Is the dairy expansion near its peak

Time for comprehensive and long-lasting economic reforms in order to achieve a 100% pure clean and green economy. As an Island we could be the world leaders with Billions in revenue generated from new and existing industries.

In the current, unpredictable crises downsizing and adding more diversity and new segments to our economy seems the way to go. We need smaller, more flexible units.  

Was talking to the bank manager today.  They said that cow prices are expected to be up to $2800/cow this year.  When asked what the bank values them at for security purposes, the reply was $1400.  So just where are farmers/wannabe farmers going to get the $1400/cow shortfall from?  My guess is that while you may get some extreme prices paid, by seasons end the average price paid will be considerably less than $2800.  I spoke to a chap who sold some cows for $1700ea, however he sold less than 5 so it was hardly a herd.

Time for comprehensive and long-lasting economic reforms in order to achieve a 100% pure clean and green economy. As an Island we could be the world leaders with Billions in revenue generated from new and existing industries. In the current, unpredictable crises downsizing, adding more diversity, flexibility and new segments to our economy seems the way to go to succeed on global markets and nationally.

The simple reason is: Only smaller and flexible units will achieve those goals described above.This is a fundamental new and structured economic strategy. Culture change, education and of course the chance of better profilabilty of many businesses lead to smaller and more flexible units.

CO you wrote on another issue:

David Carter told a farming group that he believes that peak oil will result in agriculture being forced to modify the way it operates.  It is the first time I have heard any govt Minister acknowledge that oil resources maybe finite and we will need to change our ways.

Does that not support, what I’m advocating since months ?

What a load of rubbish from Otago Uni.

So long as dairy returns per ha beat sheep which they have for almost 20 years dairy farms will still be created. Sheep cash flows are cronic and only returns have been through capital gain generated from increased land prices due to the dairy boom.

I saw a report stating just 20% of suitable land for dairying in Southland was converted. More and more farms will be converted over the long term so long as Sheep remains unprofitable.

We may have hit a temporary peak due to credit crunch but in the long run there is much more land available for dairy in NZ!

Casual Observer 

You may enjoy some of these articles. I think you are in for volatile times. Heck sheep farming is kaput. I for the first time in my life am struggling to see a way out. Banks are lending %15 including stock. I have friends who have had their accounts frozen by the BNZ. There is no easy answer, except bigger farms and less debt. The big 4 banks are going to lose a heap of dow on the east coast, this is really hurting farmers. They are just calling in farmers and saying no more credit, some get to drive to Auckland to get the bad news. If it isn't tied down its for sale. The average nzer has no idea whats coming including the government,heck 4 million lambs and a million ewes lost in a storm should have been a warning. Profits are gone but the debt lives on.

http://dairy.cornell.edu/

Andrewj, this is not the reality that im experienceing or farmers in my area..otago. The mood is one of optimism and excitement for the coming season. All our prices are going to be up and significantly so this season and many of our costs are stable or decreasing and interest rates are low I realise the east coast might have a hangover from 3 years of drought but surely the established guys are set to coin it this year?

Sheep shagger

I am voting for things to get better but in the case of hawkes bay what are the established farms growing?  If they had three years of drought presumably they had to cut back flocks and herds and did not grow too many crops?    And now with good animal prices they probably need to take on some debt to restock if the water is coming back.    Can you make the case they will do ok and who will do best please?

Thanks

Sheep Shagger, im interested in how you get on. Here they are talking large drop in farm prices. I mean huge but we have had 4 seasons from hell, which HB can get  it appears quite often. The general feel was that coastal country is going to drop significantly due to high costs many felt to $250 a stk unit. The shortage of stock is going to play hell with farmers who have low stock numbers. I think the sheep flock is %30 back and very few bull calves reared this year. Im buying yearlings for $500, and hopefully will make a few dollars. I only play these days.

Andrew

Andrewj, I will admit to playing a little bit of a devils advocate roll here as I get abit frustrated with the overly negative tone of many posters but do respect the likes of yourself and CO that seem to be reflecting genuine experience on the ground as you see it. It is no surprise to me that the HB is stuggling abit as the financial and stock  effects of the drought are present long after the rain.

I am attending a meeting with a rural valuer this arvo so will be in posession of more factual information subsequently but my bank manager told me this week that land is moving at about $700SU. With good ground moisture and riseing markets there is certainly an air of cautious optimism with those that werent too badly effected by the storm but as always it is a "we will believe it when its in the bank" sort of optimism.

