Will environmental worries hobble New Zealand’s dairy boom? A classic economy versus environment dilemma. Bernard Hickey investigates

Will environmental worries hobble New Zealand’s dairy boom? A classic economy versus environment dilemma. Bernard Hickey investigates
Many dairy farms now dispose of their shed effluent by spraying it onto land, reducing the need for fertiliser.

By Bernard Hickey*

It seemed like a marriage made in heaven that would produce a never-ending boom. 

China's fast growing middle classes demanded milk and New Zealand seemed to have inexhaustible supplies of water and grass-growing land to feed that demand. 

Some thought it could never end, but it has, and not for the same demand and cost reasons that throttled Australia's iron ore investment boom. 

Demand from China for New Zealand's milk powder has slowed slightly, contributing to a 41 per cent fall in milk powder prices this year. The bigger driver in a NZ$4 billion fall in forecast dairy incomes this year has come from a surge in milk supply in Europe and the United States in response to record-high prices last year. 

However, the longer-term headwinds for the dairy boom are closer to home, thanks to an increasingly intense and often political debate about water quality that is leading to tougher regulatory limits on dairying. 

Reserve Bank concerns about high levels of dairy debt and the increasing profitability of sheep and beef are factors too, but it is the water quality debate that is now dominant. 

Economists and industry leaders acknowledge the rapid conversions of sheep and beef farms and forests to dairy farms over the last decade are likely to slow in the years ahead as regional councils set tougher limits on water quality that force farmers to change their methods and limit the intensity of dairying. 

ANZ Rural Economist Con Williams expects the 5.5-6 per cent per year average production growth seen over the last 6 years to slow to 4 per cent in coming years as the number of conversions drops to less than a half what it has been. He sees on-farm productivity growth continuing around 3 per cent, but conversion-fed growth is likely to drop to around 1 per cent from 2.5-3 per cent. 

Farmers will have to find new ways to increase production, rather than simply converting sheep farms or pine forests to dairy farms, or using feed supplements to increase stock rates. 

"The more innovative people are already looking at different options," Williams says. 

Outgoing Federated Farmers President Bruce Wills was even blunter in a recent television interview. 

"I think the dairy boom is coming to an end.  We're seeing better profitability at the moment in sheep and cattle.  We've got these environmental issues, which are acting as a bit of a head-wind to the dairy sector," Wills said. 

"We've got a dairy sector that’s extraordinarily indebted," he added. 

The concerns about high levels of dairy debt have been around since 2008, but it is the emerging environmental concerns that are beginning to drag on the sector. 

It's all about cow urine and nitrogen. 

When a cow pees in a paddock that urine patch can contain the equivalent of up to 1,000 kg/ha of nitrogen fertilizer. That's much more nitrogen than the grass and soil can process, which leads to nitrates leaching through the soil and into waterways. Increased nitrate levels can lead to algal blooms in lakes and extreme levels in drinking water can cause the potentially fatal Blue Baby Syndrome or nitrate poisoning. 

Nitrate leaching rates vary according to local soil conditions and temperatures, but increasing stocking rates and more use of feed supplements such as Palm Kernel Extract (PKE) have massively increased nitrate levels in catchments in the fastest-growing dairying areas of Southland and Canterbury. 

The regulatory and political focus on nitrates has intensified over the last year and the issue is expected to be an election issue as the centre-right and pro-dairy National Government seeks a third term again a Labour/Green Opposition talking tough against more dairy expansion. 

A warning by Canterbury's Chief Medical Officer of Health Alistair Humphrey in October last year that increasing nitrate levels could eventually lead to a Blue Baby Syndrome death unleashed a firestorm of debate.  He was accused by farmers of scare-mongering, but the warning focused the public debate on nitrates. 

"It's a ticking time bomb," Humphrey was quoted as saying in Christchurch's The Press. 

"Sooner or later, a mother will not be aware of her water supply and she might make up some formula and that might lead to a tragedy," he said. 

His comments followed the release of Environment Canterbury's 2012 annual groundwater survey of 289 wells across the region, which found 11 per cent of the wells had nitrate levels above the Health Ministry's Maximum Acceptable Value (MAV) of 11.3 mg/litre of groundwater. It found nitrate levels had been rising in 30 per cent of the wells over the last decade. 

Then the Parliamentary Commissioner for the Environment, Jan Wright, released a landmark report into land use and nutrient pollution in November last year.  It documented rising nitrate levels in areas with the fastest growth of dairying and forecast dairying will have expanded by 650,000ha between 1996 and 2020. 

The report's modeling found nitrate loadings had increased 27 per cent in Canterbury between 1996 and 2008, and were forecast to rise another 15 per cent by 2020. 

"This investigation has shown the clear link between expanding dairy farming and increasing stress on water quality," Wright said. 

"Even with best practice mitigation, the large-scale conversion of more land to dairy farming will generally result in more degraded fresh water," she said. 

"New Zealand does face a classic economy versus environment dilemma." 

The report turned up the heat on a debate that has been bubbling along since 2011 when the Government issued the first National Policy Statement for Freshwater Management.  It was designed to set water quality standards for regional councils to start targeting, and essentially coaxing them towards more actively managing water quality. 

Some councils, including Environment Canterbury and Manawatu/Wanganui's Horizons, have already begun actively setting targets and issuing resource consents for farmers.  Others, including Waikato and Southland, have only just begun to assess and form their own targets. 

Meanwhile, environment groups, farmers and regulators have been collaborating in a Land and Water Forum since 2009 to recommend ways to improve and regulate water quality and usage. 

This all culminated in July with the release by Environment Minister Amy Adams of a new National Policy Statement that set minimum health standards for waterways, including that rivers and lakes must be safe enough to wade in and boat on, but not necessarily safe enough to swim in. 

This decision not to make '100 per cent swimmable' a minimum standard unleashed a heated political debate. The Opposition Green and Labour parties both pledged to put '100 per cent swimmable' on their election platforms and pointed to Ministry of Environment figures showing 61 per cent of monitored swimming sites were judged poor or very poor. 

Adams responded that councils who wanted to set their own 100 per cent swimmable standard could, but the National Government was not going to force one on regional councils. 

"We are not going to impose billions of dollars of costs on ratepayers and communities in areas where they do not seek it," she said. 

The expansion of dairying and the issue of nitrate leaching is set to become a campaign issue ahead of the September 20 election. It may not have the same electoral potency as the carbon tax did in Australia last year, but it is already a point of contention between the main contestants. 

"I would say that rivers that you can swim in are a birthright for New Zealanders and we aim to have a clean, green economy for all New Zealanders and all rivers," Labour Leader David Cunliffe said in backing a 100 per cent swimmable standard. 

Prime Minister John Key said such a target was unrealistic and would cost billions to achieve. 

"Swimmable is a very, very high and expensive goal. If we were to make that the national standard it would have an enormous impact on the cost for rate payers - billions I think," he said in July. 

