Dairy Farming into the Future 2023

2023 DAIRY FARMING INTO THE FUTURE

Dairy farmers are doing their best in unhelpful conditions

Good past seasons are helping dairy farmers cope with a tough period now, says BakerAg Managing Director Chris Lewis.

A specialist dairy consultant, Chris is editor of Milklines, a monthly report for dairy farmers and rural professionals.

“Everyone enjoyed a particularly good season two seasons ago with high milk prices and the cost of production initially slow to rise.”

This year there are a number of drivers squeezing the industry, Chris says.

“There is a drop in commodity prices, in ation is continuing to push up operating costs to record levels, and interest rates have doubled from where they were two seasons ago.

“Most dairy farmers have been here before, but some new ones are dealing with it for the rst time.

“Many farmers took advantage of the stronger cash situation two seasons ago to reduce their

debt levels, but right now day to day operating costs have to be pruned hard and there is little room for discretionary spending.”

The weather hasn’t helped dairy farmers either, Chris points out.

“It has been very tough for farmers with extreme wet conditions last spring, and even

in summer and autumn some places struggled with ooding and heavy soils.

“On the positive side, there has been good late season pasture growth and most still have good supplementary feed on hand.

“Both farmers and cows are wellprepared for winter.”

Chris expects farmers to keep a tight hand on spending for the foreseeable future, with fertilizer and supplementary feed use down to a basic level.

Here’s to all Kiwi dairy farmers

June the rst was World Milk Day, celebrating Kiwi dairy farmers’ commitment to reducing their environmental footprint while delivering quality food around the world.

Unified, index could lift dairy farmers’ profit

A single accurate, independent national animal evaluation index that incorporates genomic information is key to increasing pro ts for Kiwi dairy farmers.

We all want BW – and our genetic gain – to be the best it can be for our dairy farmers.

One independent BW, with genomics, will give farmers the most accurate data and lead to the most genetic gain.

NZAEL, a DairyNZ subsidiary, would deliver this single BW system as an industry-good, credible source of data available to everyone.

We believe this will give farmers the most accurate data to compare bulls and cows, building their con dence and increasing genomics use in New Zealand.

The United Nations’ Food and Agriculture Organisation (FAO) established World Milk Day in 2001 to recognise the importance of milk as a global food and to celebrate the dairy sector.

This year it showcased how dairy is reducing its environmental footprint, while providing nutritious food.

“because a low environmental footprint on-farm is positive for all Kiwis, our customers and the environment.”

To continue the progress, DairyNZ is investing in R&D alongside sector and research partners to build understanding of methanereducing technologies.

Kiwi dairy farms are the world’s most emissions-e cient milk producers – with a carbon footprint for on-farm milk production that’s 70 percent lower than the FAO’s global average.

DairyNZ chief executive Dr Tim Mackle says the dairy sector is working hard to keep it that way,

“We should all be proud of our dairy farmers for helping maintain New Zealand’s success, producing more environmentally e cient products while supporting communities and the economy.

The plans allow dairy farmers to identify and manage environmental risks on-farm. Currently, 69 percent of New Zealand dairy farms have Farm Environment Plans. By 2025, they all will.

“However, we know the job is not yet done,” Mr Mackle says. “As a sector, we are committed to further improvement.”

The industry good-body also works closely with local farmer and community groups at a catchment level. This is widely recognised as the way forward in

“Dairy provides jobs for 50,000 Kiwis and brings in about $22 billion of export earnings a year, which leads to about $50 billion in New Zealand’s economy.” Kiwi farmers are reducing footprint through good farming practices, including riparian planting and Farm Environment Plans.

improving the environment, as it achieves better results than a national one-size- ts-all approach.

The Sustainable Dairying: Water Accord has seen 99.8 percent of waterways fenced to exclude dairy cattle, while 100 percent of stock crossing points now have bridges or culverts.

Keeping cows out of waterways is a big part of protecting water. These on-farm actions include good management practices that can minimise sediment and particulate phosphorus loss from land to water.

“The actions clearly demonstrate Kiwi dairy farmers’ commitment to improving the environment – and providing quality food.”

