just about us, it is about the whole team,” they both say.

And they loved being with the other finalists for four days before awards night. “The dairy industry is great,” says Justin.

“Everyone is comparing and open, and everyone learns off each other.

If you were in the city and had the same sort of business you just about wouldn’t talk to your opposition. That is where I think the dairy industry is great. Everyone is open, everyone is in the same boat. You couldn’t get a better industry.”

Melissa: “The other contestants have been awesome. You have so much in common with them and they are all passionate about the industry. It is all positive – there’s been no negativity at all. We have really

enjoyed that.”

When he left school Justin did an engineering apprenticeship, working four years at Wallace Meats in Waikato. After that he went into the dairy industry working on his father’s 180-cow farm in Te Aroha. “Since then we haven’t looked back; I’ve been in the dairy industry since I was 20.”

Melissa is a Bachelor of Business Management and a chartered accountant, still working part-time off the farm, but also deeply involved in the farm business.

Their overall business strategy is “to dairy farm innovatively and sustainably, to be leaders in our industry while enjoying the journey and providing a balanced lifestyle for our family”.

But they break the strategy down into vari-

ous categories such wealth creation, self-development, staff, health and safety, pasture and feeding management. “We have short, medium and long term goals for all those areas,” says Melissa.

“There are a lot of key performance indicators in those areas with what we are trying to achieve.

We’ve got actions and measures to see what we will do, how we will do it and how we will measure it.”

But with all those plans in place, it still matters to be flexible, adaptable, and learning and growing.

Justin says they keep up with all the rules and regulations and use that knowledge to their advantage. “You know what’s going on and what’s happening in the area and the regions. We hope to see opportunities, whereas

other people would see a negative.”

Melissa says it is a matter of using resources efficiently which can also have financial benefits.

Obviously grass is a major resource. “Pasture utilisation is always a key driver of profitability. It’s monitored so we think of strategies for improving it to achieve those high level targets.”

With the low payout they looked at a pie graph of their costs and picked on reducing the biggest ones to make the most difference. “Wintering cost was a big one and we had a plan for that. There are other costs you can’t compromise on such as wages and staff. We have a great team of two fulltime staff.

We don’t want to compromise in that area. They do a fantastic job. They are in with our strategy and

The 2015 Awards night had a ‘Shanghai’ theme.

want to help us achieve our goals.”

Justin says they use as much grass as possible and Melissa says they reduced the overall cents per kg of feed brought in by using more palm kernel than grass or maize silage.

Palm kernel is 17c per kgDM cheaper than grass and maize silage down the throat after wastage. Bringing in cheaper feed is saving them about $82,000 over two years.

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They have also been hit by the dry this year although the Hurunui irrigation scheme served them well. “But the dryland is not looking good and it’s put a lot of pressure on the winter grazing,” says Justin. “A lot of dryland winter crops haven’t yielded properly so that has been the challenge for us. Where we were going hasn’t come to the proper yield so we have had to chop

50 R E E

and change and be flexible. Our winter grazing is going to three different places now instead of one.”

Melissa says they put a paddock into rape early as an insurance policy and will winter some cows on farm this year. “That has worked out well – just reacting early and making provisions for something that has not gone according to plan.”

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DAIRY NEWS MAY 12, 2015

8 // NEW ZEALAND DAIRY AWARDS

Rugby career great grounding for trade

Farm Manager of the Year James Foote and wife Louise with his trophy.

THE 2015 New Zealand Farm Manager of the Year, James Foote (30), has a drive and thirst for knowledge.

“He’s farming a hard and challenging farm. He’s done a lot of repairs and

maintenance just to get things to an operational state and his management systems are very good,” head judge Richard Jones, a Southland farmer, says.

Foote played semiprofessional rugby for

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10 years and is now contract milking 425 cows at Miranda for Russell and Ces Evans. He won $27,900 in prizes.

“The life skills and disciplines from his previous career as a rugby player have given him a great grounding in dairy farming,” Jones says. “He has a strong focus on improvement and does a SWAT analysis each six months and he focuses on turning a weakness into a strength. We found that very refreshing.

“He has a clear plan to go 50% sharemilking in 2016 and we are sure he will do that,” Jones says. Foote also won the Fonterra Farm Source Farm Management Award.

The runner-up, Canterbury/North Otago’s Mark Cudmore, won $12,600 in prizes and is another career changer with a great attitude. “He got chucked in the deep end and was involved in the conversion of the farm he manages at Cheviot.”

Northland’s Karla Frost won third place in the farm manager contest, winning $8000 in prizes. Frost is manag-

ing the Northland Agricultural Research Farm.

“It’s far more complicated than running a normal farm because of the trials they run and she has got it nailed,” Jones says. Frost also won the Meridian Energy Leadership Award and the Westpac Financial Planning & Management Award.

The judges criticised farm management entries as being fixated on production, not profit. In this they differed from most of the winners in other categories, who were focused on operating profitable systems.

Jones says on most higher-input farms the focus is still on production over profit. “Only one of the contestants we judged was prepared to accept lower production because the feed costs outweighed the profitability.

“We’d speculate that the majority of these farms would make an operating loss this year and that was being accepted. You can’t blame the managers, but the farm’s key performance indicators hadn’t changed to fit the environment.”

Passionate and confident THE 2015 New Zealand Dairy Trainee of the Year, James Davidson, is passionate about the dairy industry and has identified a career pathway within it.

“We warmed to his presentation and he was very confident in himself,” category head judge Nikki Halford, a Hawkes Bay farmer, says.

“The video James prepared for judging was fantastic and illustrated the variety of knowledge and skills required to manage a dairy farm. It showed his passion for dairying and the variety it offers.”

Davidson (26) won $19,500 in prizes. He working on a Darfield, Canterbury, farm owned by Warren and Annemieke Thomas, milking 1400 cows. He holds a Bachelor of Commerce in Farm Management and plans to go contract milking.

Second place in the dairy trainee contest went to Central Plateau representative Gerard van der Mark, who won $3500 in prizes. Halford says he is ready for farm management. “Gerard presents as someone who is already not at dairy trainee level, as he is thinking about managing his team and farm costs.”

Waikato’s Brett Steeghs won third in the contest, winning $2500 in prizes. Steeghs is just finishing his first season in the industry and has secured a 50% sharemilking position with his partner – and last year’s New Zealand Dairy Trainee of the Year, Ruth Hone – for next season.

Image courtesy of Te Aroha Museum

Prosperity comes from productivity.

Productivity comes from improvement.

Now let’s talk about where improvement comes from.

In 1814 there were two cows and one bull, brought into New Zealand by Samuel Marsden. Today the dairy industry has 4.9 million cows and processes 1.83 billion kilograms of milk solids per year.

ELE-01656-RN

In early days, if you were milking more than three or four cows, you were a full-time farmer. Today, two people can milk 800 to 1,000 cows in a couple of hours.

Between 1979 and 2014, milk solid production increased by 1.3 billion kilograms.

60% of those gains came from genetic improvement.

Once, farmers knew their individual cow’s quirks, characteristics and names. Today, farmers have the smallest details of every one of their hundreds if not thousands of cows at their fingertips.

The story of the New Zealand dairy industry has been one of constant improvement.

And at LIC, we’ve been part of that story for over 100 years, helping improve the productivity and prosperity of our farmers.

Helping make New Zealand dairying the world leader that it is.

Improvement. It’s in our nature.

It’s in our name.

DAIRY NEWS MAY 12, 2015

10 // NEWS

Ecology project d PAM TIPA pamelat@ruralnews.co.nz

Living Water Open Day at Pukorokoro, Miranda: DoC director general Lou Sanson Geoff Ensor and Kevin Carter of DoC and Paul Grave and Cerasela Stancu of Fonterra.

A TEN-YEAR scheme for dairying and healthy ecosystems is breaking down longstanding tensions between farmers and ecologists, says Fonterra’s Carly Robinson.

Those levels of tension can vary; sometimes the ecologists are farmers, says Robinson, the co-op’s director of sustainability and social policy.

But the joint Fonterra and Department of Conservation (DoC) scheme called Living Water is bridging the divide in the five

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catchments where it is operating.

“On the surface it seems farmers and ecologists have contradictory goals but they can be complementary,” Robinson told Dairy News.

“We want to ensure we’ve got thriving dairying communities and thriving communities off the back of that, and the healthy environment that as Kiwis we all love.

“A common goal is a great way to break down potential conflicts. Not all the conversations are easy but they are productive and forward looking and exciting in the opportunity it represents.”

Robinson says each Living Water catchment has farmers who are highly passionate about the scheme and do much interaction themselves.

DoC and their networks have come to appreciate what Fonterra farmers have been doing behind the farmgate for many years in sustainable dairy practices.

“It is impressive stuff.

Likewise we have been able to look at what DoC is doing and try to get the best of both worlds.”

Robinson says a common vision and purpose were crucial in drawing together the traditional camps and ensuring communication progressed through any obstacles.

“It is really exciting to start to hear the conversations happening for the coming year of the programme. I feel we will gain momentum. I am excited and optimistic about it and I am sure the DoC team will say the same.”

Fonterra and DoC started talking to see how they could work together on the ecology in 2012 and the next year signed a 10 year agreement with $20 million funding from Fonterra.

The core concept of the partnership between Fonterra farmers and the DoC is how sustainable dairying can work within healthy functioning ecosystems.

Work has begun in five key catchments where DoC and Fonterra have done historical work. The catchments are Hikurangi in Northland, Miranda on

the Firth of Thames and three peat lakes in Waikato – Areare, Ruatuna and Rotomanuka. Those lakes feed into the Waikato River. In the South Island there is Te Waihora/Lake Elsemere and Waituna Lagoon in Southland.

Fonterra works with DoC and various community groups, councils, iwi or other stakeholders already doing work in those areas. “We make an impact alongside that and look at what will make a difference in sustainable dairying and healthy functioning ecosystems,” says Robinson.

The first years have focussed on the objectives of all parties in each area and trying to connect those together and doing baseline studies to get good data to test whether a difference is being made.

“Fonterra and DoC are conscious we don’t want this to be some sort of token tree planting exercise. We want genuine measures and reporting to show we are making progress in key biodiversity metrics within those catchments. You can’t do that until you know what your baseline is.

“We are also using these catchments to trial stuff, so we might look at an artificial wetland in one area and we want to measure the impact of that because we want to see if it’s worth rolling that out across catchments, what kind of catchments it works on and so on.”

Much of the work is innovative.

Robinson says Fonterra and Doc wanted to start with significant water bodies, “certainly ones that had biodiversity challenges or environmental challenges and were close to significant dairying.

“We are trying to crack the challenge we have as a country [to get] both of them working together.”

The five chosen meet the criteria. “All of them are valuable and significant water bodies to stakeholders, particularly to iwi in those regions and land owners and councils.

“They are a starting point and we will start doing more in the future.

We want to get our feet on the ground with these ones and get them going

DAIRY NEWS MAY 12, 2015

NEWS // 11

t dispelling tensions well and then look to extend beyond that if and when it makes sense.”

A good proportion of the work is beyond the farmgate. “It can only be behind the farmgate if it’s over and above what farmers are and should be doing themselves anyway,” Robinson says. “This work doesn’t fund farmers doing sustainable dairying in their own right. We have another programme that works for farmers behind the farmgate which supports them in sustainable dairying.

“The programme builds on that and looks at, say, farmers retiring land or building a wetland on their property. They don’t have to do that – it is not in the conditions of supply, but we might work with them to do that because there are significant benefits well beyond the

farmgate.”

Riparian planting is a key component, education and workshops on wetland construction, habitat restoration, removing pest plants.

In some areas they look at the potential removal of pest fish, work on how water flows through catchments and how to reduce nutrient-rich water runoff into waterways.

With a steering committee of senior people from both organisations and a technical working group, a number of DoC staff and Fonterra farmers and employees are involved.

Wider networks are called in when required.

Learnings out of the initiative will be taken elsewhere by both Fonterra and DoC. “At each of the catchments we are

Tony Woodcock

learning all the time. One of the big learnings for the team has been how much work is already going on in these catchments.

“These are big challenges and opportunities we’ve got; cooperation across multiple parties in the catchment is extremely powerful. There has been a lot going on already but when you can start to bring in landowners, iwi and the community to look at solutions together it gets exciting.

“There’s a lot of optimism and hope that we can enhance the work already being done in the community by many players.”

Farmer Alan Henderson and Martha Dresser (5)with their just planted cabbage tree at Lake Ruatuna a Living Water peat lake.

DoC works with co-op THE LIVING Water conservation partnership with Fonterra is a good example of DoC working deliberately with others to grow conservation, says DoC spokesman Geoff Ensor.

“DoC has always worked with others, but our commitment to partnerships like [this one with] Fonterra is based on our belief that successful businesses and strong conservation outcomes are integral to New Zealand’s future.”

Living Water recognises the environmental importance of wetlands which “play a significant role in the storage and purification of water, help reduce flooding and soil erosion and provide a home for native wildlife and plants,” Ensor says.

“So far Living Water has focused on bringing together all the parties connected to each of the five catchments. This has included local dairy farmers, iwi living in and connected to the catchments, local communities, conservation groups and councils.

“We’re delighted with the buy-in we’re getting from the stakeholders in each catchment to the Living Water programme.

“We’re also assembling baseline data for each catchment to lay a solid foundation for our work programme. This data will enable us to measure how effective our work is in improving water quality and increasing the variety and abundance of habitats and native wildlife in each Living Water catchment.”

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DAIRY NEWS MAY 12, 2015

12 // NEWS

‘Top’ farm has Tasman and P When Fonterra’s milk tankers do their rounds, the northernmost farm they call on – in all New Zealand – is Len and Pearl Crewther’s in the Far North. This is now the country’s ‘top’ dairy farm, 40 years on, at the tiny settlement of Ngataki, from which the couple have watched friends and neighbours further north drift out of dairying. Peter Burke reports.

NGATAKI IS 45km south

of Cape Reinga and just a few kilometres north of the most northern golf course in the country at Houhora where Len plays every weekend. There is no store at Ngataki. The nearest general store is Pukenui in the south or Te Kao in the north.

To collect Crewthers’

milk the tankers have to travel 200km from Whangarei to the gate where the Fonterra sign says supplier 10021. This sign also tells a story about the 20 other dairy farmers who once worked further north than Len and Pearl.

Crewthers’ farm is down a gravel road off state highway one in one

of the narrowest parts of New Zealand. The house is a mere 10 minutes drive from both coasts and in the early days they could climb on the roof and see the Tasman Sea and the Pacific Ocean. Today the trees block this view.