Meanwhile, prominent philanthropist, economist and dot-com millionaire Gareth Morgan has launched a high-profile 'My River' campaign to push for all waterways to be safe for swimming, fishing and food gathering. This adds to a long-standing 'Dirty Dairying' campaign run by Fish and Game, a statutory body advocating for anglers and hunters. 

The dairy industry is becoming increasingly aware of the regulatory headwinds and both Fonterra and many farmers are already trying to mitigate the effects of the boom on the environment. 

The question is whether enough is done quickly enough to avoid much tougher regulatory sanctions being imposed from on high.  National is set to be re-elected on current polling, but a many in the dairy industry are aware that much tougher rules are matter of when rather than if. 

Fonterra's General Manager of policy and advocacy Carolyn Mortland says Fonterra has already pledged to fence off all waterways on farms and plant trees on the banks of those rivers and streams to reduce effluent run-off and reduce nutrient leaching. Every farm is also audited for its compliance with rules on effluent management. 

More than 4,000 of Fonterra's 10,000 farmers were provided with reports from the Overseer software programme on their nitrogen leaching rates last year. It details what each farm's estimated nitrogen losses are relative to their peers in their district, given its soil type and climate. 

"We're aware of the escalating concern," says Mortland. 

Dairy NZ CEO Tim Mackle is also conscious of the growing environmental clamour and points out farmers are now more focused on improving production from their existing operations without necessarily increasing their nitrogen losses at the same time. 

"We are facing more constraints and we have to deal with it," he says. 

Farmers are increasingly looking for efficiencies in how they use water and how they apply fertilizer to reduce their nitrogen losses, given the expense of nitrogen-rich fertilisers such as Urea.  Good environmental decisions are also good economic ones in this case. 

One example is South Canterbury dairy farming couple Mark and Devon Slee, who use pivot irrigators and and an underground network of electronic soil moisture sensors to optimize their water use and reduce nitrogen losses on their former sheep farm. 

They use Overseer and know their nitrogen losses are around 47 kg/ha per year, which is about the same rate as it was 20 years ago, despite a 50 per cent increase in production per cow and a 70 per cent increase in the number of cows per hectare. It is also about half the leaching rate of others in their district. 

The Slees, who won the Ballance Farm Environment award this year, are increasingly seen as a model by industry leaders looking for production growth with a lighter environmental footprint. 

"There's a fair bit of evidence that that will be the type of production growth possible in the future," says Federated Farmers Environment Spokesman Ian Mackenzie. 

Dairy NZ's Mackle is also confident the industry can grow production around 2.5 per cent per year over the longer term, but mainly from productivity gains rather than from new conversions. 

"There's been a sea change of attitude," Mackle says.

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BH: Well put.
But credit where credit is due. Make no mistake we could not have done this/got here with out the warp speed of credit funds that have flowed so strongly over the last 10 years. 
Issue is we are a little hamstrung with what could be a payout of high $4's (makes going Dutch a little tuff).
On the strength of the auction, ANZ Bank cut its 2014-15 milk price forecast to $5.25/kg while ASB and Westpac put their $5.80 a kg forecasts on review.
ANZ rural economist Con Williams said if present market prices persisted, the farmgate price would be more akin to "somewhere in the mid $4s", meaning most farmers would not be able to cover their cost of production.
http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=11319843
Most corporates/outside investors we understand expect a long term linear milk price of $6.25-ish plus CPI. in a pay the interest BAU sort of way.
So how do we add to the mix the inpact of not much margin over the next 18mths? (remembering farm capital values are pretty much what the lender will accept).
Our on the grownd view is that we are on our own, looking at the examples of those same credit providers looking to repeat their "lending support" to the good folk in Tasmania and Victoria, and also processors looking to draw production volume for export (playing in another pool).
 
nice tie, is that a gordian knot?
 

I wonder why the Commerce Commission/Government are allowing Fonterra to invoice/pay at under cost of production.

And if you watched the Parker vs English debate on TV3's The Nation this morning, the take away from Bill English's new ideas regards the economy:
 
It is what it is: no plan B.
 
 

So, credit for a 'rockstar' economy goes to National, but one that is a disaster is nobody's fault? I presume there will be claims there was no way they could have seen it coming. 

Worse - they're virtually saying there's no possibility it might come.
 
In other words, the boat is taking a straight, narrow path because there are never any waves or obstacles in the water.  "Have you got a new idea to boost our economy?"
 
See it online now here; It is what it is: no plan B starts at 15.00.

http://www.3news.co.nz/politics/tax-cuts-unlikely-for-wealthy---english-...
 

I can't view your link unless I download Flash Player 11 and that I am not prepared to.
 
The disaster is already baked in but it sounds like Bill is confidently asserting there isn't a problem - as are many others around the world:
 
http://hat4uk.wordpress.com/2014/08/27/greek-radio-an-american-repeal-co...
 
As Josef Goebbels remarked in 1932, “the masses respond to relentless repetition and confident assertion with total belief”.
 
Almost makes me think National deserves (to suffer) a third term.

Bill, have I got an idea to boost our economy!
 
Google: economic impact corruption
 
The abstract from the first article returned:
 
This study introduces a new perspective on the role of corruption in economic growth and provides quantitative estimates of the impact of corruption on the growth and importance of the transmission channels. In our ordinary least squares estimations, we find that a 1% increase in the corruption level reduces the growth rate by about 0.72% or, expressed differently, a one-unit increase in the corruption index reduces the growth rate by 0.545 percentage points. The most important channel through which corruption affects economic growth is political instability, which accounts for about 53% of the total effect. We also find that corruption reduces the level of human capital and the share of private investment.
 
Up to you Bill how your party handles the idea from there.

I take it Colin you have read Forbes !2 reasons why N.Z. economy is a bubble about to burst......if not for your perusal and everyone elses
http://www.forbes.com/sites/jessecolombo/2014/04/17/12-reasons-why-new-zealands-economic-bubble-will-end-in-disaster/ 
Gotta find things to do now I can't go to the dump anymore.....damn it

not economy vs environment.  that is just dumb dumb DUMB!!! 

it's consumer expectation (they want cheap prices) vs the real cost of production.  The FARMERS and PRODUCERS _want_ to make low environmental impact...your wading stream is my drinking water ffs!!!

but consumers don't want to pay for the cost of production.
And Fonterra is repeatedly showing that it is unable to get the required price from it's customers, and them from their consumers, to do the necessary work.

It's not economy vs environment at all - it's consumers just want cheap crap and aren't willing (or able) to pay for their desires.

.your wading stream is my drinking water ffs!!
 
Are you saying you reticulate stream/river water as potable water to your home?
 
I'm definitely from outside the industry, but the way I interpret it, the problem has nothing to do with quality of the produce. Milk is milk is milk - unless you value-add. Whomever has been strategically in charge of the sector here in NZ has targeted that strategy (over perhaps the past two decades) toward NZ being a price taker at ever higher volumes of the non-value added commodity.  And increasing volume has required a great deal more investment/debt within the sector.
 