One national animal evaluation index will ensure breeding decisions are made consistently, with economic and environmental bene ts for dairy.

There are currently three Breeding Worth (BW) animal evaluation indexes being used in the sector, and they are not all equal.

This creates confusion for farmers around which BW to use and is one of the key reasons why New Zealand’s rate of genetic gain is not improving.

Our genetic gain is steady, but we can do better. Slow and inconsistent uptake of genomics has meant our herds have lagged behind those of our

competitors, such as Australia, the UK and the US. We want to change that.

That’s why DairyNZ, through New Zealand Animal Evaluation Ltd (NZAEL), is looking to improve its BW to include genomics.

Genomic information enables early trait predictions and helps dairy farmers make good breeding decisions, to increase the genetic gain of their herds and lift farm pro t.

Early trait predictions enable farmers to nd the best bulls sooner and make better breeding and culling decisions based on trusted information.

The independence of NZAEL

helps give dairy farmers con dence. It aims to ensure the New Zealand dairy herd is resilient and our rates of genetic gain are internationally competitive. That’s our vision.

With that in mind, we propose a BW system that:

• ensures more accurate data is available

• facilitates a combined e ort to improve New Zealand’s dairy herd

• enables better extension on animal evaluation and breeding decisions

• includes genomic information in Breeding Worth calculations.

Under the proposed system, all dairy farmers would have the choice of using this data to improve their herds and lift the performance and pro tability of the New Zealand dairy herd.

Understanding farmers’ needs and challenges is key to NZAEL’s work, so we’re seeking dairy farmer feedback on how to ensure our proposed BW system is fair for all users and will help the sector achieve a better rate of genetic gain.

Consultation is underway until June 27 to seek dairy farmer and sector feedback on this proposed operating model over the next six weeks. Visit https:// www.dairynz.co.nz/better-BW to share your thoughts on the proposed BW system.

For more information on NZAEL and its work, visit Animal Evaluation - DairyNZ

Kiwi farmers are reducing footprint through good farming practices, including riparian planting and Farm Environment Plans.

Genomic information enables early trait predictions and helps dairy farmers make good breeding decisions.

2023 DAIRY FARMING INTO THE FUTURE

Fonterra updates Farmgate Milk Price

Fonterra announced an opening 2023/24 season forecast Farmgate Milk Price of $7.25 to $8.75 per kgMS, with a midpoint of $8.00 per kgMS, updated its current season forecast Farmgate Milk Price, increased its full year earnings guidance, and brought forward the payment date of its proposed capital return on May 25th.

The

“We’re well through the season now, with almost all of our milk contracted, giving us more certainty on where we’ll end the season.

“Global Dairy Trade prices have not recovered to the levels required to hold the previous midpoint for this season.

re ects an expectation that China’s demand for whole milk powder will lift over the medium-term.

“We expect demand to gradually strengthen over the course of FY24 as China’s economy continues to recover from COVID-19.

guideline to get cash to farmers earlier in the season.

“Our strong balance sheet allows us to make these changes and we will be using this new Advance Rate guideline going forward, starting with the season about to commence” says Mr Hurrell.

Business performance

after tax improved on last year, up $606 million to $1,078 million, equivalent to 65 cents per share.

“This is due to strong performance in our Ingredients channel, with continued higher margins in our cheese and protein portfolio, particularly casein and caseinate.

“These favourable price relatives have continued longer than expected, and we’re also seeing improved performance coming through in our Foodservice and Consumer channels, in particular in Global Markets.

“As a result, we have lifted our FY23 full year forecast normalised earnings to 65-80 cents per share from 55-75 cents per share and remain on track for a strong full year dividend.

“Total Group normalised operating expenses are up in part due to the impact of impairments reported in our FY23 Interim Results in March, as well as ongoing in ationary pressures,” says Mr Hurrell.

following the sale of the last remaining farm.

“With the sale of Soprole now complete, we are bringing forward payment of our proposed capital return of around 50 cents per share and unit from October 2023 to August 2023.”

Implementation of the capital return, which is approximately $800 million, remains subject to a Scheme of Arrangement being voted on by shareholders, and approval by the High Court, which is a common process for this type of transaction.