Len was just 19 when his father died and he moved back to the farm

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Len and Pearl Crewther

to help his mother. Within a year or so he bought the farm with the help of a Maori Affairs loan and he and Pearl, who comes from the Far North, started to run the farm.

“Forty years ago we had about 80 cows, then we moved to 120 and now we are milking 260 on the 80ha block plus another 80ha which we lease. I also have a 50ha run-off but this gets very dry in

summer because it is pure sand.”

Today their cows are run through a 32-aside herringbone. But it wasn’t always that way, says Len. “We started off with an eight-aside and that got extended over the years as the cow numbers have increased. The eight-aside only lasted three years because it took us two and half hours to milk the herd.”

This year the Crewther’s produced 82,000kgMS and last year it was 85,000kgMS. The year before that it was 78,000kgMS – a fluctuation dictated big time by weather, says Len. The weather is huge factor in farming in the Far North, drought being the unpredictable problem, not to mention the challenge of managing kikuyu grass pastures. To manage the summer dry conditions Len plants crops such as turnips and sorghum, makes hay and baleage and also maize silage – something he does in partnership with one of his neighbours. While many farmers feed out in late winter and early

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To manage the summer dry, the Crewthers grow crops.

spring, farmers like Len in the Far North are forced to feed out now.

“I am feeding maize silage now to the cows because they lost too much condition. For us late March or maybe into early April is the dry-off period.

“The season runs differently here. In January and February it can be so dry that it’s hard to keep condition on the cows no matter how much you feed them. So you end up feeding out supplements in January and February, hoping the rain will come. You can’t afford to go once-a-day because the cell counts will rise. Even if does rain it takes at least a couple of weeks for this

DAIRY NEWS MAY 12, 2015

NEWS // 13

d Pacific views to be reflected in pasture growth.”

Pearl Crewther says they haven’t had any really good rain since last October and the few showers they have had in the last few weeks have been most welcome. The winds which sweep across this narrow spit dry out the land.

Len says the weather patterns in the Far North are unusual. “We can have a poor spring and quite often you will have a good summer rain or vice versa.

It seems this is the way weather runs and so our production is normally sort of at the same level every year.”

Kikuyu grass needs to be managed carefully and farmers like Len oversow other pasture species to boost production. Len has direct drilled plantain and also grown chicory; the latter he says tends not to last. He’s also re-grassed the paddocks that have been in crops and this has helped.

Len runs an all Friesian herd and the cows are AB’d to a Friesian bull.

But when it comes to the tailenders he works with neighbour John Woodward who supplies him with bulls.

“So he gets the bull he

wants for temperament and we use them and then we sell all the four-day-old calves back to him. Sometimes I’ll rear 20-30 Friesian Angus heifers and sell them back to John in calf,” he says.

Len and Pearl milked cows for 30 years, but now they have two staff to do most of the milking. They do the occasional shift at the weekend and Len gets involved in moving the stock around. But having just turned 60 – last Christmas day - he’s taking a back seat on doing the hard yards on the farm.

Pearl says they employ a nephew and a local lad who’s been with them for a number of years. She’d like to see him get more formal qualifications which would enable him to move up the employment ladder. All their four children have attended university. “We have all our grandkids with us for the Christmas holidays.

We do it because this is our way of seeing them because they live in Auckland, Whangarei and Kaitaia, says Pearl.

For this modest and lovely couple, their dairy farm haven, with all its challenges, has been good to them. They love the area and what it has to

offer. They have raised a family who have moved off farm and are making a future for themselves.

They also have strong connections to the dairy industry. One of Len’s relatives, Claude Edwards of Opotiki, won the Ahuwhenua Trophy for the top Maori dairy farm in 1975.

Top farmer... Len Crewther owns the country’s most northern dairy farm.

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DAIRY NEWS MAY 12, 2015

14 // NEWS

Winter milk premium, no contract required ANDREW SWALLOW

IF YOU’RE a Fonterra

supplier in Canterbury, Otago or Southland you’ll earn an extra $1.40/kgMS for deliveries June 1 to July

Fonterra is offering premium for winter milk in lower South Island.

15, less a transport charge, no contract required.

The co-operative made the premium offer April 16 in a letter to suppliers in those regions in light of increased Asian demand for the mozarella cheese it makes at its Clandeboye

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by farmers.

“They understand the opportunity came along late in the piece and it’s an opportunity for some farms to look if they can do something this winter and earn a premium.”

The $1.40/kgMS premium is “comparable” to normal winter milk terms in the Clandeboye catchment and is “a number that provides us with added value for the cooperative as a whole,” he adds.

South Canterbury dryland dairy farmer and Shareholders’ Council representative John Gregan welcomed the move.

“It’s an opportunity for Fonterra shareholders to get extra money,” he told Dairy News. “The way it’s been handled is very transparent and it’s very simple.”

The staggered transport charge, which Dairy News understands nears 80c/kgMS from the far south-west of the offer area, isn’t a concern, he says.

“They want the milk at Clandeboye so it makes sense to get it from as close to Clandeboye as they can. Effectively it’s a specialty milk, a bit like colostrum.”

But Gregan’s Shareholders Council counterpart in Southland, Vaughan Templeton, says there have been some grumbles about the transport charge in his ward.

“The comments have been that it’s better than nothing but after the transport charge there’s not a lot left so they’re not all happy.”

Fonterra said the transport charges associated with the premium Clandeboye deliveries and the volume required are commercially sensitive, refusing to disclose figures to Dairy News.

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Fonterra head of cooperative affairs Stuart Gray says the initiative is an “opportunity to consider a longer-term winter milk programme” on which farmers will be updated later in the season.

Gray was giving away little on what shape that might take when he spoke to Dairy News last week but it seems Clandeboye’s mozzarella plants – a second line is due to be commissioned this winter – is at the heart of it.

“It sends a strong signal that Fonterra is looking to be very proactive in adding more value to more things with more velocity and speed,” he said, echoing the co-operative’s 3V – Volume, Value, Velocity – strategy.

Whether those who supply this winter could be first in the queue for future winter milk deals hasn’t been looked at, Gray says, though the cooperative will know who they are.

“We’re not doing winter milk contracts as we would normally do during this [June-July] period. We’re just saying we’ll take it at a premium, less a transport cost… We have some long-standing winter milk contracts and we’ll certainly be carrying on with those.”

However, Dairy News subsequently learnt that a valuable winter milk contract to supply Cadbury, which was paying some Southland suppliers more than double the $1.40 premium offered, isn’t being renewed as the chocolate maker has decided it can manage without milk in June and July.

Gray says Fonterra is “very pleased” with the uptake of the $1.40 offer and despite the late notice it has been well received

■ BREAKING NEWS ■ MACHINERY REVIEWS ■ MARKETS & TRENDS ■ MANAGEMENT STORIES ■ COMPETITIONS ■ AND MUCH MORE...

All the latest stories and more at www.dairynews.co.nz

DAIRY NEWS MAY 12, 2015

NEWS // 15

US dairy’s influence set to grow JO BILLS

IN LATE April Freshagenda’s directors were fortunate to attend the ADPI/ABI (American Dairy Products Institute/ American Butter Institute) Conference in Chicago.

This major conference draws around 1000 delegates and is dubbed as the place “where the dairy industry does business” – networking and deals dominate proceedings.

Conference sessions aren’t a high priority for many attendees – but a keynote session featuring some of the US dairy industry’s most senior and respected leaders drew a large crowd.

For us it provided some insights into the changing mindset of the US dairy sector towards the world market outside their borders and their transition to being “internationalist”.

The conference panel discussion on global trade featured leaders of three exporting cooperatives, a USbased international trader and a highly respected consultant in risk management and procurement.

Jim Wegner, the outgoing president and chief executive of the Northwest

Dairy Association (Darigold), effectively set out the likely future reality for the industry based on extrapolating trends in production and domestic consumption.

In 2014 exports accounted for 15% of US milk production, but projecting forward, Wegner’s analysis suggests exports will represent 23.5% of output by 2020 – a greater share than domestic fluid milk consumption which is expected to continue to decline.

Exporting will not be an optional extra for the US industry – it will be at the very core of the business.

In meeting that challenge, the discussion went to tackling some of the realities of being more international.

A lot of this centred on quality issues and farmer support arrangements which significantly hamper the industry in its export efforts.

Standards of identity for butter and SMP that are different from international norms, a pricing system that makes it difficult for exporters to commit to forward export orders, when

the cost of their major input – milk is based on domestic market trends, is constantly shifting, and subject to administrative rules that are out of step with the current and evolving situation.

Changing these settings will take enormous political will in a climate where the machinery of US government is highly dysfunctional.

It’s not all about obstacles; Mike McCully from the McCully Group highlighted the advantage the US has in Jo Bills an increasingly volatile trading environment in having a strong market culture that embraces risk management tools such as futures, options, swaps and forward contracts.

Some of the real gems came from Jay Waldvogel, who for a time saw action as chief operating officer at Fonterra, but is now a senior vice-president in Dairy Farmers of America.

He talked about the length and complexity of supply chains that meant that export returns will not grow in a straight line, external factors, ”the unpredictable” will have ongoing impact.

He talked about fundamentals around increasing demand based on long term demographic and economic trends that do not go away when prices cycle downwards.

It seems the US industry suffers the same emotional rollercoaster our own industry goes through when it seems the promise falls short of the reality and markets don’t continually climb.

The panel’s discussion on sustainability would also be familiar to many in our own industry – that the word means different things to different people; how it can and will be used as a non-tariff barrier; and that many farmers see moves toward increased sustainability as adding costs.

Waldvogel said consumers everywhere are concerned about sustainability - “not just the nut jobs” but also that the US is a “well-behaved” industry that can use sustainability as a competitive advantage if the industry can think about it positively.

Perhaps the most interesting insights, given where our own industry discussion has been in recent weeks, were shared in response to a question on the use of the productivity tool rbST, and GMOs.

It was acknowledged that major competitors – New Zealand and the EU – do not use either, and that customers have varying degrees of sensitivity.

However, there was a clear push by a number of US industry leaders to position these technologies as supportive of sustainability, and that fragmenting the supply chain through segregation is not that big a deal given that “milk is not milk” anymore.

That’s OK – it’s an opportunity to differentiate and create value.

Again Waldvogel’s view was that safe, efficiently-produced and affordable milk to feed everyone is important – “we can’t feed everyone on organics”.

The US dairy sector is going through a significant transition from exporter to a truly international industry.

It is clear though that US involvement in global dairy trade will continue to grow.

• Jo Bills is a director of Freshagenda, a Melbourne-based consulting and analysis firm that provides food value chain insights and solutions to a wide range of clients from farm to retail. @dairy_news facebook.com/dairynews

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DAIRY NEWS MAY 12, 2015

16 // NEWS

Cows die as farmer works elsewhere land property led to 12 cows starving to death and Niven John Lowrie, of Kaiwaka, being convicted of ill treatment of animals.

Lowrie appeared for sentencing on a charge of ill treatment of ani-

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mals laid by the Ministry for Primary Industries in Whangarei District Court on May 1.

Judge Davis fined Lowrie $4000 and ordered him to pay $1848.46 in vet expenses, $960 in costs to MPI and $130 court costs.

Lowrie had in February defended a serious charge of reckless ill treatment and a lesser charge of ill treatment in Whangarei District Court.

In a written decision on March 9, Judge McNaughton found Lowrie not guilty on the charge of reckless ill treatment, but guilty of the ill treatment of animals.

The charges follow a visit to the farm by MPI animal welfare inspectors who found 12 dead cattle and a further 13 cattle that were emaciated. They were in a paddock with no pasture and an empty water trough.

Lowrie was working on a dairy farm at Fox Glacier at the time of an inspection and had employed a farm worker to visit his Kaiwaka farm daily to move stock to new pasture and feed hay.

The worker said he

did not realise there were two herds of cattle on the farm, one of 10 and another of 25 animals.

After intervention by MPI and improved feed and water, the 13 emaciated cattle recovered under the care of the worker.

The farm was also carrying 160 deer. Seven of the deer were in very poor condition and had to be euthanased. An animal welfare inspector and an independent veterinarian assessed there was not enough pasture for the remaining deer and arranged for 80 deer to be sold or slaughtered.

In an interview with animal welfare officers, Lowrie said he gave his worker instructions on the extent of the farm, the location of the animals and the storage of hay.

Judge McNaughton said that after the issue came to light, Lowrie left the farm a second time and chose to leave the same worker in charge. He said it was “highly implausible” Lowrie would leave the worker in charge again if he believed the worker was entirely at fault.

Banned from owning cattle A CONVICTED animal welfare offender was last

month disqualified from owning stock for 20 years and fined $7500 on a new charge in Whangarei District Court.

Lester Donald Rueben Johnstone (82), a farmer, of Maungatapere, near Whangarei, was convicted of failing to ensure that the physical and health needs of six calves were met in accordance with good practice – namely by failing to provide the calves with sufficient food.

Two calves starved to death, one was put down and three were removed from the property to mitigate their suffering and improve their health.

Judge Davis disqualified him from owning, controlling or having any authority over production animals for 20 years, fined him $7500 and ordered him to pay $2379 veterinary costs and $130 in court costs.

The charge relates to several visits by MPI staff in 2014, to properties in Northland owned or leased by Johnstone, to inspect skinny calves, based on a public complaint on May 30.

During four visits from May 30 to July 22, MPI staff found several animal welfare issues on Johnstone’s properties and did what they could to mitigate the animals’ suffering. The issues included a mob of skinny weaner calves in a paddock without grass or water and an emaciated young cow having difficulty standing, which had to be put down.

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DAIRY NEWS MAY 12, 2015

18 // NEWS

Russian revolution in the dairy shed MILKING TECHNOLOGY supplied by Waikato

Milking Systems (WMS) is helping a large-scale Russian farm double its 1000cow milking herd and production.

TerraNova Group, which owns several dairy farms in western Russia, in 2012 began planning to build its 4300ha Novoladozhskiy farm near St Petersburg, in the northwest of Russia.

Director Hadley Trainis says the group president reviewed technologies and systems used by lead-

ing dairy nations and the WMS name kept coming up.

The Novoladozhskiy farm property had been a dairy farm in the Soviet Union era, winning awards and respect, and training local farmers.

The harsh climate forced its high genetic Ayrshire herd housed indoors yearround, fed a diet of silage, grown on the farm, and supplements.

