CEO Theo Spierings says 'drastic changes' to Globaldairytrade may be required after price slump to below "sustainable levels

CEO Theo Spierings says 'drastic changes' to Globaldairytrade may be required after price slump to below "sustainable levels

By Bernard Hickey

Fonterra Chief Executive Theo Spierings has suggested drastic changes to how Globaldairytrade (GDT) may be required to support dairy prices, which had fallen below the bottom of sustainable levels.

Spierings' comments follow another collapse in prices on GDT last week to record lows for the platform and calls from farmers and Opposition politicians for trade on the platform to be either suspended temporarily or for Fonterra to withdraw its volumes.

Theo Spierings said in an interview with Lisa Owen on The Nation that record low prices on Globaldairytrade earlier in the week were "below the bottom" and "absolutely not sustainable."

He went on to suggest Fonterra was considering significant changes to Globaldairytrade, pointing out that prices were now below the Government intervention levels seen in Europe.

"We have to look at some more drastic thinking around our Globaldairytrade auction, because in Europe there's a kind of a bottom created by Governments, and we don't have that, so we have to look at out-of-the-box solutions at that point in time," he said.

Some farmers, including Federated Farmers' Waikato President Chris Lewis, have called on Fonterra to either temporarily suspend GDT itself or to suspend Fonterra's involvement in it.

"It's madness, devoid of any common sense to keep GDT operative in these times," Lewis was quoted as saying, adding such a suspension was not unprecedented and pointing to the share market suspensions in China recently.

"Who could ever or would ever advertise their suppliers' raw material for sale at less than half the cost of production? Fonterra are, through their GDT platform, telling all of the global buyers they will sell farmers milk at half what it costs their farmers to produce," he said.

New Zealand First Leader Winston Peters also called for the suspension of Globaldairytrade and for the Government to offer concessional loans to farmers.

"Auctions are great in bull markets like the Auckland property bubble, but it is a terrible way to sell when markets turn ugly, as the record low price for Whole Milk Powder indicates," he said.

Fonterra's Group Director of Cooperative Affairs, Miles Hurrell, told Morning Report Fonterra was not considering suspending its involvement in GDT at this stage.

Foreign buyer fears grow

Labour Leader Andrew Little warned in this Q+A interview that unless the Government, the banks and Fonterra acted together there was a risk of forced farm sales that only foreign buyers could afford.

"There’s pressure on them to sell, and the people with the money to purchase land are offshore. That’s the US and Chinese buyers, and we run the risk of even more productive land winding up in foreign ownership in a way that we lose control of our productive sector," Little said.

We welcome your comments below. If you are not already registered, please register to comment.

Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.


He went on to suggest Fonterra was considering significant changes to Globaldairytrade, pointing out that prices were now below the Government intervention levels seen in Europe.

Oops out goes the "Free Trade" dogma - every person for themselves?

Likely why they won't do the sensible thing until after the TPP talks are concluded :-).

What...!!! Here was I waiting for cheese, milk and butter prices ... at Paknsave and countdown.... to come back down ...alot ,... ( see fig. 2 )

Question - does Fonterra seek to manage the amount of product it offers into global markets (and via GDT) to achieve the best price/volume trade-off? Or just does it offer all product regardless?

i.e should Fonterra be looking at dumping product, essentially withholding supply, to achieve better prices.

haha - no, to the contrary, they've been world poster boy for the race to the bottom - just following government policy, gotta double those agri-exports by 2025;

Volume is in, profitability is out.

Until the strategy no longer works - then you sell to the highest offshore bidder. It's a tried and tested formula.

withholding supply to get better prices is market manipulation and comes with massive fines and trade suspensions.

NZX futures will become the new reference price or are they suggesting suspending those also?

NZX futures will become the new reference price or are they suggesting suspending those also?

Fonterra has always said it has to charge domestic consumers the same price it gets overseas.

This is so original

Fonterra blamed the "global financial crisis" for the results of its latest internet auction yesterday

The GFC hasn't reached it's use-by-date yet

Really trying to get their moneys' worth out of that GFC...


If I had a supplier that withheld their product until such times as the price rose, and in the meantime I had to source my product elsewhere, would I then go back to the original supplier when he returned to market, and reward his efforts to hike the price on me? Or would I stay with the alternative supplier I had found in the meantime? There's a lot of competition out there in Global dairy-world, and more arrives, everyday....

And they have tried twice, January and last week, both fails.
I don't understand the fuss really Volume is one of the three Vs strategy so the more the better yes?

Did we hear cry's to stop the auctions when the price was $8.40kg.?
Did we hear a call for common sense when dairy farms changed hands at crazy prices?

I'd just like to point out in the interests of accuracy that the Auction equated to $9 plus for that season according to the Milk Price Manual. First indication that Fonterra was in deep when they couldn't pay it.

The first indication is that anyone expected them to.
You get a bumper year like that in business, you knock down expensive debt. They would have better to pay-out at capped $7, and bolster future funds. The "leaders" had been told that since the co-op days by farmers who had delevered, as debt was exposure to unecessary risk/cost in a commodity business.

But the "leaders" always whined and complained "how that just wasn't possible because of Law"/"Consitution"

And ran for the hills when told well change the bloody constitution/law so you can run a proper business, before it's too late.

yes I did. Were you not listening. Although $8.40 should have paid at $7 capped, and the auction should even be higher with no subsidies and farms treated as all other businesses and so need consumers to pay real prices, so that real technology and real environmental initiatives could be empowered.

