The Weekly Dairy Report: Calving starts as dairy support farmers also feel the downturn

The Weekly Dairy Report: Calving starts as dairy support farmers also feel the downturn

With most of the country suffering a month of cold temperatures and above average soil moisture levels, managers are looking for an early spring to kick start growth.

Northern herds are well through calving and are looking for soil temperature to lift so N applications can boost early spring grass, while lower North Island herds are just starting their new season.

Reports suggest more surplus dairy beef calves will be reared, as managers look for any extra income to supplement the predicted unsustainable payout and some owners have gone back milking, to reduce costs further.

DairyNZ has launched a campaign to help farmers grow and utilise more pasture in a drive to return farmers to the low cost pasture driven producers that gave them a global advantage in the past.

The market news continues to worsen, as Open Country Cheese slashed its forecast to $3.65-$3.95, and fortnightly Oceania milk powder pricing drops to yearly lows.

All bank analysts have also reduced their estimates, although a wide variation of $1.20/kg reflects differing levels of confidence among these institutions.

Big revaluations downward are being made on all milk processors stocks, and with the big currency drops, hedging positions will also be influential in determining the level of payout predictions.

Dairy giant Danone has warned the rebound will not start until next year probably too late to change the present predictions, as the global market must first consume some large stocks carried.

The downturn has seen the Reserve Bank cut interest rates and with more predicted to follow, some relief will be felt from the cost of debt, but concerns build at the length of this low price period, and the vulnerability of those heavily leveraged operators.

Graziers and suppliers of next years winter cow grazing will soon be making tough decisions of how much feed to put in for a sector certain to want off farm feed costs at a reduced rate.

We welcome your help to improve our coverage of this issue. Any examples or experiences to relate? Any links to other news, data or research to shed more light on this? Any insight or views on what might happen next or what should happen next? Any errors to correct?

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I'm a Dairy Grazier and I have fixed costs. I don't get a bonus when the dairy guys get a good year.
So in a bad year for them I will not be reducing my prices.
What are they going to do instead - let the cows starve?
Maybe they'll keep them at home - how does that affect milk production and debt repayments?
I guess there will be a real scramble for store beef animals by guys like me who are normally dairy graziers.

And there wont be much money in it if the current store prices are anything to go by

snip 'So in a bad year for them I will not be reducing my prices.'

Well I just live down the road from you and if I do, I'll get the cows. At least, against my fixed costs, I'll have cashflow !

I'll be telling the drilling and spraying contractor that I want reduced rates this year and will shop around until I get them.

It's called a deflationary spiral !

Buckle up, it will be a tough ride ... !

Why don't we all stick together and form a cartel?
You're quite right of course.
Fortunately I'll be able to walk away from my leased blocks if it gets really bad.
Reduced income but at least no negative equity.
Farming is a tough business. Time to try something else.

The problem is when your supplier gives up either you wont be able to get what you want, or the few left will be charging like a wounded bull.

Me I seem to be I am buying more and more stuff offshore because I cant get what I want here or I am saving 40%+ despite having to pay shipping and the awful exchange rate. So retailers whine GST is being missed, well frankly when I can buy something on amazon for $160US delivered and its $500NZD here, um no. What that does tend to mean is however is there wont be much retail left here.

The nasty bit is that councils and government will be upset when their takes aren't big, so they'll take more ... there's your deflatory spiral. Because we can cut other costs but not those

Yeah, well that's where ratepayers need to band together and use the Ghandi technique of peaceful resistance (ie Kapiti). There is no real reason why Councils should not also be required to 'cut their garments according to the cloth'.

When the tide goes out, all ships go down, no matter how big or small !

well leasees have been paying as much as they can, but if your customers are no longer liquid, you can hardly expect premium or even good prices. Do you expect customers in a negative cashflow position to protect your interests??

Dairy cows for lease for free! in todays dominion post.

someone looking to unload to a milk-for-grazing swap. good move.

Westland has dropped 14/15 and expected 15/16 payout. D -7.

Stockpiles are large to the point of being burdensome in China and the U.S. and also in New Zealand, according to Friday’s edition of the Daily Dairy Report, an unusual and disquieting situation for the island nation as it starts a new season.

http://www.milkproducerscouncil.org/updates/073115.pdf