But it needed new milking technology, says Trainis. “We had scale and scope not fully utilised and

the president’s vision was to realise the farm’s potential by drawing on the best knowledge, systems and technology in the world.”

The plan was to double the milking herd to 2000, with a corresponding increase in output.

“Our president [listed specific] improvements needed to release the farm’s potential, and reconstructing the facilities was uppermost. The barns which house the cows are being redeveloped… to maximise herd health and welfare.

“A new farm dairy was also critical: the existing herringbone was built in 1998 and it was taking six people 5-6 hours to milk the 1000 cow herd twice daily, so something had to be done for throughput of 2000+ cows. The obvious answer was a rotary platform.

“We looked at the leading manufacturers of rotary milking systems in the world and narrowed our choice down to two. British farmers consistently talked about Waikato Milking Systems.

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“Our farms in Russia are quite remote; there’s often a long distance between locations so [repairs take time].

“Waikato Milking Systems had a reputation for being a world leader in systems rigorously tested before launching; the farmers who used them found them very robust.”

WMS’s head office location in New Zealand didn’t bother TerraNova, says Trainis. And the company has agents in Russia.

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importing anything into Russia…. The paperwork’s the same no matter where it’s come from and any additional cost is offset by the knowledge that you’ve bought the best.”

With WMS’s Grant Wisnewski advising, TerraNova chose a 60 bail Centrus platform with automatic cup removers and washing system. It also bought milk analysis equipment from AfiMilk in Israel.

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form is needed 8km from our Hamilton base or, as in the case of Terranova, 16,500km, the same fundamentals apply: farmers want a product tailored to their needs and which will perform and [endure].

“Those were the attributes Terranova wanted.

Their farms are relatively isolated from our service centres so they wanted state-of-the-art systems which are easy to use, robust and [low] service.

“With servicing in mind, Terranova opted for a 60 bail Centrus platform which is 80% lighter and five times stronger than concrete alternatives.

“The deck sections are formed in a multi-layer laminated process that includes Kevlar, a material five times the strength of concrete and used in the manufacture of the latest Boeing Dreamliner aircraft, Americas Cup racing yachts, police vests, etc.

“The strength and lightness of the rotary platform means less wear and tear on running gear, and lower maintenance costs. A 60 bail Centrus rotary platform, for example, is 5 tonnes compared to the 26 tonnes of a concrete platform.

“The composite platform is unique to Waikato Milking Systems, which

has a worldwide patent, and is made entirely Grant Wisnewski at our Hamilton base and shipped to the destination.

“We prepare a layout of the parlour which takes into account such things as cow flow, integration with barns where the herd is housed, and multiple herds where several thousand cows are milked up to 22 hours per day.

“The platform was constructed entirely in New Zealand and shipped to Russia in two containers. Once the milking systems arrived we sent an engineer over to build the rotary platform supported by two or three of our local service people.

“Our engineer normally spends 18-21 days on site and then comes home. He is followed by another man who oversees installation of the milking machine which can take up to 20 days. “[Then another man] commissions the platform and spends four to five days onfarm, training the staff in how to operate the milking system and how to milk cows in a rotary.”

WORLD // 19

Fonterra UK partner cuts milk price, jobs SUDESH KISSUN sudeshk@ruralnews.co.nz

UK’S BIGGEST farmer-

owned dairy cooperative is reducing its milk price and slashing jobs as part of a turnaround plan.

First Milk is reducing payout to suppliers by an average 66c/L and will lay off 70 staff.

Fonterra has close links with First Milk: in 2011 it launched a joint venture in innovative whey protein products to meet growing European demand.

The two co-ops produce premium whey proteins for Fonterra’s food ingredients business, combining their intellectual property and expertise to add value to whey at First Milk’s Lake District creamery in Cumbria.

First Milk’s new chief executive Mike Gallacher says the decisions to lay off 70 staff and reduce the milk price were “necessary steps in the process of rebuilding a secure and stable future for First Milk, its members and its employees”.

“First Milk plays an important role in many rural communities across the UK and values the support it has received from all stakeholders. We aim to restore the health of First Milk so we can [pay]… better milk prices.”

The collapse of dairy markets and the big increase in milk volumes during 2014-15 exposed weaknesses in First Milk’s existing milk pricing system, he says.

From June 1, pricing will be based on net commercial returns from First Milk’s plants and customers.

“As part of this, the

tightest and closest milk fields have been identified which will be used to service those outlets most effectively; we will have four manufacturing and three balancing milk pools.”

Farms near the co-op’s Arran, Campbeltown, Lake District and Haverfordwest creameries will make up the manufacturing pools. Farms on the Scottish mainland, in Northern England and the Midlands of England/ East Wales will make up the balancing milk pools.

First Milk’s board has

mendations are to be presented to members before the summer. We look forward to this painting a full and clear picture of what has happened in recent times and help explain the rationale for the turn-

■■

■■

around strategy.

“We have already been in touch with First Milk, [seeking] to understand the rationale behind this latest price movement, and to seek clarity on their long term plan.”

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agreed to cut $6.6 million in member payments and this has been built into milk prices, equating to an average price reduction of 66c/L. NFU dairy board chairman Rob Harrison says the drop in milk payout brings little or no comfort to members across England and Wales who have supported First Milk over the years.

“We all want to see a secure future for First Milk but this should not be done at the expense of their members,” he says.

First Milk will get an independent review of governance and commercial learnings from the business’s recent performance.

Harrison welcomed the review. “The recom-

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DAIRY NEWS MAY 12, 2015

20 // WORLD

Processor rescues stranded Oz farmers AUSTRALIAN DAIRY

company Warrnambool Cheese and Butter has come to the rescue of 40 farmers caught up in the receivership of an independent processor.

The 40 suppliers, who produce 60 mil-

lion litres of milk, were left with nowhere to send their milk, after processor United Dairy Power (UDP) went into receivership last month.

WCB’s senior vice president and general manager Richard Wallace says

UDP’s financial woes affected 52 suppliers in Southwest Victoria and South Australia and over 100 million litres of milk were displaced.

Most of these suppliers were given minimal notice (about 48 hours) to make

alternative arrangements for their milk.

“We have worked hard to attract these suppliers to WCB and are pleased to announce that over 40 have joined the company,” he says. “This is estimated to provide us with an addi-

Warrnambool Cheese and Butter has come to the rescue of 40 Australian farmers abandoned by an independent processor.

tional 60 million litres of milk annually.”

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ers who have joined WCB will be paid on the Saputoowned company’s milk pricing system.

“As these suppliers are joining us under such unexpected and unforeseen circumstances and also so late in the current season, WCB has assured them they will not be adversely impacted financially in comparison to UDP monthly prices by joining us,” says Wallace.

“We expect our milk price will be on par or above that of UDP for most suppliers joining us in the remaining months of this season, particularly as we aim for a further increase in milk price.

“While the new suppliers and increased milk volume will have very little impact on the business

performance for the current season, it will deliver incremental value and efficiency gains to WCB.” Last year Hong Kong businessman William Hui paid about A$70 million to take control of UDP, Australia’s largest privately owned milk processing company, from its founder Tony Esposito.

But UDP’s parent company was placed in receivership after its banker sacked its board and appointed a new chief executive to manage its debts.

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Cheese and Butter is boosting its presence in the cheese market by taking over a rival’s brands.

It will buy Lion Dairy’s everyday cheese business for A$137.5 million, the deal including Coon, Mil Lel and Cracker Barrel brands.

WCB will also take over Lion’s cut-and-wrap facility adjacent to WCB’s site at Allansford, Victoria. Lion manages cut-and-wrap for both businesses; WCB manufactures cheddar for Lion.

WCB says it will run the cut-and-wrap facility as a going concern, and intends to retain all staff.

Lion managing director Peter West says under its stewardship Coon, Mil Lel and Cracker Barrel have become family staples, and its everyday cheese business continues to perform well in the market.

“Our decision to sell is part of our broader threeyear strategy to turn around performance at Lion Dairy and drive sustainable profit growth.

“We are focusing resources on our biggest growth opportunities, which are in higher-value categories such as milk based beverages, speciality cheese and yoghurt.

“Warrnambool Cheese and Butter is ideally placed – with the right assets, business profile and manufacturing footprint – to take over ownership of Australia’s leading everyday cheese business.”

Lion is happy that the agreement secures jobs at the Allansford cut-and-wrap site.

“This deal appropriately values the business and delivers a win/win for all stakeholders – including our people, the Allansford community, local farmers, customers and consumers. The proceeds of the sale will be invested in our turnaround strategy,” says West.

DAIRY NEWS MAY 12, 2015

WORLD // 21

South Australian fresh milk reaches China SOUTH AUSTRALIAN dairy

farmers have begun exporting fresh milk to China.

Last month the first commercial shipment of 1872 one-litre bottles left Adelaide on a Cathay Pacific flight to Hong Kong, then by air to Nanjing in central eastern China, and so to retailers.

SADA Fresh was launched 18 months ago by the South Australian Dairyfarmers’ Association (SADA) “to help secure the future viability of the state’s dairy industry and its farmers”.

“Using the milk brand to draw investment to South Australia and open up new markets for our dairy products were always primary goals of the enterprise, so this is a very exciting day for us,” says SADA president David Basham.

“After the initial run the Chinese importer has committed to purchasing one air pallet of about 3960 bottles per week for the next three months, and there are

expectations it will double after China is also processed, packaged that, depending on the market’s and exported by Parmalat, under a separate licensing agreement with response,” Basham says.

“Despite all the headlines SADA. About half recently about the bottles in last Chinese intermonth’s shipment est in Australian were used to prodairy products, mote the brand to and the new Free Chinese customTrade Agreement ers and help build between Austramarket share. lia and China, it The milk will be is very difficult to retailed through crack this market conventional shops and convert the talk SADA president and supermarkets, into actual sales.

David Basham and the online gro“Even though the initial shipment is relatively cery stores now popular in China. small, we hope this breakthrough Consumers can buy two or more will open doors for other South bottles at a time and even subscribe Australian dairy brands and lead to receive weekly deliveries.

Basham says the first shipment to greater opportunities for us all.”

Parmalat holds the licence to follows small-scale trial shipments process, package and supply SADA in the past two months, and six Fresh wholesale in South Australia, months of planning and negotiawhere it is currently retailed exclu- tion.

“The opportunity came last sively through Coles. The milk for

Milk in biocartons hits shelves

October when Austrade (the Australian Trade Commission) held a food expo in Melbourne. Among potential export buyers attending the event was a Chinese importer looking for companies that could supply fresh milk, and I just happened to be in Melbourne at the time so I met with them,” he says.

The association helped set up meetings with Parmalat who negotiated a formal contract with the Chinese buyer last month. In the meantime, trials were organised to fine-tune delivery and distribution protocols, and to make sure the milk meets Chinese quarantine regulations and quality control specifications.

“It’s been a far from straightforward process that has also involved developing a new label, not just to incorporate Chinese characters, but to feature blue rather than the brand’s usual red or yellow, to meet a request from the importer,” Basham says.

EUROPEAN DAIRY co-op FrieslandCampina will from next month sell its fresh milk and buttermilk in ‘bio-based’ cartons.

The already-paper cartons will have their caps and coatings made from certified-organic waste polyethylene.

FrieslandCampina says this innovation makes the container the most sustainable beverage carton ever.

“The CO2 footprint of this bio-based milk carton is 20% lower than the current carton.”

The co-op’s managing director in the Netherlands, Berndt Kodden, recently presented a carton to Jacqueline Cramer, professor of sustainable innovation, Utrecht University.

Says Knodden, “In recent years our beverage carton has undergone a sustainable evolution. Now we [have] a bio-based milk carton in which we invest in the transition to renewable raw materials.”

Cramer says the carton fits perfectly within the movement to a ‘circular’ economy, where the raw material of the carton is completely renewable. “This step can work as a flywheel because the technology is accessible to everyone.”

The carton is a useful application of waste streams, the co-op says. The material supplier, Elopak, says it hopes the project will lead to an increase in demand for the certified bio-based cartons.

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DAIRY NEWS MAY 12, 2015

22 // OPINION RUMINATING

EDITORIAL

An uncomfortable reality

MILKING IT...

It’s all a bit hazy…

ATTENDEES AT the recent New Zealand Dairy Awards finals got more fun than they bargained for. A haze machine, used by Sky City to add colour to the finals atmosphere, triggered a smoke alarm.

Attendees were ushered out of the hall. Milking it was told the evacuation was orderly; once the smoke alarm was neutralised, the party resumed in earnest.

Dark milk lightens sleep woes

HAVING TROUBLE sleeping? You may want to try a specially concocted brand of ‘dark milk’ being produced at New Zealand farms.

Canterbury’s Synlait Milk has discovered that if you milk cows after the sun has gone down, and then again in a darkened shed before it comes up, the milk has higher levels of the hormone melatonin, known to help regulate sleep cycles.

Synlait research manager Simon Causer says melatonin levels in night milk can be four-ten times higher than in normal milk.

Dozens of Canterbury farms have now started adjusting their milking schedules up to 30 days every year to provide special orders of dark milk, he says.

Mothers’ milk – from the bank NEEDY BABIES in the US state of South Carolina now have the chance to receive breast milk from the state’s most generous moms. South Carolina’s first breast milk bank just opened in North Charleston. Ten “milk depots”will accept donations.

Milk donated to the bank won’t be sold, but will be distributed to neonatal intensive care units across the state.

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No bull, cow enrols for exam

IMAGINE A cow aspiring to be an engineer. It’s possible in the Indian state of Jammu and Kashmir, as the state’s board of professional entrance examination (BOPEE) made history of sorts by issuing an admission card to a cow for a state `diploma in polytechnic’ test.

For the record, she is not an ordinary cow.

Her name is Kachir Gaw (blonde cow), daughter of Gura Dand (big bull).

She has to appear for the entrance test to be held at Government Degree College Bemina, Srinagar, on May 10.

This year the admission form for the entrance test was to be submitted online. And one of the applicants was Kachir Gaw. Surprisingly nobody bothered to verify the credentials, even though the applicant had also uploaded the picture of a cow on the form. Worse, the authorities issued the admission card also with a picture of the cow.

Red-faced by the goofup, BOPEE is trying to track down the “man or woman” who played this mischief.

DAIRY INDUSTRY optimists have for months been talking up the future, saying things will improve. Others who saw the bright sky in the morning as a warning some time ago were bemused at Fonterra’s optimism.