I have purchased lots of ylg bulls as its the only stock thats reasonably priced, I think because the west coast of the Nth Is is a bog, the bulls are weak and light having lost over 40kg during winter. Lots of 200-220 kg bulls around that normally would weigh nearer 300kg. Landcorp payed  $160 for late lambing ewes a few weeks ago up here. Recent farm sales have been around the $6k an acre but cropping land. We have some blocks being sold soon that are the typical family farm, 2000 ewes and 100 cattle hill country. They will really test the market. Banks up here are only lending %15 including livestock. I think the sooner the banks are forced to restructure debts the better,I dont think the Aussies are keen on the idea.

 Typical, I go away for 4 months and dont miss a thing.

Just returned from a week on the farm down south.  Have to say I was surprised at how well things are looking there. Good grass cover and feed for the cows (we are feeding a bit of silage -like we always do in the spring), cows in good condition, (despite the snow) and  milk production is only marginally down. We have only just gone back to twice a day milking after putting the cows on 18hr milkings when the snow struck.  We even have taken a mob of ewes and lambs on for a less fortunate sheep shagger.  So things are not too bad for us down there.

Andrewj: I agree with your comments on volatility. We do all our budgets on $5kg/ms, regardless of payout predictions.  Last season Fonterra started off with a $4.50 prediction and ended up with $6.37 and this year they start with a $7.10 prediction so I will not be surprised if we see a payout south of $6 if the dollar stays up.

Interesting comment from a RE agent this week - there are more buyers than sellers in Southland.  Not for large farms but in the up to 600cow farm range. They are struggling to get farms to advertise.  Sounds like the penny has finally dropped and people realise that if the price is right, these are profitable farms and have less labour issues than the big farms. There are Waikato farmers reported to be looking at Southland after being tired of consecutive years of drought.

SS: what I heard from dairy mates down there was not that they expect grazing to come down, but that they hope there will be surplus feed made and therefore the cost of bought in baleage/silage will come down.  Most guys seem happy to pay the $8 - $8.50/head for rising 2yr old grazing. Interested to hear how your meeting went.

Hi CO,Very kind of you to think of your local sheep shagger a nice gesture indeed.

 Was at a guys place who had taken a hit and he was certainly looking to his dairying nieghbours as a source of income either through selling grass , contracting wholecrop or putting in winter feed for cow grazing purposes.

Im often surprised that there is a general uneasiness in the relationships between our two farming systems. To me there is much mutural advantage to be gained from grazing and feed sale arrangements but from a sheep farmers perspective often you dairy cockies are seen to be trying to "screw the price down" at any opportunity which in turn leads to reciperical behaviour when the circumstances turn. Im sure there are very many good relationships as well but it would be better if both parties were more willing to meet in the middle abit more rather than having a winner and a loser. This was talked about quite abit today.

Im in possession of the latest sales data for our Sth/west otago region and it was surpriseingly pretty solid. I understand that most were to nighbouring farmers but the range was $650-$900 per su with some outliers well above for smaller blocks. These were for actual sales over the last 6 months. Dairy prices were considered to be back 25-30%.

As for Southland give or take the odd storm it would have to be the best place in NZ for pastoral farming and im sure you wont regret your investment there. The shear consistency of its ability to grow grass and lots of it is phenominal.... This is coming from a displaced Cantabrian by the way!

Thanks SS.  I do believe that when the chips are really down the farming community does support each other.  As you said it is a pity at other times we have to have this argy bargy between the sectors.  We have a runoff and do also graze off and I sometimes wonder if we need to have more families like our graziers and our own - 2 sons in each family, raised on dairy farms, but one son chooses dairy and one chooses sheep for their futures.  I know it certainly gave us a much improved respect for sheep shaggers when our son chose sheep farming. :-)

Your figures back up what our bank manager said to us a few months ago - sheep farmers were back in the market to buy and prices were quite good and dairy was fairly quiet.

Being farming in Southland for over a decade now and quite frankly wouldn't be anywhere else.  Southland's being very good to us - even if it lost the Shield on Saturday night!

Good to read your comments Casual Observor and Sheep Shagger- but do you guys with your actual experience expect to convince the Wolly's of the world (NZ)????

And bad luck with the Shield the other night but your guys did themselves proud this season.