The commodity is no longer gold, but silver, and the ever increasing volume strategy is vulnerable. Problem is, the debt remains.
 
As I say, just an outsiders view. I hope I'm wrong.
 
 
 

Kate, in Cowboys defence it is possible to have solutions with both economic and environmental benefits. There are though several (largely political) problems to achieving that:
 
1. Government/Fonterra/DairyNZ's unwillingness to accept that it is possible to have higher farm profitability at lower production intensity levels
 
2. A range of other vested interests wanting higher total agricultural production regardless
 
3. Denial that there are diminishing economic returns to increasing production
 
4. Denial that supply and demand applies to dairy commodity production i.e. higher international prices inevitably lead to higher supply, lower supply means higher prices

I read the 'marginal cow' thesis some years ago. It all made business/economic sense to me as an outsider. I assume that's your Point 1.
 
The other vested interests in Point 2. are the banks. Right?
 
And the rural advisors (i.e., lending specialists) employed by the banks support that denial in relation to their risk analysis for borrowing purposes. Point 3.
 
Yes, the proposition that milk isn't bananas has always made me chuckle. Point 4.
 
What I don't have a good handle on is what percentage of dairy farmers bought into this and just how bad the debt crisis might be - if indeed there is going to be a crisis at all. 
 
So I guess the billion dollar question is, if prices halved, what percentage of our present producers would be foreclosed on?  And is that actually the intended end game here by those that have been running these lines?
 
 

Point one also involves cronyism and militant ignorance. What is good for dairy farmers doesn't get much of a look in. Include in government MPI and MFE.
 
Finance is definitely the major included in point two but don't forget civil construction and an economic development strategy promoting asset bubbles. There is also still an inclination to value farms on production volume rather than profit.
 
Point three includes more militant ignorance and neoclassical/liberal economics. A belief that there are no physical limits to economic growth and debt doesn't matter. 
 
Point four could/should have been included as a sub part of point three.
 
You may have noticed various commentary on different possible means to get further injections of equity into dairy farming. Fonterra has already been down a similar path but as a processor. All on the basis that there will be reasonable returns to it.
 
That the dairy industry's increasing need for huge equity imputs predates the current collapse in commodity prices probably says it all.

Thanks, Colin - always value your comment.
 
But, you skipped the billion dollar question ... is the prospect of large numbers of future distressed sales all a part of the drive toward corporatisation plan?
 
In other words, have they got it in for the family-owned farmer?

Those are tough questions that I will need to think more about before replying beyond saying that 'they' are probably complex and confused beasts.

IMO the answer to your billion dollar question is they aren't in control any more.

The need 4 equity.

If we know the projects to fund, then funding could be by CLEAN Levy.

This the Commercial Lenders Eco Agri Nation levy based on lenders interest&fee income, interest margin, dividend and tax paid. Tied to banking licence.

Alot it by project or kg/protein.
Lenders do so as it protects assets lend.

Also, could we assist the small farmers with debt reduction via tax credits for downsizing herds, particularly in problem catchments?
 
 

I too value the input of above commentators et al, as it provides  a refreshing counterbalance to the mundane, embarrassing, neoliberal corporate rhetoric peddled out to shareholding suppliers, from an entity increasingly removing itself from simple tried and true co-operative principles and philosophies it claims to be a part of. An example is the candidate assessment matrix used to 'analyse' (rubber stamp) potentially corporate suitability to govern a co-operative. I don't know if the general public are familair with, or it is common practice in all other stock standard large scale corporates, but it makes cringe worthy yet amusing reading, particularly when the 'judges' cast their 'independent' verdict.
There are  forces 'external' to Fonterra, such as the government and MPI, that see no value in a national co-operative selling globally, but with principles, and therefore leadership and direction that’s also consistent with community wellbeing, and have unrelentingly undermined the co-operative structure since prior to de-regulation.
 
However concerning the environmental challenges mentioned in the article, I do hope we can develop sustainable and acceptable solutions, as despite burning out at the tail end of calving, I sit here looking out the window at the sun filtering through the trees on our farm, glistening off the healthy mixed species pastures, with a mosaic of soft atmospheric hues and patterns, capping the now verdant (1080) native clad ranges, and snow-capped mountains in the south. Despite my disillusionment, I know I’m lucky, and want to stay.

Regional Councils are bringing in nutrient limits which will, in some catchments, force lower stocking rates.

Just have to be patient and allows these policies and adjustments to take effect. There is no quick fix with a 12month time frame. The biggest issue is that some catchments have tremendous time lags for nutrient effects to be noticed. Mike Joy mentioned this. However Joe Public seems to think 'bring in regulation and it will all be hunky dory'. It doesn't work like that.
Lower stocking rates isn't going to sort the issues in all catchments.

We will see more push towards Partial Feed Ration liek in US (or the Visible Cows that Colin showed).  More sales of equipment, more high tech toys.  That's the "high productivity" philosophy embraced by certain policy writers (and (non-farming) financial advisors).  by pouring in more money to technology, then we get more (economic output) for less (environmental impact).  We replace low paid farm workers with high paid autmoation technicians, and a bigger tax gain.   The product per farm, and per cow is pushed higher, the margin is pushed lower, and theoretically that's minimum product cost to consumers, while having maximum job paycheck for staff.
 It's Adam Smith's "500 nails a day" for specialisation.

The increased density of operation also means tighter green control and lower buy in for infrastructure.
There are massive downsides of course.  Although technological risk/point of failure is seen as an _advantage_, not a disadvantage, as this means more support contracts and extra sales of parts and spare machinery. that being an economic boost.  
 The downsides include the system is high maintainence, requires truly expert management to pull off, is energy intense, and worst of all, and not admitted by the systems supporters, it needs a deep well cashed up economy to sell into.  One which NZ doesn't have.

There are a few other issues (up and down) - which I will not bring up in open forum.

Although parallels can be seen in the bulk retail philosophy and globalisation of the clothing industry.   You will all notice how much better your clothing lasts these days........

I hope that tax credits and other manipulation won't be necessary for small farmers.  If we go down that path we do have to question the viability of why we are doing so.  Are we trying to prodive a (wartime) local industry?  Are we protecting a (historic outdated?) system?

Everything I've seen points to redundancy of daiyring in problem catchments.  Can we put better land use there?  What economic use is possible?  (for long term new zealand, looking forward).

Just how stupid are the "leaders" that one minute crow about NZ dairy forever, and massive increases in productivity, then write the entire industry off as archiac.  One moment they're quoting Lange "Sunset industry", next it's re-birth of White-gold.
... seriously the farmings ok, it's paying those clowns thats a waste.

Point three is one of the large ones.
Many locally owned businesses in NZ are grossly under-capitalised.  It -really- doesn't help that rather than acknowledge this -fact- our government keeps acting as if it can just spend more in government services to make up for lack of revenue.