Now emerges the reality: economic forecasting by DairyNZ which will send shivers up the spines of dairy farmers who are highly geared, have high cost/high input systems and are relatively new to the sector. Not too many businesses outside dairying would survive for a year or more on overdraft, but farmers and their bankers have little choice.

The raw facts are that the $4.50 payout will not even give most farmers enough cash to service debt and pay farm working expenses, let alone buy a loaf of bread from the corner dairy.

It will be a case of borrow and hope and in the case of the banks, lend and hope. They too are inextricably caught up in this mess.

New Zealanders living in provincial cities and towns will feel the pinch pretty quickly as farmers cut back on rural services.

Capital spending will probably be a no-no and, as DairyNZ predicts, farmers will likely cut back on repairs and maintenance and be strategic with fertiliser use and supplementary feeds.

There may be job losses on farms. Retail outlets in dairy dependent towns have reason to be worried. With less cash, optional environmental projects on farm could also be cut.

The trickle-down effect will flow on to the big cities as well.

With a lower tax take, government spending is likely to face the chop and overpaid bureaucrats in Wellington may have to revert to instant coffee rather than their expensive lattes. God forbid, even their Koru Club memberships could be under threat.

To be fair, not all hope is lost: farmers are lucky that interest rates are very low and will likely remain so for the foreseeable future – but things can change. The banks are predictably suggesting that all will eventually come right and that only a few years ago there was a similar volatile price upheaval. They are basing their optimism on developing economies, especially in Asia, where people demand more protein in the form of milk products. But more milk from the US and Europe will also hit these markets and there are no guarantees.

Right now there is an undeniable financial crisis in the dairy industry which could last 18 months or more.

While this is hard on individuals, maybe it will help all concerned to have more realistic expectations of an industry that is clearly prone to volatile market swings.

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DAIRY NEWS MAY 12, 2015

OPINION // 23

Councils must keep it fair CHRIS LEWIS

RATES ARE being

set nationwide as local authorities prepare their long term plans (LTP) for the next three years.

These plans set out a council’s long term focus, describe the activities it intends to provide and specifies the community outcomes to be achieved.

More importantly from the ratepayer’s perspective, the plans show who will foot the bill for these activities.

a tough job in meeting the growing legislative requirements of recent years, while being saddled with an archaic system of property value rates, where landowners are disproportionally charged higher on behalf of the whole community.

So, three cheers for the Waikato Regional Council, which has proposed a prudent draft LTP with only a very small overall increase in total rates – 0.8%.

The council has tried hard to be fair, and its consultation documents and

Rates are a big expense for the urban population and even bigger for rural dwellers.

Federated Farmers staff and elected members are busy scrutinising these plans. Members don’t fully understand where their membership money is spent. It has taken me a while to get my head around all the different activities of the federation and its effort towards keeping 85 councils honest and fair to rural communities.

At Federated Farmers’ Hamilton office I observe mountains of folders our policy staff have to read, in a short time, to write their submissions, present them and hopefully get some big wins for our members and communities. It’s a job I prefer to leave to professionals.

Rates are a big expense for the urban population and even bigger for rural dwellers, especially now when commodity prices are low and the US dollar is high – tough for our exporters. Federated Farmers has a strong interest in the effective performance of local government and strives to ensure transparency in rate setting and a fair go in the overall cost of local government to agriculture and ratepayers.

The federation submits on at least 60 annual plans each year, so our elected members and staff well understand what’s reasonable. Councils have

extensive background documents are user friendly – important in serving ratepayers. For our policy advisors, it enables them to better engage and inform the rural community and be a conduit to ensure the council meets their needs.

I make this suggestion: the council needs to keep the increasing trajectory of the annual general charge (UAGC) for the rest of the LTP, not just the first year.

Full use of the UAGC will reduce the council’s reliance on propertyvalue rates, which will reduce the inconsistencies between what farmers contribute to council public-good functions compared to those of other ratepayers.

To date the council’s UAGC hasn’t represented progressive good practice and lags behind many other regional councils.

The affordability and fairness of rates is a big issue for farm businesses, given that in large part they are allocated on the basis of property value as opposed to income.

Further increasing the UAGC will help to relieve this burden and provide for more reasonable rating in that all households, rural or urban, will pay a fairer amount for access to the same services.

Just as the council’s service of democracy ben-

efits all ratepayers in the same way, so they should pay the same as far as possible.

For those on lower incomes that struggle to

afford it, there is help via schemes such as the rates rebate scheme.

• Chris Lewis is Federated Farmers Waikato provincial president

Chris Lewis, Federated Farmers Waikato president.

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DAIRY NEWS MAY 12, 2015

24 // AGRIBUSINESS

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are among the 10 finalists for the 2015 Ballance Farm Environment Awards.

Rachel and Greig Alexander, Pakotai, were named supreme winners for the Northland region and Eltham dairy farmers Mark and Jacqui Muller and their manager Conrad Maeke won the top award for Taranaki.

Wairarapa dairy farmers Leo and Rebecca Vollebregt won the Greater Wellington Award; Te Anau sheep and dairy farmers Robert and Anna Kempthorne took out the Southland title.

Winners from each region will now contest the highly prized national winner title.

Simon Saunders, chairman of the New Zealand Farm Environment Trust (NZFE), says the calibre of entrants in this year’s competition was again very high, making it tough for judges to select the finalists let alone the supreme winners.

“I’ve [attended] most

Wairarapa dairy farmers Leo and Rebecca Vollebregt won the Greater Wellington award.

of the award ceremonies and what I’ve seen there has amazed me.

“Every entrant has a good story to tell and it’s incredible how much work is being done to improve sustainability onfarm.

Much of this work is unheralded, so it’s good to see these hard-working people get recognition for what they are doing.”

Saunders says the 2015 awards attracted a diverse range of entries, with sheep and beef, dairy and

horticultural operations all represented among the supreme winners.

The competition also attracted a number of first-time entrants eager to learn more about environmental sustainability.

“Some regions had a pretty tough year due to drought, but it was very pleasing to see that farmers were still willing to enter the competition and show what they were doing to improve sustainability and profitability.”

The regional winners will be honoured at NZFE’s National Showcase in Wellington on June 24. The national winner will be announced at this event, receiving the prestigious Gordon Stephenson trophy.

Supreme winners also host field days on their properties.

“I’d urge all farmers to get along to these field days because they are educational and inspirational,” says Saunders.

Pasture pest under probe FRESH

RESEARCH by AgResearch scientists will help unlock mysteries about a serious West Coast agricultural pest and allow farmers to make better management decisions and potentially save money.

Porina caterpillars are grazers that can reduce the long term quality and production of pasture, but AgResearch senior scientist Sarah Mansfield says little is known about the pest’s specific impact on the West Coast.

Now, research during a three year $300,000 Sustainable Farming Fund project will allow farmers to better understand how to monitor for the pest and then kill them more efficiently and cost effectively.

“One of the big problems is that farmers often use control methods too late and after the damage is already done,” Mansfield says.

“Clearly this costs a great deal of time and money for very little return so we hope to be able to pro-

noticeable from April to September.

Mansfield is analysing moth numbers from light trap collections on eight farms in the region over the summer.

“Our initial review of the traps is to identify adults to see if there is more than one species of porina. We suspect there is and that they fly at different times of the summer so in effect this means the porina problem gets ‘stretched’ Porina caterpillar over the summer struct silk-lined casings on the soil making it even harder to control.”

Mansfield plans to run farm field surface, and as they grow they construct permanent burrows in the days in early winter on the West soil. They emerge from their bur- Coast allowing farmers to observe rows at night to feed, severing first-hand the work scientists are grass and clover leaves at the base doing.

In addition to SFF funding, the of plants and dragging them back to work is supported by DairyNZ, their burrows to eat them.

Moths fly in large numbers the Ministry for Business, Innovaduring spring and early summer. tion and Employment, Ecosystems They do not feed, but each moth Bioprotection programme, Westcan lay up to 3000 eggs on the land Milk Products, Landcorp and pasture surface. Caterpillars and the West Coast Pest Management the damage they cause are mostly Group.

vide them with more effective tools to alleviate this.”

At low densities, porina are direct competitors with stock for foliage and at higher densities plants are destroyed allowing inferior plant – or weed – species to establish.

Young porina caterpillars con-

DAIRY NEWS MAY 12, 2015

26 // AGRIBUSINESS

Farmers in survival mode, trimming c Milk prices are volatile and difficult to predict so farmers should approach next season with caution. DairyNZ economists Matthew Newman and Zach Mounsey look at how the 2015-16 season could shape up.

THE DRY summer

nationwide has undoubtedly had an impact on the global dairy market. Fonterra’s announcement of an expected 3.3% less milk than last year and a corresponding expected reduction in GDT volumes was met with an unexpected spike in whole milk powder (WMP) prices.

Since then, milk production predictions for this season have been lifted with DairyNZ estimates currently sitting at similar volumes to last year. Any chance of a lift in the $4.50/kgMS milk price has now diminished with declines in recent auction prices putting a further dampener on the season.

FMG0055DNP

Supply and demand factors While most analysts were forecasting an improvement in milk price over the next six months, there are many reasons why farmers should proceed into next season with caution.

Russia’s one year ban on imported food from Western countries (although this does not include New Zealand) may be extended beyond August of this year.

This means any surplus European Union (EU) production is likely to make its way into developing markets such as North Africa, the Middle East and Asia.

The EU have now removed milk production

quotas and while this may not have much initial impact, the Netherlands, Germany, France, Denmark and Ireland will look to increase production over the next five years.

Chinese stocks of milk powder should be largely worked through now, but uncertainty remains as to when we will see a substantial increase in demand from this key market.

Reduced cow numbers and lower milk prices will constrain milk production in China over the next couple of years, creating a larger supply gap and adding to the requirement for imported powder.

US milk production continues to grow in line with positive milk:feed price margins.

The exception is California, which is much closer aligned to international milk prices.

In

Matthew Newman

mid-2014 the exchange rate for NZD:USD was 0.86. Just six months later in the beginning of 2015 the exchange rate had dropped to 0.74. While there is some expected appreciation later this year, it is unlikely to increase to the 0.80 mark.

However, the New Zealand dollar is performing strongly against the Euro and Australian dollar.

Oil prices are currently very low, and there is a strong correlation between whole milk powder prices and crude oil prices. Forbes economic commentator and forecaster Bill Conerly expects there may be temporary market volatility, but doesn’t expect a higher oil price to be sustained in

2015. His estimate is $60 a barrel with some rise possible in 2016.

2015-16 milk price Cashflow this season wasn’t as grim as the headlines portray, and was still manageable, largely due to the high 2013-14 retrospective payments.

However, the retrospective payments next season (2015-16) will be

less than 50 cents when compared to this season of $1.50. To put things in context, just one of the month’s retrospective payments paid this season (40 cents) is close to as much as what will be received over four months next season.

Recent auction results on the GDT have shown substantial movements. Some of the major banks have been quick to

Zach Mounsey

DAIRY NEWS MAY 12, 2015

AGRIBUSINESS // 27

g costs and raising productivity adjust their forecasts for this and next season. Most analysts are forecasting a milk price of $4.50-$4.70 for this season. (See table below). Most farmers should be well placed this season to manage their way through on the back of last season’s record payout. However, the outlook of a stronger milk price for next season has taken a blow following recent reductions in auction prices.

This cycle in milk

prices is very similar to the 2008/09 downturn. If you believe history may repeat itself, the milk price will begin ‘with a five’, still a way from the five year average of $6.50/ kgMS. This is based on an anticipated milk price of around US$2800-$3200/ tonne and an average exchange rate of 0.74 to 0.77 NZD:USD. In times of low milk price such as New Zealand is experiencing it is a case of survival firstly, through

trimming costs and improving productivity.

There has been higher early culling of cows, indicating farmers will take this route as well as once a day milking and early drying off, rather than relying as much on purchased supplementary feed, as occurred last season.

Capital spending and discretionary expenditure will be knocked right back.

However, if milk prices do not reach $6/kgMS

Forecast milk prices by industry analysts

Fonterra ANZ ASB Westpac AgriHQ

2014-15 $4.50 $4.50-$4.70 $4.60 $4.90 $4.50

2015-16 $5.75 $6.20 $6.10 $5.70

As at 1/05/2015

There have been higher culling of cows as farmers reduce costs.

next season it will be core operating expenditure that will need to be looked at further to prevent debt escalations. This will require difficult on-farm

management decisions.

Farmers who are proactive rather than reactive will be better equipped to approach the volatile fluctuations in

milk price. Maximising margins through considering the cost of production is crucial, and New Zealand dairy industry’s competitive

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DAIRY NEWS MAY 12, 2015

28 // AGRIBUSINESS

New herd test lab a world leader LIC HAS opened a new $5 million

herd testing facility in Hamilton.

LIC chief executive Wayne McNee says the facility is part of an ongoing redevelopment of LIC’s assets, buildings and systems to help enable the co-op to deliver on its strategy.

“The new lab will set us up for growth. It will give space for us to introduce new tests, and improve service delivery to our farmers,” he says.

The co-op is also upgrading its information technology systems, renovating and refurbishing offices at its Newstead headquarters, upgrading its semen laboratory and building a new semen collection barn.

The move into the new herd testing facility has begun, with the laboratory to be operating at full capacity by August when the peak season starts.

Following a blessing by Tainui kaumatua, the Minister for Primary Industries, Nathan Guy, addressed a crowd of around 80 people, including Hamilton MPs David Bennett and Tim Macindoe, local LIC director David Jensen and senior managers and staff of the co-op.

Guy congratulated LIC, noting that it will be one of the largest facilities of its kind in the world.

“Herd testing and diagnostics are major contributors to the profitability of New Zealand dairy farming. Information collected through these tests is used to predict the likely efficiency of cows, bulls and their progeny.

“Our farmers are the best in the world, and one of the biggest contributors is our smart use of genetics to add value.

“Congratulations on this worldleading facility and thank you for

LIC’s new herd testing facility in Hamilton.

being such strong supporters of the primary industries in New Zealand, a big part of the New Zealand economy.”

LIC’s herd testing service processes at least 10 million milk samples each year.

The new facility at LIC’s Riverlea site includes a laboratory which will process milk samples collected from all North Island dairy herds.

It will also be the new base for the staff who collect the samples from farms in Waikato.

It was constructed to support growth of the co-op’s diagnostics

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“I recently sold an ordinary herd for $1700/head, but top herds I was selling last year for $2100/2200 are now reaching only $1900/head,” he said.

He believed that representatives of Ngai Tahu have been looking for North Island herds to stock their recent dairy conversions.