“We’re also continuing to take steps towards our sustainability goals, and are expecting to announce a scope 3, or on-farm emissions target, in the middle of this calendar year.

“Meetings are underway with farmers where we’re sharing more information on what a target will look like and how we can collectively achieve it.

Average to above average temperatures

Temperatures are likely to be average or above average for the Wairarapa, according to NIWA in its Seasonal Climate Outlook JuneAugust 2023.

It also predicts rainfall totals are likely to be near normal or above normal.

“July and/or August may feature more south-westerlyquarter winds, leading to spells of drier than normal weather. Soil moisture levels and river ows are about equally likely to be near normal or above normal.

Sea during July and/or August, leading to more southwesterly quarter winds than normal and periods of below normal rainfall, particularly in the north and east of both islands.

“For the winter season as a whole, rainfall is most likely to be near normal in the west of the North Island and north and west of the South Island.

“Marine heatwave conditions persisting in New Zealand’s coastal waters will likely prevent a sharply colder than average winter, although more frequent southerlyquarter winds may cause winter 2023 to be colder than recent winters.

CEO Miles Hurrell says while the forecast Farmgate Milk Price for this season has been impacted by reduced demand, the Co-op remains on track for a strong full year dividend.

Farmgate Milk Price

The reduced short-term demand, particularly from China, has had an impact on our 2022/23 forecast Farmgate Milk Price.

For these reasons, we have narrowed the forecast range for the 2022/23 season from $8.00 $8.60 per kgMS to $8.10$8.30 per kgMS and reduced the midpoint from $8.30 per kgMS to $8.20 per kgMS.

“The opening forecast Farmgate Milk Price for next season of $7.25 to $8.75 per kgMS, with a midpoint of $8.00 per kgMS,

“However, the timing and extent of this remains uncertain, with China’s in-market whole milk powder stocks estimated to be above normal levels following increased domestic production. This is re ected in our wide opening forecast range for the season.

“We recognise the pressure farmers are under and have designed a new Advance Rate

Fonterra has reported a pro after tax of $1,326 million, equivalent to 81 cents per share, for the third quarter of FY23.

This is up $854 million on the same period last year and includes the gain on sale from Soprole of $260 million.

“Excluding the net gain from divestments, our normalised pro

Progress on strategy

In the third quarter of FY23, Fonterra continued to make progress on its long-term strategy.

“The Co-op has transitioned to its new Flexible Shareholding capital structure,” says Mr Hurrell.

“We have also completed the divestment of Soprole and nalised our exit of China Farms

“It’s also pleasing to see the Centre for Climate Action Joint Venture, of which Fonterra is a shareholder, is now operational.

“The JV has made its rst investment, contributing $1.8 million to Ruminant BioTech, a New Zealand-based start-up that is developing a slow-release, biodegradable, methaneinhibiting bolus,” says Mr Hurrell.

“Despite a trend toward El Niño, warmer than average sea temperatures remain present in the western Paci c. This is expected to continue to fuel moisture-rich disturbances in the Aotearoa/ New Zealand region through at least June, some of which will bring heavy rainfall, snow, and strong winds.

“Higher than normal air pressure is forecast to develop in the Tasman

Coastal sea surface temperatures (SSTs) ranged from 0.4˚C to 1.5˚C above average during May.

The warmer than average seas will likely have an upward in uence on air temperatures, particularly around the start of winter.”

reduced short-term demand, particularly from China, has had an impact.

2023 DAIRY FARMING INTO THE FUTURE

Animals are at the heart of wintering

By Justin Kitto, DairyNZ lead advisor

wintering

We’ve all been feeling the colder weather creep in and, with winter o cially here across the country, farmers are getting ready for the months ahead.

Farmers are passionate about their farms and their animals, no matter the season, and regional councils, MPI and other sector bodies have been recognising farmers’ wintering e orts, including keeping our animals comfortable.

Keeping cows comfortable

We know that lying time is important to cows as it provides rest, opportunity to sleep and reduces the risk of lameness, which leads to better welfare outcomes.