We're ending up with ultra-modern first world expectations, based on an 19th century agricultural  economic base.  We don't have the merchantilism of the UK, the age and economic expanse of Europe, or the myriad of economic development in the US, we don't even have the size and population of Australia (we're only the earning power a large city!)
 
Just look at some of the decisions made: German sponsors PV panel installation, pays people to put in panels.  NZ....refunds a portion of the interest.   UK wants farmers to reduce pork production, taxpayers pay farmers to keep them in business.  NZ...increases costs and restricitions forcing pig farmers out of business (not good for equity growth).
 
Just who is the Ultra-fast Broadbank supplosed to help?  Are NZ consumers getting the service for free (as part of their tax paid dollars)....or are several companies looking to make profits...foreign profits... in sales using that infrastructure?

but that just backs up that first world problem again.   NZ consumers expecting services cheap or free, and the sales not building equity in NZ.  without the equity building up, where is the re-spending?  Rather than pay for the installation of UFB, rather than pay for the "value adds" they want on top of "old milk systems", they expect the man behind the tree to pay for all those things.   well in NZ there is nothing but a few possums and a rabbit behidn the tree.

And the longer it continues then that harder it is to develop modern economic structure.

as for the family farms... they're the safest.  As long as they have no debt, they have extremely low cost of production - until the government comes for them to pay everyone elses bills.

Where do you think the water comes from?

Yes, all the houses and dairy and stock water on this farm comes from two streams.  It has done so for over 20 years.   the main dairy used a settling tank.

I've leased the property for 4 yrs, sharemilked lower order two yearas before that.

Two years ago I managed to put aside enough of my money to install a basic auto-flushing filter for the house line.  It took me another year to get time to rearrange the pumps and pipes to take the filter.    At the same time I put in stainless steel lead and follow pipes and a water meter for the stock water.  Last year I bought and installed UV sterilisation and cartridge filtration for the milk plant and silo.   All while under constant negative comments from the landowner how it wasn't needed and hadn't been done because of the cost and problems with maintenance.

After two years I'm still waiting for the local engineers to certify the backflow prevention valve.

When the owner first purchased the property, the houses were on rainwater collection, but people kept getting sick from the stagnant water, and frequently ran out of water during summer.   Not being able to take a shower after a poo-covered milking is not pleasant.

the previous owner used tricks like: if he had a leak in the stock water line that squirted in the air, he would put a lump of firewood on it to stop it squirting in the air.  He considered that was "fixed".  Over 25 years later we'll still finding odd bits of his pipelines (still under active water pressure)

Kate unless farm water is collected via roof rainwater systems ALL farm water, including house water, comes from rivers and streams. Either above ground or below ground.

I just assumed all farms collected rainwater given stream/river water is untreated.

No Kate.  Rainwater is unreliable - unless you live in Southland.  ;-) Rainwater in tanks is easily contaminated with e-coli but most farming families get immune to a certain level of it. :-) 
 
Yes the water is untreated. There has never been any problem (from a pollution contamination point of view) of any bore water we have had as house water on the farms we have lived.  It's an urban myth that all water is polluted, and the number of farming families using bore water to live on, is part of that proof.

Where I grew up we couldn't drink the stream water, as it was a muddy bottom stream and had too much natural bush nearby.  The natural bush had too much runoff from bush humus and hydrophyte (water plant life). also bird and wild animal droppings, and slow water stagnation.

The farm owners routinely boil their drinking water and always have.  The water is fine for washing in.  I tend to drink tea and coffee (and energy drinks) so the little water I drink, maybe 2 cups of unboiled hardly justifies panic.   One reason for the primary filtration is for modern electronics (dishwasher, washing machine) that can't handle any sedimentation in storms, so just as easy to install a good filter as a poor one.   The owners didn't have a dishwasher, and their older washing machine handled poorer water, and they just didn't use their appliances at peak water levels.  I'm on my own so I can't afford to support another person to housemind/do washing up when time suits.

It seems a bit rude to demand the landlord pay for nice water and potable solutions when they've lived and raised their family on much less.  So I wanted it, saw the possibility, so I paid for it.

"milk" isn't just "milk".  Otherwise the cow juice that came out of a cow eating grass 50 years ago would pretty much cost the same to produce as the cow juice coming out of a cow today.  

It's all those value adds.
Do you want anti-biotic tracking?
Better cooling systems?
The factories to be cleaner, bigger, with better tankers (with lower environmental impact)?
Recycled water systems?
Lower energy foot print?
Better fertiliser usage?
Better wages for staff?
Better dairy systems (no longer skimming cream in dishes in the shed, no longer "brass hat" cooling systems, 12deg or lower cooling with efficient refrigeration that doesn't use CFCs)
and then there's the higher asset cost - not every family is happy to go with 30 cows and a step-up shed anymore.  More hardware = bigger herd = more debt service and cost recovery
You want animal tracking and genetic improvements?

so the milk isn't "just milk".

The theory was that NZ could try and compete for top end products against Nestle, Danone and other companies, but we didn't have volume, expertise, capitalisation or market influence in large countries.   But what we could do is provide top quality ingredients, instead of competing against the consumer brands, we were supposed to get premium returns on supplying them ..... but in order to move volume the higher ups have constantly been cutting our throats while selling us BS.  (NZ production is such a minute amount of world production, so we could maximise production in NZ and not make a dent... oh no, there's oversupply on market & prices plummet....)

We can go vertical with NZ top brands, but Fonterra keeps pushing itself as a "One Stop Shop for everything dairy" (I quote from several Fonterra employees)  even for things like running job placement ads.   It also insists that it has to be the market leader and top quality in everything. (why oh why do they need to release news on their own sky channel?? And when I was doing computer tech work they were famous in the industry for just throwing buckets of money at problems.  Put in thin clients? no problem. No bandwidth? No problem, buy up every bit there. Still not enough, pour more money in, run ISDN or fibre to some small town rural site.... Pull it all out 5 yrs later.
  A company that wants to do everything, at the highest cost level, and makes it's revenue selling commodities on open market....   why can't farmers afford Dutch level sophistication?   And any time there's a boom you can count on RBNZ to stop any economic growth!

For there to be a justification of investment/debt within the sector there must be projected improvement in returns.   Town people just aren't prepared to pay for their demands, and the only place that price demand can be made is Fonterra.  If they want to sell cheaply, then they are going to have to cut costs (eg head count, services) and they're going to have to stop demanding infant formula perfection for product they're selling at calf milk powder prices.