PGG Wrightson livestock manager Waikato, Dean Evans, said most herds sold in his area have been priced between $1400-$1900/head. Most stayed in the North Island and 10-12 went to the South Island.

“As always quality rules and the well-presented herds with good records made up to $2150/head.

Swap Agriculture held its annual sale of in-calf heifers and carry-over cows on April 21 at Walton near Matamata, with farm manager, Vaughan Armstrong reporting a satisfactory sale.

“Of course we would have liked more. But with 112 Friesian and Friesian cross in-calf heifers averaging $1700/head and the 92 in-calf carry over cows averaging $1750/head we were happy considering the season.”

Buyers were given free grazing until June 1.

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DAIRY NEWS MAY 12, 2015

30 // MANAGEMENT

Field day highlights nutrition, cow housing TONY HOPKINSON

Raewyn Bennett (right) with Ian Williams, Pioneer Seeds.

A LARGE successful field day was held on May 5, organised by Pioneer Seeds on the property of Raewyn and David Ben-

nett and their son Jeremy and his wife Lucy’s farm, at Richmond Downs near Matamata.

Attendance was about 350 with busloads from Whangarei and Taranaki.

“We were originally

only expecting 40-50 so this is a pleasant surprise,” said David.

The buildings and surrounds were presented well, “as they always are,” said Pioneer’s Ian Williams.

The farmers were given handouts giving a broad view of the large farming operation – its philosophy, history and their present situation and expectations.

Raewyn and David bought their first farm in 1985 in Springdale, then sold this and bought at Ngarua, before selling and buying the 90ha present farm at Richmond Downs.

This has since grown with the home farm of 258ha milking 1200 cows, and a second farm of 136ha milking 300 cows.

This is a short distance from the home farm.

There is also a 57ha runoff.

Currently the farms are running a split calving system with 70% autumn calving and 30% spring calving.

“We have been supplying Open Country Cheese for the last two seasons and the winter premiums through May-June and July make it worthwhile,” said Jeremy.

Raewyn says they have a lot of capital tied up in Fonterra, which they think could be better used in the farming operation, and with their final payment received in August as opposed to Fonterra’s October, cashflow is improved.

The farms grow 143ha of Pioneer maize and 32ha of Pioneer lucerne. Other supplements are canola, PKE, kiwifruit, potatoes and seasonal vegetables.

The visiting farmers were divided into three groups and had 40 minute presentations in different locations.

The first group was addressed by Raewyn Bennett, assisted by key account manager of Pioneer, Ian Williams. She is

the book keeper and oversees the financial management of the enterprise.

“Lucy my daughter-inlaw is gradually assuming the role and we are linked by marriage and by computer and it works well.”

Raewyn stressed the importance of keeping good records and she can locate details from previous years which help her to make decisions and ensure mistakes of yesteryear are not repeated.

Second stop was managed by Pioneer’s Raewyn Hensley and Jeremy Bennett discussing the farms’ feeding programme and their four large Herd Homes each with a capacity of 300 head.

“We had been talking to Herd Homes for a couple of years and put one down on the other farm and when we saw the results and benefits we built four adjacent to each other and close to the dairy,” said Bennett.

Each was 90 x 10.3m and twin bunkers in each shed are 1.5m deep It was a two million dollar project with the buildings, laneway and underpass to the dairy yard. It was commissioned in July 2014.

Bennett says the benefits were immediate: being able to split the herd into four and alter their feed allocation to suit the animals’ lactation cycle gave annual savings of $100000.

Springers are brought in near calving and calve in the barns. Further savings were in feed costs, and $16,000 by not having to pump water from the feed pad as previously. All rainwater from the Herd Homes drains to storage tanks.

“With less food wastage we saved another $260,000 and we did it with a third less staff.”

The last stop was to hear David discuss labour management and succession plans for the family enterprise.

LATEST STORIES EVERY DAY Get upto date news at www.ruralnews.co.nz

DAIRY NEWS MAY 12, 2015

MANAGEMENT // 31

For hoof health and increased immunity…

Proper housing provides a comfortable environment for calves.

Calf housing lifts milk yield, helps reproduction

Replacement heifers raised properly produce more milk, says FlexiTunnel.

verted wool sheds, hay barns or implement sheds and therefore risk their herds not reaching their potential.”

It is still happening despite dedicated calf rearing facilities costing as little as 1% that of a replacement heifer, based on an assumed 10-year depreciation time of the capital expense.

FlexiTunnel says there is evidence that most of the country’s replacement heifers fall short of expected liveweight targets.

The financial implications are far reaching: heifers don’t reach the target and produce less milk.

A heifer that falls 20% below the target weight is expected to produce 10% less milk fat in her first lactation. This can equate to an average loss of 35kgMS or $175 at a $5 payout. And this represents the loss for just her first productive year.

On the other hand, heifers that reach the target weights not only produce more milk, they also have a better reproductive performance (fewer empties), a better calving pattern and remain longer in the herd, it says.

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successful calf rearing, says Christchurch company FlexiTunnel.

It says proper calf housing should provide a warm, draft free environment with adequate ventilation and plenty of sunlight.

Liveweight gains in calves reared in a dedicated facility can be up to 10kg higher at six weeks than in animals reared in conventional sheds with the same fed inputs and similar management, the company says.

Additional lifeweight gains in the important first weeks of an animal’s life help it to achieve target weights at two crucial points further into a heifer’s life: at mating (60%) and at calving (90%).

“Unfortunately, calf housing often has a low priority on farms or on new conversions,” the company says.

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DAIRY NEWS MAY 12, 2015

32 // MANAGEMENT

Pressing on through tight t ANDREW SWALLOW

HOW LOW will you go?

How long will you stay there?

Those are the questions Dairy NZ is asking at the latest round of ‘Tactics for Tight Times’ workshops around the country.

“The challenge for everyone will be cashflow next season with a low forecast price and low retro payments,” South Canterbury consulting officer Caleb Strowger told a workshop at Pleasant Point last week.

Even before the April 30 cut to Fonterra’s then $4.70/kgMS forecast, a typical 730-cow, owner operated farm in the region with a zero bank balance at June 1 could expect a near quarter million-dollar overdraft

by September and again in December before clawing back above zero in May, he calculated.

For a similar scale 50/50 sharemilker the dip’s not quite as deep, at -$160,000 by December, but the recovery is longer coming with the bank balance only just back to zero by June 1.

The April 30 forecast revision meant those figures would be even lower, with owner operators probably needing another $60,000 on the overdraft, he added.

“How many of you are confident you will leave here today able to plot where you’re going to get to?”

Several visitors, and host farmers 50/50 sharemilkers Cole and Virginia Groves, said they’d already run budgets for next season a couple of times and would be doing so again

following the $4.50/kgMS forecast for 2014-15.

“The problem is we don’t know what we’re going to get next season [2015-16] and we won’t know until May 25,” said Groves.

Later the group thrashed through ideas to reduce costs, and be prepared for an extreme weather event such as a big snow.

Reducing cow numbers to cut or eliminate feed costs came up repeatedly, possibly with a switch to rearing young stock at home instead of

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contracting out. Keeping calves on until May instead of sending them away in December was considered a good option as heifers would get closer to target mating weights on the high quality pasture typical of dairy platforms than the lower quality feed offered by many graziers.

Keeping those at home, instead of the yearlings, would also take less feed

away from the milking herd.

Growing more winter feed, most likely fodder beet, on the milking platform also came up a couple of times so more cows could be wintered on, while it was also suggested grazing fees which were considered “quite high” at $27-28/ head/week could be negotiated down.

However, with beef

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DAIRY NEWS MAY 12, 2015

MANAGEMENT // 33

t times on farm booming, graziers have other options so maintaining the relationship for the future was also stressed.

“A lot of graziers are very nervous about whether they’re going to get paid this year,” noted one dairy farmer present.

There was no such sympathy voiced for contractors who needed “the acid” put on them over rates. “Ask the question before you get them in, whether they charge per hectare or per hour. These guys have had a pretty good run!”

And it’s not just contractor fees that should be challenged.

“Renegotiate everything,” it was suggested, including bank and insurance quotes. The accountants should be briefed to minimise tax, especially provisional tax.

Meanwhile, “question everything you buy” on farm as to whether it’s essential. “Have you got something at home you could fix?”

Having “a good clear out” of surplus kit could also tidy the farm and raise cash. Selling some larger capital items, possibly surplus Fonterra shares, to reduce debt and interest was also suggested.

Transferring overdraft

KEEPING MENTAL ILLNESS AT BAY WHILE CALEB Strowger focussed on the financial answers to the ‘how low will you go’ question, DairyNZ’s Dana Carver, possibly unwittingly, put a new spin on it, warning of the dangers of burnout and descent into mental illness.

Even before the current downturn, 14% of dairy farmers recorded high “burnout” scores and 32% had pain which interfered with their work. High blood pressure affected 57% of male farmers and 41% of all farmers have high cholesterol. On average there are 25 rural suicides a year, twice the number of vehicle deaths, she pointed out.

“We are concerned WorkSafe is going down the ‘safety’ line way too much and not doing nearly enough about health.”

With input from the field day audience, Carver listed the many stresses farmers face, including the “quite unique” trifecta of isolation, public perception and the fishbowl factor of being the nation’s biggest and most successful farming sector. “We are not seeing this many stresses in any other industries.”

Up to a point, stress is a good thing, as it’s what gets us out of bed in the morning and motivates us. But too much for too long is detrimental and burnout becomes a real risk. Symptoms include high blood pressure, heart disease, weakened immune system, aches, joint weaknesses, and inability to concentrate, make decisions and stick to a plan.

If those last symptoms persist for a fortnight or more such that “disorganisation” of the mind and emotions impairs normal functioning then you’re into the realms of mental illness.

Carver listed five internationally recognised strategies to keep stress in check: ■■ Rest and ‘take notice’.

■■

Be active and eat well.

■■

Connect and give back.

■■

Be safe and have a plan.

■■

Keep learning.

In a dairy farming context, being able to do those things depends on good people and time management, hence DairyNZ’s efforts in those areas, she added.

to lower-rate term debt could get interest rates down three percentage points on that money.

Fertiliser could be cut to maintenance level, and the need for even that checked where drought may have reduced nutrient offtake.

As for personal drawings, there would be no holidays in Fiji this winter, which would at least be a positive if the weather turned to custard. “We’ll all be in biking distance!” @dairy_news facebook.com/dairynews

Dana Carver, DairyNZ.

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DAIRY NEWS MAY 12, 2015

MANAGEMENT // 35

DNA test unlocks genetic potential of Oz herds RESEARCHERS BEHIND a new tool say

it gives Australian dairy farmers the potential to double the net income per cow that arises due to genetic improvement.

The new genetic selection tool, called Clarifide, takes genetic information from an animal’s DNA and converts it into a practical decision making tool for farmers.

Clarifide is the culmination of many years of research and development at the Australian Dairy Herd Improvement Scheme (ADHIS), the Victorian

now confidently select their best replacement animals, allocate higher value or sexed semen to genetically superior females, and increase the rate of genetic gain for economically important genetic traits, with the use of this new DNA technology,” Pryce says.

South West Gippsland farmers Peter and Jeanette Clark were able to realise the hidden genetic potential of their heifers after using Clarifide during trials in Victoria.

“We could never have imagined the extent of genetic potential that existed in our herd

that will help to build a more profitable farm.”

Zoetis technical services manager Emily Piper says the new tool will allow farmers to avoid the risk of raising genetically inferior

animals.

“We can now assist dairy producers with the difficult decisions on selection and management of heifers using a simple tail hair sample. That DNA sample

can deliver a wealth of knowledge to producers about the animal’s future production, health and type potential,” Piper says.

Holstein Australia chief executive Graeme Gillan.

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It has been successfully trialled in Victoria.

Clarifide offers reliable predictions of the potential of a herd with a simple tail hair test from the day of birth. A Clarifide genomic test delivers information on young heifers that is equivalent to recording their performance over seven lactations Geneticist Jennie Pryce, of DEDJTR, said Clarifide gives farmers access to more reliable data for a number of traits not previously possible, with significant economic benefits. “Research suggests that farmers could double the value of their investment if they adopt a genomic selection tool for their breeding and selection decisions,” Pryce says.

The simple tail-hair DNA test will allow farmers to identify superior animals from as early as birth and identify whether or not these animals possess the potential to deliver on economically important traits including milk production, good fertility and overall durability.

“With an extra level of precision, farmers can

without a genetic test like it,” Jeanette Clark says. “We realised we were missing out on an opportunity to mate our heifers to top-rated semen after seeing their breeding values, so this tool has allowed us to make faster genetic improvements in our herd and know that we are breeding from the cow families that will make this advancement possible.”

Holstein Australia chief executive Graeme Gillan says the Australian dairy industry should take advantage of valuable breeding tools and grow their overall knowledge, acceptance and utilisation in herds.

“In Australia, genomic testing is an under-utilised technology, especially at female level, so it is exciting that there is going to be another channel that farmers will be able to incorporate into their business,” Gillan says.

“A farmer’s biggest asset is their herd, so if they don’t value genetics, they are missing out on an opportunity to know more about animals from an early age and make better breeding decisions. The more farmers can get out of their herd, the more opportunity for gain.

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36 // ANIMAL HEALTH/WELFARE

Welfare law boosts industry credentials THE ANIMAL Welfare Amendment Bill, passed by Parliament last week, further strengthens New Zealand’s excellent reputation for animal welfare, say vets.

The New Zealand Veterinary Association (NZVA), which played a key role in helping to shape the bill, says some of the key changes include the legal recognition of animal sentience – sensation or feeling in animals – for the first time in New Zealand law.

The bill’s passage follows the first major review in 15 years of New Zealand’s Animal Welfare Act 1999, which defines animal welfare standards; it was passed unanimously by parliament.

NZVA president Dr Steve Merchant says veterinarians are at the vanguard of animal welfare advocacy and public support is behind us in the call for greater clarity on issues concerning animal welfare and increased sanctions for animal cruelty.

Expectations on animal welfare have

BETTER TREATMENT OF ANIMALS The Animal Welfare Amendment Bill will: ■■ Provide for regulations to set mandatory animal welfare standards ■■

Broaden the range of enforcement tools, including new tools that will enable animal welfare inspectors to prevent animal suffering as well as punish perpetrators

■■

Remove uncertainty about the ill-treatment of wild animals by targeting acts of wilful or reckless ill-treatment (but not affecting ordinary hunting, fishing, and pest management)

■■

Improve the transparency of research involving animals.