• Saving crops positioned in drier or more sheltered areas for grazing during wet weather

• Increasing the feeding area by giving cows a fresh break

• Rolling out straw for cows to lie on

winter, but plan for the worst.

“It is never about if we get bad weather, it’s always about when and considering what you will do to look after your animals and your people no matter the weather.”

Helping reduce injuries over calving

By Callum Eastwood, DairyNZ senior scientist

It’s been great to be able to get out and about more this year, connecting in-person again with farmers at events.

One entry was our easy-entry calf trailer, with a spring-loaded and self-closing saloon door. This enables easier, faster and safer calf loading, to reduce injuries associated with collecting calves.

Other concepts include a calfrearing area pedestrian gate, exible breast rail, new milking cluster design, cups on mat design and bucket-lifting trolley.

While we continue working on trialling and improving our concepts, still encourage you to focus on the physical and mental wellbeing of yourselves and your team over calving.

When cows are well fed, have suitable soft lying surfaces, space available and are not exposed to adverse weather conditions, they prefer to lie for 10-12 hours per day.

• Providing cows with access to the area behind the back fence (if suitable for lying on).

Some great work from the Southern Dairy Hub has shown soil moisture conditions, in particular surface water, results in cows not getting enough lying time.

There are many innovative actions that farmers can use to ensure their cows get su cient lying time, including:

• Shifting cows to drier, lower-risk or sheltered paddocks

It is also important to put cows in mobs based on calving dates to help monitor and manage herds. This makes it simpler to move cows o -crop two weeks before calving to provide the best conditions and outcomes for the herd and ensure no calves are born on crop.

Wintering in action

Southland dairy farmer Luke Templeton applies a range of good wintering management practices suited to his farm. He says they always hope for the best over

His animals are checked twice a day to observe the condition of the cows and the ground, including looking for lying bowls where they have gotten comfortable and settled down in more sheltered or warm areas.

Luke says if conditions seem too wet, they use their contingency plan, typically by doing an additional shift of the break fence to provide a fresh lying surface. They also use portable troughs and provide additional feed, such as hay and baleage, along with moving the break fence up to three times a day.

Further information and resources are available at dairynz.co.nz/ wintering

We are 100% New Zealand owned and operated.

All of our products are produced from all-natural limestone, quarried right here in Wairarapa. We don’t use unnecessary additives or chemicals and offer both organic and non-organic options.

We’ve been talking about a range of topics, but there has been a focus on keeping our sta safe and well by reducing injuries over calving.

Research has shown sprain and strains comprise about 40 percent of all dairy farm injuries, particularly between August and October during spring calving.

These mainly occur when farmers are:

• Collecting calves from the paddock

• Lifting/feeding calves buckets of milk

• Cupping cows, particularly on rotaries

Research has shown sprain and strains comprise about 40 percent of all dairy farm injuries

• Slipping or tripping on uneven ground or pipes/hoses.

With this focus around on-farm safety, DairyNZ has partnered with ACC through the ACC Workplace Injury Prevention Grants.

Through this we are designing and developing creative solutions with farmers that support a sector-wide reduction in sprains and strains,

particularly during calving.

We know this time of year is busy enough without additional injury to yourself or someone on your team.

DairyNZ is passionate about ensuring solutions that sound good on paper and are practical to implement in real life.

That’s why we co-design innovative farm safety solutions with farmers to understand how to improve safety during day-to-day calving activities.

Farmers are part of the initial designs, and they test all concepts on-farm to further re ne the solutions and determine whether they are practical and help solve the problems identi ed. It’s been exciting sharing these prototypes with farmers at recent events.

This included showcasing them at the Innovation Hub at Fieldays, which provided a great opportunity for farmers to come and see the concepts in person.

Here are a few top tips from farmers that can help reduce injury during calving season: have two sta pick up heavier calves together if needed. use a specialised trailer to transport calves pipe milk into calf feeders instead of lifting buckets tuck hoses away after use in the milking shed invest in the right footwear look for great grip and ankle support

More information and videos on the concepts are available at dairynz. co.nz/sprains-strains.

Easy-entry calf trailer in use

Southland dairy farmer Luke Templeton.