 

and here is a neat summary of the current revenue line (from a month ago - Aug 2014):
 
China drove global demand for dairy products through most of 2013, and continued importing dairy products through a period of global expansion, which masked the effect of an increasing supply for a number of months.
However a decision to stockpile significant volumes of product has seen demand drop off, while the world continues to produce more product.
But since China, the dominant buyer for powdered milk product on the global market, has stopped buying, prices have fallen significantly.
"It is not all going to China, but when buyers see that prices are falling because China is out of the market, they don't want to go out and buy a product that is going to be worth less money next week," Mr Droppert said.
"So it follows a herd mentality, we see prices continue to fall because nobody wants to step in any more than they actually need to.
"The flip side of that is when people do see China come back and start to buy that's when they realise the days of bargain hunting are probably over because the cycle turns.
http://www.farmweekly.com.au/news/agriculture/cattle/dairy/wa-dairy-production-continues-to-fall/2708253.aspx?storypage=0
 
How does "China stopping buying" fit with the govt. to govt. communications/news opportunities
 
Today Prime Minister John Key and Chinese President Xi Jinping announced an “ambitious new goal” of reaching $30 billion in annual trade by 2020.
Back in 2010 Key reached an agreement with former Chinese Premier Wen Jiabao, aiming to double trade levels at the time to $20b by 2015. Last year two-way trade with China reached $18.2b, and  Key said yesterday it was “well on track” to reach the target.
http://www.stuff.co.nz/national/politics/9846693/NZ-aims-to-boost-China-trade 
 
would the buying have stopped before or after that announcement from March 2014.
 

To any one who has studied Chinese and Japanese history the Chinese emporers and local governors have been do this same thing for over a thousand years.   That's why they invented some of the market indicators that we still use in foreign exchange today.  (it's also why many of their neighbours won't play with them any more).

The usual rules of business caution apply.  avoided debt exposure, don't take promises, smill lots and don't believe anything you hear.   What really worries me is that our "leadership" and politicians seem to be buying the propoganda, and they really do not want to be "a friend" of China's interests.  China keeps it's opponents close and friendly, and if a "friend" won't help them out in a time of "need" and see them through on a favour, then the "friend" can quickly find themselves "out-of-favour" with the insulted party (ie China) and information dies up quickly, and "other friends of the insulted" suddenly find they need to "show their friendship".  It's an old trick, and served the Emperors well.

Cowboy, you are doing tomorrows news today - very good Mr Bond your thesis seems demonstrated below.
 
China's visiting foreign minister has taken an apparent subtle swipe at the Abbott government, saying his country "may not be Australia's closest friend at the moment".
The remark by Wang Yi, who arrived in Australia on Sunday, was an apparent reference to Prime Minister Tony Abbott's controversial observation last year that Japan was Australia's "closest friend in Asia" – breaching the common rule of not ranking diplomatic relationships.
But Mr Wang otherwise was full of praise for Australia, urging it to become a bridge between the East and West.

Read more: http://www.smh.com.au/federal-politics/political-news/china-takes-dig-over-closest-friend-remark-20140907-10dngp.html#ixzz3Cd2yfwi8
 

Oz Govt. thinking:
The deflation of the property bubble is already seeing big falls in property prices across China, especially in second tier cities where there is less prospect of excess inventory being taken up. This rebalancing, while necessary, has its own wealth effect -  negative impact on household spending, offsetting at least for a time the policy objective of increasing consumption as a share of GDP.
Either way it underlines the need for us to to think of China less as a destination for bulk commodities - coal, gas and iron ore - and more as a sophisticated market for high quality, differentiated services - education, architecture, design, legal and financial services and technical services among many others.
Among these shifts, Australia can and should be at the forefront of this transition and can be a huge potential beneficiary of the new Chinese economy.
That is why the shift towards a services economy has been a major focus of the proposed Free Trade Agreement.
http://www.malcolmturnbull.com.au/media/speech-nab-australia-china-business-week
and
But there is one chapter in those histories which is all too often unread even where it is written at all.
For China the war with Japan had begun in 1937 and for four years she fought alone. Japan had 680,000 troops in China at the time it launched its offensive in the Pacific - four times the number it deployed to sweep through South East Asia until they were stopped at our doorstep in the jungles of New Guinea13.
Had China been defeated and become a collaborating puppet state, like Vichy France, not only would Japan have been able to fling vastly greater resources into the war against Australia, but it would have been able to  invade Siberia in 1942, as Hitler asked,   when the Red Army was almost smashed by the Nazi offensive in the West.
We may not have succeeded in resisting  Japanese aggression without the tenacious heroism of our Chinese ally. 
 

The Oz government doesn't realise that China is the worlds leading manufactury? And that they are current leaders is hard technology in many sectors (energy, technology, robotics, medicine)?  And that they have the human resources that outweigh anything in the world?  That can be redirected without the usual protests we see in the West?  just what kind of architechiture are they thinking of selling (more posters of the Premier?) or legal services?  Or do they imagine that the AUD has proven a better financial performers than China's financial policies that shape Renminbi usage?

Cowboy: Pull it all out 5 yrs later.
like this:
http://www.stuff.co.nz/business/farming/dairy/10471369/Angry-retort-to-Fonterra-u-turn
Southland farmers have been left with a sour taste after Fonterra cancelled contracts to supply milk over winter and the shoulders of the season.
''There has been significant growth in the region with the likelihood of more to come. We have been hit with a double whammy by investing in facilities to supply winter milk as well as buying share capital to provide milk.
Winton farmer Alfons Zeestraten, of Southern Centre Dairies, agreed, saying farmers had spent years pouring money into their farms and the co-operative and he could see his investment disappearing north.
''The company is trying to lure Waikato farmers into winter milk by telling them it is good for their cash flow. I read a statement about adding value and improving cash flow which I found quite upsetting as this is what Fonterra is taking away from us,'' he said.
 
Have Cadbury have been getting milk at below the cost of production, given contratual arrangements appear not to have a facilities/production termination clause, or allow the full costs of supply chain have not been able to be amortised (as per farmer comment above) over the term of the supply arrangement.?
As an aside some would say the $3.80 is just a portion of the factory benefit alone of operating year round production v seasonal schedule (capacity utilisation/overheads etc), but you could imagine a multi-national saying we pay pay less for more anyway for our glass and a half.
 

Henry it's not the first time Fonterra has pulled the plug on Southland farmers.  We don't even look at any 'offers' they make now.  A few years ago they wanted southern colostrum.  Sharemilker was keen so we said yes.   One year later they pulled the plug.  Then they came back to Southland again wanting colostrum some time later.
 
The cadbury contract is an interesting one.
 