The bill provides for a penalty scheme to enable low-to-medium level offending to be dealt with more effectively, and gives animal welfare inspectors the power to issue compliance notices.

It also bans the use of animals to test finished cosmetic products or ingredients intended for use exclusively in cosmetics.

been rapidly changing, and practices once commonplace for pets and farm stock are no longer acceptable or tolerated. The bill brings legislation in line with our nation’s changing attitude on

the status of animals in society.”

He says the inclusion of sentience strongly reinforces that people are obliged to meet their animals’ physical, health and behavioural needs, and

places New Zealand at the “forefront of progressive animal welfare legislation.”

Primary Industries Minister Nathan Guy says the bill will strengthen the protection of animals in New Zealand by improving the enforceability, clarity and transparency of the Animal Welfare Act 1999.

“New Zealanders care deeply about how animals are treated. 68% of New Zealand households have at least one pet, and we earn around $25 billion a year by exporting animal products such as meat, milk and wool. How we treat animals matters not just to animals, but to ourselves and overseas markets.”

Merchant says that the bill also includes a clearer definition of significant surgical procedures for animals and the policy has been retained that these procedures only be performed by veterinarians or veterinary students under veterinary oversight. “Veterinarians will play a key role in developing regulations on these procedures which will

NZVA president Steve Merchant.

be enforceable by law.”

The ability to effectively enforce animal codes of welfare has been a longstanding issue and the veterinary profession welcomes changes to enhance the protection of animals. “The codes will now provide a clearer benchmark for compliance, rather than just being guidelines.”

Merchant says mandatory standards for the export of live animals are also strongly supported and were a central issue in the NZVA’s submission on the bill.

The bill’s passage follows the first major review in 15 years of New Zealand’s Animal Welfare Act 1999, which defines animal welfare standards.

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DAIRY NEWS MAY 12, 2015

ANIMAL HEALTH // 37

Parasite ‘geek’ lauds liver fluke, roundworm killer pamelat@ruralnews.co.nz

ABIGAIL CHASE is

tion around summer time when the snails are more active so they produce more parasites onto the pasture. As it gets cold at this time of year, if you treat for liver fluke now with the right product, then obviously you will get rid of whatever the cattle have picked up in that period.

“With fluke there are lots of different products for treatment. It takes about three months to get to an adult fluke age in the liver, so if you treated them now with those products that only kill adult fluke you wouldn’t kill any of the fluke they picked up in the summer.

“With the triclabendazole in SWITCH Fluke 10, you can kill early immature fluke from two weeks of age.

“It is a good product to use in the autumn because you are killing off those early fluke so you don’t

get the damage of them migrating through the liver and getting to adult stage. Obviously you don’t get any contamination on the pasture because they are not making it to adult fluke.”

Abigail Chase

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can do the same job. And you also just have to buy one product.”

The product went on the market this month after waiting for registration and is available only through veterinarians.

Liver fluke live in the liver of cattle, sheep and other animals such as rabbits and it is transferable to humans, though this rarely happens in New Zealand.

“It goes through a life cycle of the mud snail and there are three types of species in New Zealand it can go through,” Chase explains. When the eggs are passed in the animals’ dung they hatch out into larvae-type things, go into a mud snail, go through a cycle and come out again.

Then they are eaten by the cows. The parasite is dependent on the life cycle of the snail.

“You tend to find you get a lot more fluke infec-

nt

a self-confessed “parasite geek” with the PhD anthelmintic treatment to match.

But her academic knowledge means she has embraced with enthusiasm her role as Merial NZ’s technical product manager for new product SWITCH Fluke 10. It fits well with her particular interests in targeted anthelmintic treatments, anthelmintic resistance, liver fluke and emerging parasite diseases.

“This is the only product that has liver fluke treatment and roundworm treatment with a dual active (abamectin and levamisole),” Chase explains to Dairy News. “It is much better for reducing the chance of getting resistance and it treats

for liver fluke and roundworm. You can use just one product.”

The roundworm Ostertagia is a major problem to New Zealand dairy cattle as are flukes which are about 2-3cm long and crawl through the bile ducts causing big issues.

“Liver fluke is ubiquitous in New Zealand but causes issues mostly where it is wet, including irrigated pasture” says Chase. “There are lots of products which have two actives in them for roundworm control but combining that with a flukicide is new. Most farmers would treat roundworms with a triple or dual active and then have to treat separately with another product for fluke.

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DAIRY NEWS MAY 12, 2015

38 // ANIMAL HEALTH

Tips to increase the chance of s GEMMA CHUCK

IN LAST month’s Dairy News, we discussed the common causes of dystocia (difficulty in giving birth) and ways it can be prevented.

This month we’ll focus on how to assist in a calving, give some tips to increase your chance of success and advice on when to seek veterinary help.

How to intervene The cow or heifer should be adequately restrained in a crush or tied with a halter to a suitably fixed object. Hygiene is important and all equipment (including arms) must be thoroughly cleaned to avoid contamination of the reproductive tract.

You will need: ■■ Two clean buckets of warm water ■■ Jug ■■ Mild liquid soap ■■ Disinfectant (e.g. chlorhexidine)

■■ ■■ ■■

■■

■■ ■■ ■■

Paper towels Obstetrical lubricant Calving chains of variable lengths Calving rope/head snare Calving handles Obstetric gloves Calving jack or pulley (experienced person-

nel only) Resuscitator (optional) ■■ 7% iodine for calf navel It is helpful to have all these things readily accessible in a designated box or bucket.

Place the calving chains and head snare in one of the buckets with some dis■■

infectant. Use the second bucket and mild liquid soap to thoroughly wash the anus and vulva of the cow (the jug helps here), ensuring all excess soap is rinsed off.

Use the remaining soapy water to wash your hands and arms and dry

with paper towel. Wearing obstetric gloves with sufficient lubricant, insert your hand through the vulva and into the vagina of the cow.

Determining the position of the foetus Calves can present in

many different positions (see last month’s article).

Sometimes it can be difficult to determine the position of the foetus and therefore what needs to be done to correct it.

Start by assessing the size of the calf relative to the birth canal. A vaginal

delivery should be possible when: With the calf coming forward you can fit your hand entirely over the calf’s head in the pelvis of the dam or if you can extend the front legs so that both fetlocks are a hand’s breadth past the

DAIRY NEWS MAY 12, 2015

ANIMAL HEALTH // 39

f success at calving

Front leg vs back leg?

This is a common error and can result in excessive traction on two ‘back legs’ when in fact they are two front legs and the head is flexed backwards. The calf will never be delivered this way.

A helpful tip is to count the number of bendable joints between the elbow (or hock) and the hoof of the calf.

There are two bendable joints between the elbow and the hoof (the knee and the fetlock) whereas there is only one bendable joint (the fetlock) between the hock and hoof.

Calving chains Chains are generally used around the limbs of calves to allow traction using a calving jack or pulley. An advantage of chains over ropes is that they are easy to remove after traction has ceased and they are easily cleaned.

It is essential that they are placed correctly to avoid damage to the legs of the calf. Chains should be placed in a double half hitch, with the hitch aligned along the front of the legs.

One hitch should be above the first joint (fetlock) counting from the hoof and the other should be placed below this same joint. This helps prevent fractures of the limbs when traction is applied.

Head snares Head snares are usually made of rope, although plastic or wire loops are also used. Rope head snares consist of a thin piece of rope with a loop at one or both ends. They are often essential as they allow traction on the head independently of the legs.

Careful placement is necessary to avoid damaging the calf.

The loop of the snare should be positioned over the top of the calf’s head, behind both ears and the hitch of the snare should be placed in the calf’s mouth and pulled until the loop tightens.

Snares should never be positioned around the lower jaw as this will increase the risk of fracture.

■■

■■

have a prolonged stage 1 but you cannot find either the legs or head on examination.

If you cannot advance your arm into the birth canal.

If there has been no progression after 20 minutes of you trying to deliver the calf.

Traction Traction can be performed manually, using handles attached to calving chains and the head snare, or mechanically using a calving pulley or jack.

Serious injury can result if calving pulleys or jacks are used inappropriately and advice should be sought from those experienced in this procedure prior to attempting it yourself.

Other forms of mechanical traction which are not intended for this purpose should not be used to deliver calves as this can result in serious damage or death to the calf and/or cow.

In a normally presented calf, traction should be applied on alternate front legs to ‘crawl the calf’ out through the pelvis. When both front legs are fully out of the vulva, traction can be applied on both legs at the same time. Aim to apply traction simultaneously with the dam straining.

Once the shoulders of the calf have passed through the vulva, rotate the calf 90 degrees to help the hips (which are the widest part of the calf) pass through the pelvis more easily. This will help prevent ‘hip lock’.

When to seek help Ultimately, if an abnormal position is found, experience and judgement will decide on whether professional help is required to deliver the calf. Guidelines for when to call for veterinary assistance include: ■■ If you have observed the cow or heifer to have a prolonged calving (stage 1 or stage 2 labour) and you are unable to provide assistance yourself.

■■ If you have observed the cow or heifer to

■■

■■

■■

■■

If there is a fetid smell or obviously dead calf.

If there is a disproportionately large calf to the size of the dam and it feels like there is ‘no room’.

If the health of the cow or heifer is a concern.

If the cow or heifer is down and unable to

stand.

• Gemma Chuck is a dairy vet working at The Vet Group in south west Victoria, Australia. She has a special interest in calf rearing and is currently undertaking her PhD in this subject at the University of Melbourne.

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With the calf coming backward you can fit your hand entirely over the calf’s hips in the pelvis of the dam or if you can see the hocks of the calf at the level of the vulva when traction is applied using only handles (and humans).

Hygiene is important during calving.

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DAIRY NEWS MAY 12, 2015

40 // ANIMAL HEALTH & STOCKFEEDS The cows at greatest risk of poor reproductive performance are the first and second calvers.

Aim for tight BCS spread at calving RANGE IN body con-

dition score (BCS) is as important as average BCS at calving, says DairyNZ. The ideal BCS of 5.0 for mixed age cows and 5.5 for first and second calvers is

a target for each individual animal, as well as a herd target.

The cows at greatest risk of poor reproductive performance are the first and second calvers.

“We all know that within a herd there is always going to be a range of BCS, as each animal will have a slightly different metabolism, intake, milk production, etc,” it says.

The challenge is to get the spread in BCS at calving as small as possible around the targets. Aim for at least 90% of mixed age cows being BCS 4.5-5.5 at calving.

There are various strategies managers can use to get every cow close to her ideal BCS at calving within a herd, such as: Drying-off low producing, fat cows early These cows put fat on

herds based on condition and expected calving date. This allows for preferential feeding to get all cows to target BCS. Even if not enough feed is available to put on extra condition, creating herds is still a good idea, as it protects the younger cows from competition from the older more dominant cows. If supplement is going to be fed then feed it to the herd you want to gain the most condition or that needs to put it on fastest.

Staggered dry-off based on BCS and time to calving The principle here is that

“If supplement is going to be fed then feed it to the herd you want to gain the most conditions.” their back instead of milk in your vat. When feed is short, herd milk production commonly increases by drying-off the low producing fat cows as the other more productive cows are fed better. And there is often an area of low quality feed on a farm where these cows can be put to maintain themselves, such as steep sidelings or gullies.

Ensure heifers are on track for weight and BCS Check every four-six weeks that replacements are gaining enough weight and remedy any shortcomings. Aim to have these at BCS 5.5 when they return from grazing, as they will put on little weight (and often lose weight) while they adapt to being in the herd. Well grown heifers introduced to the mixed age cows during the dry period will compete well as milkers.

Give the first calvers more time dry than older cows Young cows are still growing to reach their mature weight and often have lower intakes. Therefore, they are only able to put weight on slowly, and require more time to get to target condition.

Split dry herds on BCS and time until calving If you dry-off all at once then it is necessary to split the dry cows into

every dry cow can be fed the same, but the difference is how long she is dry for. In low input systems, the dry-off decision rules work well. In higher input systems, where dry cows are well fed on a mixture of pasture and supplement, cows at BCS 4.5 or better only require 50-60 days dry; cows at BCS 4.0 or worse need 80-90 days dry.

Part season once-a-day (OAD) milking for all or part of the herd Cows that are milked OAD are less likely to milk off their back than cows milked twice-a-day, and when well fed will put more weight on during lactation. Groups of cows particularly vulnerable to not reaching BCS targets, such as first calvers and early calving cows, are ideal candidates for partseason OAD milking.

The key is to go on OAD early enough to have an impact on BCS, as milking OAD for a couple of weeks or a month before drying-off has little impact. The reduction in daily milksolids production can largely be made up by milking on for longer, as cows do not have to be dried off as early due to BCS. OAD milking is unwise where the herd already has a high SCC, as it will increase when starting OAD.

DAIRY NEWS MAY 12, 2015

ANIMAL HEALTH & STOCKFEEDS // 41 PKE has reasonable levels of energy and protein.

Palm kernel plugs inevitable ME gap PALM KERNEL extract (PKE) is a

by-product of the palm oil industry in South East Asia.

It is derived from the nut of the palm fruit after the oil is either mechanically extracted (most PKE imported to NZ) or solvent extracted (lower nutritive value).

According to DairyNZ, PKE is a dry, gritty meal with a soapy smell and has low palatability until cows get a taste for it. However, PKE has reasonable levels of energy (ME) and protein, and is relatively easy to introduce to cows over a range of farm systems.

The profitability of PKE is dependent on the price of PKE relative to milk price and the utilisation of PKE and pasture.

Some farmers question whether PKE is a low digestibility feed and should it matter?

DairyNZ says there is no single, ideal measure of feed quality. However, in New Zealand, metabolisable energy (ME) is the factor limiting milk production in most situations.

Therefore, ME content (MJ/kg DM) is the best measure of feed quality for most farmers to use. It does not matter whether a supplement contains fibre, starch or sugar. The cost of each MJ ME should be how you decide which supplement to buy.

PKE contains about 11.0 - 11.5 MJ ME (mechanically extracted) and is, therefore, a reasonable quality feed for dairy cows when short of pasture.

DairyNZ also dismisses the suggestion that PKE should be avoided as a feed for dairy cows because it has a low digestibility (about 50%) and, as a result, will not promote the growth of rumen microbes. It says cow survive and produce on the waste products of rumen fermentation (volatile fatty acids), the micro-organisms that have grown during rumen fermentation, and the feed that was not fer-

mented (i.e. bypasses the rumen).