 

Too right. Its makes you weep:
https://agrihq.co.nz/article/southern-dairy-farmers-to-lose-winter-contracts?p=11
Fonterra director of milk supply Steve Murphy said the company had been up-front about winter contracts finishing. “However, we are making the commitment that we will pick up milk through winter in the south. We have a service to provide.” 
- as mentioned above any supply processed outside of seasonal supply profile is of great $ benefit to the processor.
`
but agrihq does give folk a feel for the system changes and transition required to gear up ops.
Westpac agribusiness lower South Island area manager Peter Moynihan said although he hadn’t seen a cost analysis of winter milking in Southland, farmers who were doing it were making it work. It was especially useful for farmers with wintering barns.
“I’m not sure if everyone with barns is milking all year round but they are calving earlier than they used to and they’re also extending their lactation into June and July because they have a barn. The dry period for the cow is becoming a lot shorter.”
“It’s about avoiding pasture damage, it’s getting livestock in the condition they want and not sending them 100km away for grazing and there is the environmental side as well.” There were about eight types of wintering barns being built in Southland, from plastic tunnel houses costing about $300,000 to free-stall barns that cost more than $2.5 million, he said.
Westpac was approached by one or two farmers each year in Southland who wanted to build barns and the bank viewed it the same as buying a runoff for wintering. “Our biggest consideration always is cashflow and does the farm have enough security? We look at the whole farming business.”
 

I can buy a gallon of milk in the States for a lot less than i can in NZ. Fonterra chooses to go the commodity way anfd is happy to accept the high prices.
 
USA Milks prices retail
The national weighted average conventional milk price for half gallons, at $1.89, is 10 cents higher than two weeks 

ago. Organic half gallon milk, at $3.45, is 11 cents higher than the previous period. The organic versus conventional 
half gallon price spread is $1.56, up 1 cent from two weeks ago
 
http://www.ams.usda.gov/mnreports/dybretail.pdf
 
 

Aj with respect, USA dairy farmers operate under a completely different cost structure than kiwi farmers. The vast majority of USA milk is consumed domestically, 95% of NZ is exported. There is a backstop price for USA farmers that if reached, the government will step in and support the price paid to farmers. Yes the price of milk maybe a lot cheaper in the USA but it can't be compared to NZ unless you compare chalk to cheese.
Due to the high percentage of milk exported from NZ Fonterra needs to produce commodity product.
In Europe at the moment I'm paying 1.65 swiss francs for a lite milk. Back home in Central Otago I can buy 2 litres for $3.50.

What rate do US dairy farmers pay their staff, and what kind of % return on asset are the owners expecting?

Are you saying it is the domestic demand rather than the internationala price that sets what the farmer gets paid?
 
Anyway I disagree, the price is more determined by how much the bankers can extract from farmers. But you are closer to the action, what is the average interest cost vs the farmers other inputs?

Consumer do not just "want" cheaper prices, the problem is that they do not have the luxury of choice.
You can bet your rear end that if enough cash was in the wallet that most would make the choice of the better product.
I believe that it is not consumer choice that drives us to more and more intense production, in fact I believe it is absolutely the opposite

We do have choice Raegun. I have a choice of brand and price in the supermarket or go to the local service station and buy the Fonterra budget brand cheapest of all.

Raegun, the company representatives and government departments are completely adament that customers are demanding better quality raw milk, better tracability, more documentation, better cow conditions, better wages and nicer working conditions for staff, better environmental caretaking.   they just don't think they should pay for these things

Vast numbers of NZers have no choice at all, for many it is not even a choice of what to buy but whether to buy anything at all.
If people have the money they will make the choice, especially if they have kids, I am not rich by any stretch, but I can keep my milk consumption down therefore choosing the more expensive option, preferably organic. I still need to go pastuerized as I don't consume enough to make trips for the raw stuff.
The regular stuff is vile, I am quite fond of Lewis Road product

They have more choice than I have in production side.  You can choose to buy expensive, buy cheap or buy not a all.

I am forced by law and having my house and families assets seized and thrown into the roadside - if not jail - if I don't comply with the demands these people are making on your behalf.
- - -
anyway It's sunday, and fathers day.  I've had my 3 hr break for the week to see the kids, so I better now go milk the cows again, and feed the calves, and check the springers mob.  

How many of your 'no choice' kiwis have Sky tv, buy alcohol and cigarettes, raegun? I accept there are some kiwis who genuinely do struggle but I don't believe they are 'vast numbers'.
 
For many it is the choices they make. Last year (I think) Campbell Live went to school kids to see what they had for lunch.  A lot of the kids who had no lunch, had in fact, being given a weekly amount to buy lunch and they were filmed buying it at a dairy.  They had entire control over whether or not they spent all the money in one day on sweets etc or whether or not they spent it over the week,  It was interesting the number of kids who said their parents wouldn't get out of bed to make their lunch but would rather give them money to buy it.  These kids were from the not so affluent part of Auckland. 

my concern is not the cow juice, it's the price of add-ons.  How much homogenisation and treatment does your milk *really* need?  How much documentation do you really want?  Does it really matter to you if the outside concrete race of my cowshed has cracks in it?
 Frankly I think you could get better, for less, if your product channel was optimised rather than volumised - and if the likes of MPI and government weren't playing one-upmanship games with our neighbours.  As it is government is quickly finding out that having broken the political power of the farming cartel (via TAF), that there's not a lot economically holding the country together...

Let me work this one out.
The cockies stuff up the rivers big time but during the good times all they did with their money was conversions and buy the neighbours property thus ramping up property prices big times. Now when a few brave scientists point out the fact that the only thing pure in NZ is the cows urine in the rivers, National's cunning plan is to use tax payers dollars to ring fence the rivers and also shout down / cut funding to any environmental group that dares challege Professor Key's scientific view.
Where is the long term planning here - you can't just keep adding cows to each hectare? Also why should the tax payer have to cover the mistakes and short cuts of the cockies?
 
 

Approximately 80% of dairy farmers own 1 farm. Of the remaining 20% approximately 4% own more than 2.

Trust your facts are legit. Seems we know more about who is buying farms than who is buying up in AKL.
When I look at dairy farms for sale the number that advertise as being in several titles / with several houses seems way more than 20% of those advertised. Is this an indication that a higher proportion of those farmers that have over extended by buying more land are bailing?
Another point noted when looking at the farm sales is that farmers sitting on a paid off dairy farm in most cases would be on paper multi millionaires. How come then National deem it the tax payers duty to ring fence the waterways and bail out the environmental issue caused by the farmers? You will forgive me for thinking that it is another case of National looking after its bread and butter rich mates.

The dairy industry has quite good data on farms. Fonterra also has data. ;-)

Most farms have multiple titles. Ours has 5 and thats the way it was when we when bought it. We have two houses on the farm. One for our sharemilker and one for their employee. Dairy farms mostly have accommodation on site for staff, hence multiple houses. Kumbel or waymad may be able to explain how come farms are in multiple titles as alot of it is way back historical.

You only realise the value of your farm when you sell it. If you don't sell, then your 'wealth' is only on paper and doesn't have anything to do with cash flow.

Actually Fonterra made it a condition of supply to fence off waterways before National or even some regional councils deemed it compulsory.

As I replied to Kate on another thread a few days ago, I believe that the funds National has set aside is for Regional Councils to buy land (farms)that it believes is necessary to be retired from farming in order to protect sensitive waterways that have significance to the local community. Approximately 90+% of all Fonterra supply farms have fenced off waterways. I think they all have to be completed in the next year or so, but I am happy to be corrected.

Well there you are - I rest my case. When is a farm with several titles not a group of farms (ableit amalgamated in some cases over a long period)? So in fact the statement that "Approximately 80% of dairy farmers own 1 farm. Of the remaining 20% approximately 4% own more than 2" is a nicety put out to hide the bleeding obvious and the facts are more my previous point ,  "during the good times all they did with their money was conversions and buy the neighbours property thus ramping up property prices big times." and totally ignoring the environment.
Again why should the tax payer bail out these (on paper) multi millionaires. Get them to sell off one of their titles (farms)
 

Which title are you talking about?   Usually "more than one title" refers to land titles, which are arbritrarily decided by planners and surveyors over a hundred years ago.

My neighbours farm has around 40 titles, because the planners put a town there.  It never even got a pub, but it would cost a fortune to have it re-surveyed.   also many titles are split by roads or streams, or was 20 acres blocks (drawn on paper).

A title is not a farm.  (seriously people if you can't not be stupid at least not be noisy).

And the multiple farms buying their neighbours are usually not the ones in big debt.  The big multiple farms often have one or two fully paid up farms, often multigenerational, almost always supported by a partner not in farming (eg consultancy, finance, accounting, law, fields - or even just well paid senior staff member working in town).  Those farms allow them to have the nest egg, and as pointed out they don't claim the "rent" (asset cost) of the main farm so the main farm(s) are almost pure profit with minimal costs.   They also often don't have updated equipment and they are cash cows.   those aren't the ones that get in difficulty.

the ones in difficulty are the sharemilkers getting into farms, or just sharemilking.  Or conversions where the profitability (or conversion) is way behind what the experts promised.  Or people like myself, who have to upgrade several tens (or hundreds) of thousands of dollars worth of assets just to be safe enough for outsiders to work.

And you're not being asked to bail anyone out.... you are only being asked to pay the proper price for the demands you (and your government & retailers) are making (on your behalf).    The same people who would complain at retail staff not being paid "a living wage" are happy enough to insist that paying for farm produce at less than cost is ok (and then they insist the farm people pay for the city folks environmental demands... would they insist a minimum wage town employee pay to have their bosses building refurbished!!!!!!!!!

 When is a farm with several titles not a group of farms (ableit amalgamated in some cases over a long period.  Almost never.  Reason being a title can be as small as <1ha - hardly a farm. Of the five titles on our farm not one of them would be an economic unit in itself.  We had a title on our first farm that was originally a 1950's Labour scheme house that the then government built.  Once the government did away with that scheme it sold it to the neighbouring farm - a house on a 1/4acre section.  Following your logic we should have a house on every title but we don't.  Take off your green envy glasses smalltown.  It is obvious that you don't understand land titles.
The government funds will be paid to the regional councils to spend.  Compulsory land acquisition under public works act has being happening for decades.  This will be no different. Regional Councils are the ones who have consented dairy farms, so need to accept some of the responsibility and given the power of the urban vote (In Southland the first dairy farmer on regional council got elected last year - prior to that there were no dairy farmers on the RC) the urban taxpayers/voters can also be held responsible.
 
 

perhaps his solution for town people who get made redundant or suffer losses should sell a room of their house.   It makes as much sense.   I don't think they realise a farm isn't just bare land,  eg this 60 ha farm has over a hundred thousand hours of workhours of improvements, and over a million dollars worth of infrastructure (fences, water reticulations, homes, dairy shed, farm sheds, calf sheds, hay sheds, race ways, underpass, drainage system for underpass, effluent storage pond, effluent sump, effluent reticulation, water tanks, pumps, pump shed, power to some sheds and houses, water filtration, water metering, yards and stock ramps, renced of waterways, culverts at streams capable of handling fertiliser trucks, drainage in some areas, water take points, shelter trees (many getting old), equipment loading ramp, tanker and truck access areas, roadside culverts strong enough for milk tankers.  That's not including land and pasture development work (or stump and old shed removal)

CO & CB
As you preach from your seemingly bully pulpit could I raise a couple of points:
Firstly I work as a surveyor with enough cadastral experience to understand titles so your comments (insults) were midly amusing. Keep them coming - Sunday is a slow day.
Secondly I grew up on a dairy farm and understand the attachments farmers have to land. You can never have enough and the public domain readily provides the evidence that dairy farm sizes are growing. http://www.stuff.co.nz/timaru-herald/news/6689269/Dairy-farm-size-gets-b...
Acknowledging perhaps your own personal situations aside  but farms don't suddenly get bigger by themselves do they? Every time I get home the local land baron appears to have purchased another neighbour's block. Again its easy to find the reason. Farmland has always been a good inflation hedge. http://www.aginvest.com/research-for-investing/nz-farmland/
CB - you try and make it a town vs farm but actually if someone goes bust surely all assets are on the table to be taken.
Meeting you halfway CO, yes - a lot of the pollution is historical and that is the only difficulty but my position remains those who make the mess have to clean it up. How are you going to feel if sometime in the next ten years clusters of illnesses / cancers crop up and farmers are the obvious cause?
 

Smalltown,   as you are a surveyor and do understand titles it is surprising to read that you see each title as a farm.  That is where we differ. According to your view I own five farms because my farm is in five titles.  According to me I own one farm made up of 5 legal titles.  So we will never agree.  Perhaps you are a troll. ;-)
 
You can never have enough  That is a very broad brush stroke to tar all farmers with.
 
farmers are the obvious cause if that were the case then it is most likely that farmers would be the first to be affected as many access their drinking water from farm rivers and streams (either above or below ground)- as you will well know.   
 
Regional Councils allowed your so called mess to happen.  They could have stopped it but didn't.  So they are as guilty as any farmer who has simply followed the law and policies of the time.   It is a rather narrow view you have that you 'hold the sons responsible for the sins of the fathers'. Is it only farmers you hold this view towards or everyone in general?

She doesn't only tar farmers with that brush but all businesses who would seek to expand or to gain security.

Two of the reasons I'm so incredibly insensed at her ignorance, (1) I'm currently having, and have been caught in the past, when a farmer DID sell off part of the farm (several titles) thereby reducing the viability costing myslef and other friends their businesses, herds and jobs.

and more important (2)  The farmers that -are- currently viable -are- the ones the brought all the neighbours up, and worked sharemilkers hard.   Those operations are now the viable ones and those who didn't get "land fever" are finding they're too small to hire staff and cover costs.

The ones looking at the rocks are those that trusted Fonterra as *their* company and that their company had their interests at heart.

My first post-school job was surveying for power board.  I buy and sell a few houses. I'm in the process of buying a multi-title dairy farm.  
That you claim to work for a surveyor and don't know about multi-title farms marks you as an idiot or a troll.