As a result, there are multiple measures of feed quality, including: ■■ How much is digested (digestibility) ■■ How much energy is available for production (metabolisable energy or net energy) ■■ How much protein is in the feed (crude protein, true protein, soluble protein) ■■ How much fat is in the feed Minerals and vitamins.

All of these are important to varying degrees, depending on what is lacking from the diet.

Digestibility The digestibility of the feed refers to how much of the feed is digested in the rumen (rumen digestibility or rumen degradability) or along the entire digestive tract (dry mater digestibility). The rumen digestibility of a feed is important for determining the growth of rumen micro-organisms. These supply protein and some energy to the cow. However, there is a long digestive system after the rumen, in which proteins, fats and some sugars are digested and absorbed.

Therefore, dry matter digestibility is a better measure of feed quality as it takes into account the whole digestive system and not just the rumen.

Metabolisable energy is estimated from some measure of dry matter digestibility.

Protein Protein is important because it provides the rumen micro-organisms with nitrogen to grow, the protein that bypasses the rumen is used directly by the cow, and because it also provides some energy.

Fat Fats and oils cannot be used by the rumen micro-organisms and, therefore, do not promote microbial growth. They are instead used directly

by the cow as an energy source.

What about PKE? Palm kernel is not very digestible in the rumen. Estimates of rumen digestibility range from 50-60%.

However, this does not accurately portray the feed value of PKE for dairy cows. The feed value in PKE comes from

PKE is considered a reasonable quality feed for cows.

the ruminal digestion of fibre, some ruminal digestion of protein (55-60%), the protein digested in the small intestine (40-45%), and the fat, although the minerals are also important.

Most grazing dairy cows are short of ME. They are only rarely short of metabolisable protein (that is protein that reaches the small intestine).

Therefore, changing supplement to increase the growth of rumen microorganisms to further increase metabolisable protein will not be beneficial.

Metabolisable energy is the most important measure of feed quality for New Zealand farmers. Laboratory analyses indicate that PKE has an ME of around 11.5MJ/kg DM because of its relatively high fat content, its reasonably digestible fibre, and its protein content. However, as PKE is a by-product, this figure will vary and farmers are encouraged to have their feeds tested by a reputable laboratory.

DAIRY NEWS MAY 12, 2015

42 // ANIMAL HEALTH & STOCKFEEDS

Don’t hold back on feed, Holstein breeders urge PASSION FOR farming and their animals runs deep for David and Pip Fullerton, known for their international genetics work with Holsteins on their “top-performing” South Waikato farm, comments feed manufacturer Fibre Fresh.

The company says they are littleknown in New Zealand for genetics, but notable in world Holstein breeding.

The Fullertons have farming roots in the area that date back to the turn of last century. Pip’s family has since 1903 worked the land on which the couple farm, and David’s farming roots began down the road in Ohaupo, in 1930.

Today the Fullerton’s 220ha block named Waipiri is home to 500 milking cows. They have farmed it together since 1990 when it was converted from drystock. Over the last 10 years, Waipiri has boasted the highest-yielding herd in NZ four times, and remains consis-

tently at the top.

Waipiri’s highest-producing season was 300,000kgMS, dropping to 260,000 during the past two years as a result of drought.

Fullerton’s passion for genetics began at age 13, and he has strived for perfection and betterment ever since.

He has travelled the world in search of the best-quality cattle.

He sees genomics and production going hand-in-hand, with dedication and hard work paying dividends both ways. “They’re inclusive. It’s in your best interests to have your cows doing well, as the international market works on high yields.”

Rearing 400 calves throughout the year, including 180 replacement heifers, Fullerton has specific goals and systems for each. All export bulls and embryos are also sourced from their own herd.

“We’re always looking for new

genetic families to bring into the herd and make a difference. Most of our herd is full international pedigree. We breed cattle for milk and protein and international genetics, so we need to grow out the best animals possible. That means you’ve got to have targets in mind.

“Most of our heifers are in excess of 600kg at first calving – that’s our goal.

But that means you have to push from day one in the shed, through transition, right the way through summer, autumn, and the following winter.

“It’s all crucial – you can’t afford to have too many bad days. And it all stems back to good farming practices, there are no secrets.”

For Waipiri’s Holsteins, many of which have origins in North America, protein is the key to development.

“Holstein cattle thrive on protein.

If you want to grow them out to 600kg, they need plenty of fibre and protein.

David and Pip Fullerton, South Waikato.

Our animals are reared on Fiber Fresh, which is lucerne based and extremely high in digestible protein. We’ve used it for a number of years and it’s been a good partner feed for our calves…. It’s quantifiable and easy to manage.

“The best stock I’ve ever seen – and I’ve travelled all over the world – have been reared on high protein diets.”

Fullerton also feeds his export yearling bulls Fiber Fresh while they’re in

transit, the company reports.

He advocates coaching calves to eat as much as possible for future benefits, and not holding feed back if animals need more.

“You get them to eat more by feeding them more. From transition onwards… coaching them to eat large amounts will see them develop out to their full potential. If you do a good job of that, the heifers do a good job of calving.”

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DAIRY NEWS MAY 12, 2015

ANIMAL HEALTH & STOCKFEEDS // 43

Test for trace elements first FARMERS SHOULD

consult with a veterinarian to determine if cows are deficient in trace elements before supplementation.

DairyNZ provides the following information on trace elements; Cobalt Required for production of Vitamin B12, energy metabolism in the rumen and in the cow, fibre digestion and immunity. High manganese in soil reduces cobalt uptake by plants. Therefore, as pasture is generally high in manganese it is usually low in cobalt.

Copper Required for growth and production, animal health and immunity, reproduction and calf viability. High intake of molybdenum, sulphur and iron, which often occurs in pasture-based diets, especially in winter and spring, reduces copper uptake by the animal.

Iodine Required for intake,

energy metabolism and milk production, protein synthesis, reproduction and heat detection. Uptake of iodine by pasture can be low. Additionally, iodine is easily leached during wet weather in winter and spring. Requirements for iodine increase during cold, wet weather.

Selenium Required for disease resistance (e.g. mastitis), placental shedding (post calving cleaning), milk production, reproduction, calf viability and immunity. There are regions that will have high selenium levels in pasture, particularly if they have been fertilised with selenium fertiliser. In such areas supplementation should be avoided. If in doubt, consult with your vet of farm consultant.

Zinc Required for growth and production, reproduction, hoof strength and immune system. The need for

zinc supplementation will vary from farm to farm. Farms using zinc in summer for facial eczema may still require zinc supplementation in the spring. Pasture analysis

Consult a vet to determine if your cows need trace elements before feeding them supplements.

should determine the need for supplementation.

Excess zinc intake will increase the risk of milk fever and copper deficiency and may depress appetite.

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herds helped shape the thinking of Australian farmer Tim Humphris when he and his wife Lyndal decided to go farming.

“I saw too many empty cows. Declining fertility in the dairy industry was always going to be an issue I wanted to address,” Humphris said.

A three way cross breeding program to boost hybrid vigour has been the cornerstone of their farming enterprise at Tongala in northern Victoria since they entered the industry seven years ago.

“Mixing Friesian, Jersey and Aussie Red bloodlines has given us a motley-looking herd, but we are getting outcomes in fertility and cow health,” Humphris says.

He keeps careful pedigree records and aims to keep continually out crossing their 330 milkers.

Cows that are predominantly Friesian are mated with Jersey semen, Jerseys get a red sire and Aussie Reds are crossed with a Friesian.

The couple maintain about 30 registered Aussie Reds as a contribution to building genetic diversity in the small breed. This year they have had one of their bulls selected as an AI sire by Genetics Australia.

“I’ve always had a strong interest in breeding, especially in selecting bulls,” said Humphris.

The breed had opened up its register to quality red bloodlines from Scandinavia to help broaden its genetic base.

While there were a number of Aussie Red herds in Australia, semen sales were overwhelmingly used for crossbreeding. For this reason the breed restricted the percentage of Friesian blood to help farmers maximise hybrid vigour when using Aussie Red semen.

When making breeding decisions on his farm, Humphris says he gave priority to health and fertility traits over production.

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DAIRY NEWS MAY 12, 2015

44 // ANIMAL HEALTH & STOCKFEEDS

Popular calf nutrition workshop is back DAIRY WOMEN’S Net-

Farmers recognise the importance of getting calf rearing right, says Wendy Morgan, Seales Winslow.

work and SealesWinslow, a subsidiary of Ballance Agri-Nutrients, are again running free calf nutrition workshops throughout the country after last year’s “extremely successful” events.

SealesWinslow’s nutrition and quality manager Wendy Morgan says DWN had already received expressions of interest from 14 regions, highlighting how the value of the best practice workshops.

“Farmers recognise

how important it is that they get calf rearing right,” she says. “Last year’s Calf Nutrition Days were well attended by those new to calf rearing, as well as those who had been doing it for years, and it looks like the workshops will be just as popular again this year.”

She says the calf nutrition days are best practice-focused, but take into account that every farm has different calf rearing facilities, so provides practical ways to make the best use of existing pens, equipment and systems.

“We will cover successful task planning, your calf rearing teams and being aware of the different roles required, as well as best practice calf housing

and set-up.”

Morgan will also do an in-depth session on evaluating feed options and what to look for in calf feed. “That includes looking at what a calf actually needs in feed, as well as what it doesn’t,” said Wendy.

The workshop is interactive and social, allowing attendees to draw on the knowledge of those taking the sessions, and on other attendees who have been calf rearing for many years.

The workshop agendas have been updated this year to make sure common topics that people asked about at last year’s nutrition days are included. To register: www.dwn.co.nz

VENUE AND DATE North Island dates: ■■ Mid-Northern June 22

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Manawatu July 3

South Island dates: Southland May 21

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Far North June 22

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Whangarei June 23

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Marlborough June 8

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North King Country June 24

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West Coast June 9

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Bay of Plenty June 29

North Canterbury June 18

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Otago July 21

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Taupo June 30

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North Otago July 22

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Taranaki July 2

‘Mammary memory’ claim debunked DAIRYNZ DEVELOPER Jane Kay says the term ‘mammary memory’ is being bandied around the industry, causing farmers to question their drying off decisions and continue milking when this might not be the best option.

“This statement is based on the premise that the cow’s mammary cells have a memory for low production and short lactation lengths. There is no truth behind this statement,” says Kay. “Don’t worry about when the mammary cells go on holiday as most of them won’t be coming back.”

Kay says the cells in the mammary gland (or udder) are continuously changing.

“During the lactation, old, inactive cells die and new cells are formed. These two processes -- cell death and cell formation -- are constantly occurring and the rate at which they occur depends on factors such as stage of lactation and milking frequency.

“The balance between cell death and cell formation determines the number of cells in the udder and this affects milk production.”

After a pregnant dairy cow is dried off, the udder resets itself during the dry period. Old inactive cells continue to die and new cells form.

DAIRY NEWS MAY 12, 2015

MACHINERY & PRODUCTS // 45

Aiming for the sky with new telehandler range MARK DANIEL markd@ruralnews.co.nz

AGCO TOOK the opportunity at the South Island Agricultural Field Days (SIAFD) to make a foray into the telehandler market with the new 9407S. With a lift capacity of 3.5 tonnes to a maximum height of 4.0m, and powered by a Perkins 130hp engine, the machine appears to have the right credentials.

Centred on a shorter, wider chassis with a wheelbase of 2.87m, and shod with 24 inch diameter tyres, this telehandler offers tight turning for operation in confined spaces. The industry norm of two wheel, four wheel and crab or offset steering takes care of pointing the machine in the right direction.

The engine is housed along the offside of the machine, and features a Perkins 4 cylinder that pumps out 130hp

mounted parallel to the main boom.

This helps access to items requiring routine maintenance, with main items such as hydrostatic and hydraulic pumps mounted at the front of the engine bay. The all-important cooling pack is also mounted forwards and features a flip-up design for cleaning, and when coupled with the reversible fan should ensure cool running on hot days From the engine the drive is transmitted via a hydrostatic pump to gearbox with two mechanical ranges and two hydraulic splits to ensure a range of speeds to suit all applications.

Creep speeds allow slow speed with high throttle settings to achieve fast cycle times. Maximum speed is a true 40km/h. Forward/reverse control is via a shuttle lever mounted under the left side of the steering wheel.

The grunt of the machine, the boom, offers a 1.75m pivot point and is pow-

ered by a closed centre-load sensing hydraulic pump with a peak flow of 160L/min which should ensure fast cycle times.

The newly designed cabin front and rear curved screens has the former carrying on up over the roof space and the latter around the right rear of the machine. Both give unprecedented views, particularly to the right rear quarter that can be a blind spot on some brands. At 900 mm wide the cab should suit all sizes of operator, and with standard features such as air conditioning, air suspension seat and a noise level of 75 dbA, long days should be a breeze.

For operator information and boom control, a dashboard is located in the front right of the cab, so easing the view down through the boom to the toolbar, while a fully proportional joystick lies ahead of the right hand armrest www.masseyferguson.com.au

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DAIRY NEWS MAY 12, 2015

46 // MACHINERY & PRODUCTS

Tractor tuning for more power: will y MARK DANIEL markd@ruralnews.co.nz

FOR AROUND $1500 you can get a ‘black box’ and unleash useful extra power and torque from the old tractor parked up in the shed. Sounds tempting: what are the risks?

Over the last few years increasing numbers of farmers and contractors have been tempted into fitting aftermarket tuning devices to their tractors and harvesters. This appears to give cheap extra horsepower compared to buying a bigger model, and there might be more users taking this route as margins come under greater pressure, particularly in the dairy sector.

How does it work?

There are three main ways of ‘tricking’

the system into what is fundamentally getting more fuel into the engine.

Common rail tuning works by increasing the pressure in the common rail (reservoir) that feeds fuel to the injectors.

This type of system is largely only suited to pre-2010 tractors that have basic injectors, as opposed to the high voltage Piezo units fitted to more modern engines.

Limitations are largely in the capacity of the fuel pump to supply the increased demand for more fuel.

Injector tuning works by extending the time the injector is pumping fuel into the combustion chamber. Note that a modern injector goes through a number of phases, measured in milliseconds, during the injection phase: pilot, preinjection, and finally the

main injection phases.

This type of system works by extending the final of these phases.

ECU (engine control unit) re-mapping seeks to rewrite the software in the main engine controller to effect the increase in fuel in a much more sophisticated manner, and with a much more precise control of power and torque outputs What are the benefits?