And the farm buying isn't about ego or land attachment, it's about practicality of business.  I would think even the most house bound urbanite would understand that a farm has animals and physical location is a critical feature of the operation.  Except the people at Child Support - who thought my relief milker shifted my cows to her farmlet to milk them....
 Growing a neighbouring farm is one thing, but selling off a portion is different kettle of fish - is it big enough to be viable, much of the infrastructure has to rebuilt (size of paddocks, water, pump and water sources, electrical sources, raceways to the new paddocks).

And it's not town vs farm you imbecilic prick.  It's consumers desires vs what the consumers are willing to pay for.   There's a reason town folk are consumers (and farmfolk aren't the buyers)  but perhaps since you don't realise about the business aspect of farm access when buying the adjacent property, and work with a surveyor but don't understand multi-title holdings, grew up on a farm and can only see the ego and probably moved off farm... you probably aren't good enough to think through why townfolk are the consumers.

 And as has been pointed out by people cleverer than yourself, the consumers themselves aren't getting the option about which of their "desires" they are allowed to demand.

But if you REALLY want something to stretch your brain.
regarding the multiple farms thing, ask why the Crafar brothers (NZ biggest private Fonterra dairy supplier) were extended so much credit?  and by whom (NZ? Aussi? or someone else?)     who underwrote it?   Why, when we're told that Fonterra helps some farms with equipment and animals did Crafar's sharemilkers not receive help with irrigation or calf rearing, when it was obvious they're were in difficulty ... after all we're not talking some small two bit operation?    Why did they not receive important environmental help, when Fonterra's people have recently been seen voluntaring to work on Landcorp owned property (Landcorp is predominantly a supplier to Open Country Dairy, if interest.co.nz posters are to be believed).
 Ask why it was that Crafar was not permitted to sell individual farms.  Ask why it was that ex-sharemilkers who had succeeding working on Crafar properties were not contacted to assist and instead airchair experts were hired who had no experience or expertise in that type of operation.  Ask why it was the politicians like my local MP were adamant "not to interfere and I quote "a farmer must be allowed to get maximum sale price for their property") even though that farmer wanted to sell locally and not to foreigners.
 Ask why with so many millions on the line, fonterra and others would not step in to help with narrow portions of help (they'll drop 100M for factory extensions, but even with the noise they made about helping the environment and animal welfare, they wouldn't spend a cent to assist their largest private supplier)

Now ask why this all went down right before the TAF vote, the vote where fonterra still won't release the number of farmer people who voted.  When the largest private voter, Crafar, would have been a swing vote.

so he wasn't _permitted_ to sell individual farms, and that was all in the papers.

please indicate the number of sharemilkers - after all Fonterra might only allowed land-owners to purchase wet-shares but it's usually the sharemilkers taking the big risks and making some of the big decisions.

that is why Crafar farms looked run down to the outside eye.   Crafars considered sharemilkers to be tenant farmers, if you sharemilked you can have all the professional equipment you want...if like a builder or dentist or doctor...you bought it yourself...

Cowboy, I'm offshore and don't have laptop so searching for links is difficult. I have sharemilker data at home. It is probably available from Fonterra or dairynz. We employ 50/50 sharemilkers and they get 50% of dividend. I don't accept they take bigger risks. It is a risk for us as owners to devolve the operational management of the farm to a young couple we often don't know.

Where we used to farm some owners required 50/50s to own 50% of the wet shares. These days anyone can buy units and later convert them to wet shares on farm purchase. We know young couples who are sharemilkers but who also own their own farm and employ contract milkers. It is their 50/50 position that is subsidizing their own farm. After a few years - 4 in our previous sharemilkers case - they no longer need their 50/50 position.

There's good and bad on both sides of the owner/sharemilkers fence. We got to ownership via share milking, not via family assistance so have experienced both sides.

I own cows, the landowner in February decided they've had enough of the new requirements and decided to sell.     so what am I supposed to do with these cows which I have almost paid off....

I suppose your contract/lease runs out at the end of this season?  Some farms are sold with the sharemilker part of the contract, but if you are leasing then that won't be the case, I guess.  Good luck as I know there aren't a lot of sharemilking/lease positions available

I detest cows.  I took the lower order winter sharemilking job of 120 cows (150 peak) to help pay for some deffered maintainence on property and to finance the rest of my comp sci degree.   The property is also owned by my family and was leased to someone else.  I took the 2yr lower order sharemilk job with the leasee, as we had a vested interest in getting the place back together in working order.  But since the leasee (the higher order to my sharemilking) didn't front with a bunch of feed and put on 30 extra stock in winter.   When his lease finished I was stuck with a 15k of debt.  So I could go back on the sickness benefit w/ 15k debt, or buy cows and lease the now-working place myself.

 Last year the owners didn't want to discuss the lease at all (too busy with other things) so I plowed a bunch of cash into sexed semen and extra feed.   February this year they announced they wanted to sell up.
 I have had to put huge amounts of development and cash into this place, sod if I'm going through that again,  and no way would I ever go sharemilking with anyone ever again. hell no.

Yes I have heard of 50/50 sharemilkers doing that.  I find it rather odd, because IF I was to hire someone to be a 50/50 sharemilker I would expect them to be running the place.  If I contract staff/partner I don't expect to find someone else turning up to do the job!

And I'm not a couple. I'm a divorcee.  My wife split 15 years ago with our son, and my partner that I had two children with decided she didn't like the sound of farming (she grew up on a sheep station) and refused to stay with me.  This means Child Support take 30% of most of my income over 18k  before tax.

And yes I'm aware that I can buy units costing over $6, on this payout which is looking like a sub $6.   I previously brought some dry shares through the farmowner for 4.52, and sold them at 6.90 to pay for suppliment feed and (unsuccessful) tractor repairs.

This property is worth around 2M, and I'm leasing it for a sweet deal of 4% (around 80k), I did have access to a 45ha runoff but that was just sold after getting it up to good working order (owners work) for 750k, that was another 25k.   I'm only doing around 55k kgMS at moment, so that's $2 kgMS just in rent.
 So buying the farm without runoff is possible, it's whether on low payouts, that a farming operation with 120 cows is viable these days.  As it's going to be minimum 12 years in the farming operation (not counting FX, property and film business work) before I can intensify, and that's under current laws/regulations.

unlike most farmers I have done the calculations on what nutrients I get from spraying shed waste onto pasture...    

4 years ago I said to the Horizons people (who were threatening all sorts of legal action if we didn't do what they wanted)...I said "Tell the farmers what fertiliser is in the effluent and how much money they will make/save from applying it as natural fertiliser, and they won't ignore you, you'll have to be beating them off with a stick".

the councils have gone from constant threats, to telling farmers not to be earlier adopters!

- - 

and from someone who knows, the PKE isn't a problem.  Actually any suppliment feed fed on a properly managed, effluent collected, feed pad isn't going to be a problem....  simple sense if you think about it.  Because the effluent can be gathered and spread over a wide area.  Volume might be a problem...if you are in China but how many of those size farms do we have in NZ?

Or are we just looking at the "media service" trying to breakdown the NZ dairy sector, now that the corporate supply profit has gone to China............