As with any aftermarket industries there will be professional, and fly-by-night operators.

The main theme everyone promotes is power and torque increase from 25% to 35%. There are also claims that although there is a major increase in power, there can be a reduction in fuel consumption which this writer finds difficult to fathom. The suppliers suggest this happens

Tuning devices fitted to tractors help boost horsepower.

because the extra power means the driver will run at lower engine revs thereby seeing the reduction. I suspect this is wishful thinking as most tractor jockeys use one of two positions – idle or flat out. One company also makes an unsubstantiated

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claim of increased engine life because the engine runs more efficiently.

There is also mention of unlocking 40km/h speed restriction and the opportunity to delete the need for diesel exhaust fluid from modern Tier 4 machines.

The main pros as promoted by suppliers: ■■ Major increase in power and or torque for low cost ■■ Reduction in fuel consumption (unsubstantiated) ■■ Removal of 40km/h limitation ■■ Deletion of Ad-Blue requirement ■■ Removal of exhaust gas recirculation (EGR) system.

Remember, modern tractor and engine manufacturers spend a lot of their research budgets ensuring their products perform as they should do. And during the last few years that spending has been huge as everyone has striven to meet ever tighter emission regulations. In many cases this has resulted in systems such as EGR, DPF (diesel particulate filter),

DOC (diesel oxidisation catalyst) and Ad-Blue to name a few. The engines of today are far more efficient than those of 10 years, or even five years ago.

Note also that manufacturers supply tractors in a state of tune that is a compromise of performance over economy because of the varied life a modern tractor leads. It might be tedding hay, ploughing or providing PTO power for a large power harrow on the same day.

Are there risks?

The straight answer is ‘yes’. Today’s modern tractor engines, transmissions and final drives are complementary to one another, to ensure they have the ability to deliver the power, and thereby get the work done, and also to ensure a built-in safeguard to handle peak loads and ensure reliability and long service life.

The internal components of the tractor will vary depending on the power rating, so no surprise that clutch packs may have more plates and

might be bigger diameter, and drive shafts might have bigger diameters or carry larger bearing assemblies. This might not be apparent if you stand two tractors from the same product line next to one another. Therefore the introduction of more power or torque might have a devastating effect on a machine’s driveline.

By the same token the increase in fuel through the injection system can cause premature failure of these key components.

The key pitfalls: ■■ Irreparable damage to the ECU ■■ Might cause the tractor to drop into ‘limp home’ mode as it protects itself ■■ An over-boost of power with calamitous results ■■ Major damage to the transmission or drive train ■■ Safety implications of driving a tractor set up for 40km/h at 50km/h.

So what do the tractor manufacturers say about this practice? Without exception, they believe this course of action is a big no-no.

Mark Hamilton-

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DAIRY NEWS MAY 12, 2015

MACHINERY & PRODUCTS // 47

ll you want chips with that, sir?

Manns, NZ manager for John Deere, commented “John Deere’s policy is that warranty is null and void if the ECU is modified. Aftermarket performance specialists will not mention this to customers. JD does not endorse modifying ECUs, nor does it endorse or condone other functions such as ‘deleting SCR’ or ‘deleting EGR’. Our machines are designed for optimum performance and longevity as they leave the dealership. Modifying power and torque will place additional stresses on drivetrains and axles and almost certainly cause failures.”

Peter Scott, national manager for Agco (MF, Fendt and Valtra) tractors made the same comments about the removal of warranty support from machines but also stated “dealerships are increasingly wasting a great amount of time trying to get to the bottom of failures that cannot be attributed to normal use as they seek to support their customer. Eventually they are seeing more cases of tractors that have been ‘chipped’ or modified, and are then put in the unenviable position of telling the customer there is no factory support. This can also lead to problems for the user, particularly contractors, with a loss of reputation which is linked to the tractor brand they operate.”

But the suppliers will say the device is undetectable, in the case of a simple ‘black box’ or that if a re-map of an ECU is detected and subsequently removed and restored with an original map, then they will replace it with their version free

of charge. Do they have something they are trying to hide, and why?

A machinery industry source has told Dairy News that some manufacturers now have a feature in their diagnostic software that will remove spurious software from their ECU’s, and then remove the original software also, thus rendering the unit useless.

The remedy is to go to the supplier for a new item and a big invoice.

What about the local dealer?

Most dealers will not condone fitting these devices for the above reasons, but appear to be between a rock and a hard place as they seek to preserve the reputation of their brands and keep their customers happy.

They accept that users will fit devices to older tractors but will not take any part in the upgrade.

Do I need to inform my Insurer about these mods?

As with any modification the onus is on the user to inform the insurer or risk any claim being rejected. Insurers contacted said they were concerned to hear about companies ‘unlocking’ 40km/h limiters, as tractors that operated at 50km/h normally required front suspension, fixed wheel equipment and in some cases braking systems.

In summary, while ‘chipping’ or ‘re-mapping’ a tractor appears a cheap option compared to buying the right tractor from the manufacturer, such a choice might be counter-productive. If you are spending upwards of $100,000 on a new tractor is it worth the risk of losing a manufacturer’s

warranty of perhaps three or four years?

On the flip side, if you have a tractor that is out of warranty it might be an option for a little more get up and go, but it probably makes sense to go the conservative route just in case. Plug-in units bought from the internet would cause this

writer some concern, and it would appear that the ‘safe’ route is via an established company that can install and back its products. Whichever route you go make sure the tractor is connected to a dynamometer so you can see exactly what you’re getting, otherwise it’s akin to driving with a blindfold.

Common rail tuning works by increasing the pressure in the common rail reservoir that feeds fuel to the injectors.

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DAIRY NEWS MAY 12, 2015

48 // MACHINERY & PRODUCTS

Restored concrete base keep bugs at bay HOW DO you protect dairy shed concrete floors from wear and chemical deterioration?

According to Regis Coating, which makes and supplies concrete fillers and coatings to farmers, dirty dairy shed floors are viewed by inspectors as a potential place of microbiological contamination.

“Given the sensitivity of New Zealand’s trading partners to the alleged contamination of our products, including dairy, coupled with reduced financial returns, the dairy farmer is being pressured to maintain high standards and to find funds for the acceptable maintenance of his facilities,” Regis says.

“Understandably cost effective repair solutions are required.”

It says the winter period before calving is the ideal time to carry out these repairs and

improvements; allow ten days or so to complete work and to allow curing time.

The Epotread SL250 floor repair screed is supplied as a 10L kit, is easy to mix and apply and cures to a well bonded, hard and chemical resistant surface.

Preparation is simple. Clean using a suitable detergent and preferably water-blast or steam clean to remove residues. Then simply mix Epotread SL250 with a drill and mixer, pour and spread with a trowel.

These coatings are chemical resistant to prevent further erosion.

Regis says it also markets a range of high quality concrete repair products, dairy wall coatings and waterproofing coatings for water tanks and troughs.

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Winter period before calving is the ideal time to restore concrete floors in the shed.

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Standard features include a holding tank that enables selfpriming of the pump and a 360 degree filler/outlet pipe system. The complete assembly is galvanised for a long life and requires tractor power of 100-120hp. www.toplink.co.nz

DAIRY NEWS MAY 12, 2015

MACHINERY & PRODUCTS // 49

Chainsaw mishaps up CHAINSAW ACCIDENTS are on the rise

and it’s time to make some noise about this, says chainsaw maker Stihl.

The Stihl Chainsaw Safety Awareness Week returns this week in a bid to tackle New Zealand’s high accident statistics.

ACC claims for chainsaw accidents continue to rise: claims reported last year exceeded $2 million, on average six accidents per day.

Stihl marketing manager Stace Hall says it’s worrying that as chainsaw sales increase, accidents with the tools do too. “So keeping keeping people safe is why we continue… the Stihl Safety Awareness

Week.”

The campaign kicked off last week at Myers Park in Auckland, where 40 women donned pink chaps to learn chainsaw safety tips with kiwi axeman and current Stihl Timbersports world champion Jason Wynyard.

Stihl shops are also hosting chainsaw training events for women. They include ladies’ nights and safety breakfasts for members of Dairy Women’s Network and local customers.

Qualified safety trainers will teach women about the simple safety techniques that can mean the difference between getting the job done and

ending up in hospital.

“We believe that raising the issue first-hand with women who are often strong influences in the household is a good idea,” says Hall.

The company will support St John by donating some of the sales proceeds from its chainsaw safety packs, including the spe-

Chainsaw safety is like putting on a seatbelt when getting into a vehicle, say Stihl.

cial pink women’s chaps.

Wynyard says chainsaw safety is like putting on a seatbelt when getting into a vehicle. “It should come naturally. You wouldn’t drive without wearing a seatbelt or go fishing without a lifejacket. Why would you use a chainsaw without safety gear?” www.stihl.co.nz.

Stay safe this firewood season WORLD TIMBERSPORTS champion Jason Wynyard offers these tips for safe chainsaw use.

1. Use the right safety gear Even for a five minute job, your feet, legs, head, ears, eyes and hands need protection. Safety gear is widely available at power tool suppliers and hardware stores, so make a point of getting what you need.

Before starting any task that involves using a chainsaw, you should be wearing: ■■ Steel-capped boots (ordinary leather boots offer no protection) ■■ Chainsaw chaps or trousers ■■ Safety helmet ■■ At least grade four earmuffs (it only takes a minute for a chainsaw to damage your hearing) ■■ Safety glasses or a helmet visor ■■ Protective gloves, especially during maintenance.

2. Stop and think Thinking about the task before you attempt it can help reduce injuries. Before you start, make sure you have the right equipment and a safe environment to do the job.

Here are some key things you need to remember: ■■ One chainsaw does not fit all jobs – what’s good for cutting firewood may not be suitable for cutting smaller pieces of timber ■■ Only use a chainsaw on the ground, and never above shoulder height ■■ Chainsaws are designed to cut wood – never use one to cut other materials ■■ Know your skill level – for example, never try to cut down trees, unless you’re a professional ■■ Stay alert – if you’re tired, stop and rest ■■ Get to know the manufacturer’s safety features.

3. Kickback Kickback happens when the moving chain at the tip of the bar hits an obstruction or a softer piece of material. This causes the chainsaw to whip back at high speed towards you. To reduce kickback: ■■ Hold the chainsaw firmly with both hands ■■ Always be aware of the location of the tip of the chainsaw – if possible, don’t let it touch anything ■■ Take care when cutting light material (e.g. twigs) that may catch in the chain 4. Sharpen up Good maintenance reduces the risk of injuries. This is because a well maintained chainsaw is easier to use than one that hasn’t been kept in good condition.

■■ Follow the manufacturer’s specifications for correct depth gauge settings.

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DAIRY NEWS MAY 12, 2015

50 // MACHINERY & PRODUCTS

Bank may still see you right for ‘must-have’ machines MARK DANIEL markd@ruralnews.co.nz

HOW DO you finance that ‘must-have’ piece of tackle for next season?

While the agricultural industry sits tight and waits for final confirmation of the payout for the 2014-15 season, there is little hope it will better the $4.50/kgMS forecast.

Industry sources are telling Dairy News that tractor retail sales for the first quarter 2015 are about 25% down on the same period in 2014, but there is still business out there. Many suppliers have their sales teams running around at present trying to secure orders for high

value items that need landing in New Zealand for the start of the new grass campaign in September.

Hopefully, this dip in the payout will be short lived but the good news is that the agricultural community is in a position where it is considered a safe bet by lending institutions, and there are a number of options available.

If we look beyond the shoebox under the bed stuffed with hard cash, the major sources of credit are the high street banks, finance companies and finance brokers. Between them they offer a range of products that should suit most funding require-

Tractor sales are down but there are not shortage of lenders willing to finance machinery purchases.

ments and help you get that needed piece of kit on your yard.

For many farmers their banks are the first port of call, but many report how quickly things can change when they try to source capital; from a gung-ho “have as much as

you want” to an “end of the world-you should lock your cheque book away” attitude in difficult years.

Finance companies, and brokers who tend to work with second-tier finance providers, are particularly active in the lending arena for machin-

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ery purchases, and in many cases have aligned themselves with machinery manufacturers to offer subsidised finance schemes. These can prove to be very attractive with recent press offerings ranging from “pay nothing until 2016 at 0%” to “30% deposit then 36 monthly payments at 2.99%”. Assuming you can find a deposit, which might be a trade-in, and the monthly instalments, it’s worth realising that a finance rate of 2.99% represents an annual interest charge of about $1050 per $100,000 borrowed on a declining balance.

The products they offer might include bank loans, hire purchase agreements, lease to ownership, operating leases or hire.

Looking at these individual products throws up some key differences mainly surrounding ownership.

Bank loans and hire purchase agreements tend to be the most straightforward with a fixed monthly

repayment and a fixed term which might run from a minimum of 12 months out to around 60 months. Most companies require a minimum agreement value of $10,000.

Ownership is transferred to the user from the start, and as such any gains or losses in the value also pass to the owner. Any expenses or depreciation of the item can be claimed in annual accounts.

Lease purchase or lease to own is also extremely popular in the purchase of farm machinery, and tends to be used more by businesses with a cashflow profile that is seasonal. The agreement is likely to be structured so that repayments cover the reduction in capital cost and interest, but there will be a residual component to sort out at the end of the deal. Whilst there is a fixed term as with hire purchase of between 12 and 60 months, the structure of the repayments can be fixed, or they might be seasonal.

A good example might be an agricultural contractor who has a larger monthly repayment from October through to March, and then reverts back to minimum amounts for the remainder of the year. Alternatively, the profile might be quarterly, half-annual or yearly over three to five years. The key point of difference is that ownership lies with the leas-

ing company until the end of the agreement. At this point the customer has a number of options. They might carry on using the machine and pay a secondary rental, or trade the unit in for a new machine.

Alternatively, they can refinance the machine or pay off the residual to own the machine. On the latter option the residual value must be reasonable as seen in the eyes of the IRD department.

A further expansion of the lease to own route is a full operating lease, which is a route that continues to grow with larger businesses who will need typically purchase larger, more capital intensive machines, but don’t want any surprise bills. In these instances they do not seek to own the machine, but require a fixed cost per hour to run the machine, and when the lease ends, trade up to a newer and more productive unit.

They will typically have a component built into the agreement that covers the maintenance of the unit, which will be carried out by the supplying dealer on a routine basis.

The final route into new machinery which might not immediately spring to mind, but could be useful, is short term hire. Indeed, there are a number of companies throughout New Zealand who operate a fleet of tractors and machines for this market.

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