But remember what happened when goats were the fad. People paying unreal prices for studs and top nannies. Even feral and wild goats were fetching several hundred dollars. then a month later the whole bubble collapsed. Studs worth 50k were now worth 1k, and nannies were barely worth the fence wire to keep them in.

yeh I heard an interview on RNZ of a former Fonterra employee (board member maybe?) who said Fonterra doesn't know anymore how to cultivate client's relationships, that would have been useful in this kind of situation. Basically they screwed up the relations with clients and they don't have the people any more to rebuild them

It now seems that select asset markets e.g. stock markets, residential housing and farm prices can rise to the upside as much and as fast as possible. However when the cycle turns these overpriced assets have to be supported by any means necessary.

You are on the money - if it were not for this unplanned for and hence unexpected outcome, the US Federal Reserve would have hiked interest rates already.

Momentum also points to correction with bonds outperforming most stock indexes over the last three months. In particular, long term Treasury bonds have moved to the head of the momentum class while junk bonds, emerging market stocks and commodities bring up the rear. Large cap stocks, domestic and international, are stuck right in the middle – and trending down the rankings. High quality bond outperformance is a transition that started, believe it or not, way back at the beginning of 2014 and after correcting for most of this year, appears to be reasserting itself. Bond outperformance is a function of the ongoing commodity rout which is dragging down inflation expectations and pushing down commodity (oil) and materials stocks. Read more

It cannot cut either as it would be an admission of total and abject failure in respect of ZIRP and the associated fabrication of credit scheme (aka as QE)

Can someone who would like to see GDT suspended explain exactly which aspect of the GDT platform is failing? Is it failing to find a market price? By all means stop auctions and price all WMP at $3,500/t but don't be surprised if no product gets sold.

With excess production in other parts of the world why would buyers pay above the market?

None, but it would be carried out beyond the public's gaze. Nothing good will come of it for the majority, other than the possibility of behind the scenes tax payer funded private buyer contract adjustments.

It's the literal interpretation of sticking your head up your arse.

If they wont (and that is reasonable) then the expectation is "someone" will. Look at the oil market and how it has collapsed in price for a way forward. eg Saudi is borrowing or spending down its reserves,to kill off the expensive competition.

Meanwhile, NZF "thinks" farmers should be handed cheap loans at the tax payer expense, WTF? So on the upside of the market us NZ consumers were forced to pay more to the greedies who over-spent on farms to make a tax free capital gain and now we are expected to keep them going until the price recovers and they can start over-charging us again, F*** em! springs to mind.

our competitor countries all subsidise their farmers, why should NZ taxpayers get a free ride?

No 1 reason. We couldnt afford it.
No 2 Its wrong
No 3 let them eat cake
not too sure if I mean that but it sounded good

Maybe they could turn the retained cheap milk into the value-added products that to date we have been told the high price of powder has financially prohibited them from doing?
Given that Fonterra have led us to believe that Value-added high-demand exports have always been seen as a future marketing strategy, all the cheap milk could be converted??
Also, Taking into account the confidence that John Key sees (saw) in doubling the number of dairy cows by 2025 as the "star" export earner of the Rock Star economy, now is a great opportunity for him to support the industry with interest-free loans to turn his dreams into reality!
Surely Fonterra will be able to 'action' their Plans B & C promptly, with the cost of production being supported by taxpayers? No time for "The Market takes Care of Everything" dogma now.
It might not gain as many corporate brownie points as the lending to the yachting, but long-term if Fonterra can learn to be smart, as well as dedicated to their Co-operative, It could produce a longer reaching, sounder more profitable outcome than blindly trying to out-smart the likes of Danome and Nestle etc none of which have 'all the eggs in one rusty bucket?"
Value-added product, in conjunction with professional, dedicated marketing staff could also decidedly lessen the Co-operative's vulnerability to global geopolitics - an area Fonterra's highest earning staff clearly do not have the expertise to read well ahead of the proverbial "Sh..t hitting the fan!"
I have no expertise in any of the above, but imagination and creative solutions can usually be found with the right support, expertise and dedication to responsibility

is this the same j key that was invested in a farm that didn't make money so sold up? not the best guy to take advice on farming from

So the upside of the system is/was maximised return but now that is dropping as demand drops and supply grows there is a need for "support" Read in here I suspect we as tax payers who in the past as consumers were farmed for profits will be now expected to bailout the greedies.

BTW why would offshore ppl spend more on a farm than you can get a reasonable return on? The tax free capital gains look to be gone? so all that is left is shock horror making a profit on the good.

Because they aren't 'people' - they are 'entities' and entities don't behave like people.

for people offshore, it's like the Auckland houses.

First up they have offshore income servicing the debt, so it's not like NZers who have to service from farm profit.

Second its vertical consolidation of their business supply. It doesn't matter what pollution or tariffs or internal (eg Chinese) legislation might happen, they can "mesh network" their supply lines and processing, so can enter contracts anywhere in the world with confidence.

And also they have better control over quality (or lack of it) - no Danone or Melamine scandals, its all in-house.

Also if assets are seized or politically (or nuclear irradiated) then it doesn't matter because they have purchased redundancy elsewhere.

And FINALLY they _own_ the land so they will never get cheaper supplies from anywhere else, and land will go up. and they can decide how low that production is, or how high it is, based entirely on internal company decisions - no betting on warehousing or gdt, no reliance on it either.

So if you're a massive corporation sitting on 1 trillion USD of fiat cash....what would you be doing with it?

He seems to be confusing theory with reality:

Others marginal costs can compete with NZ's now quite high average costs.

Quote: "below the bottom" and "absolutely not sustainable." No doubt this same logic can be applied to the iron ore market .. yet no one is expecting any rebound in the future. While the Roy Hill's come on stream in addition to current oversupply - prices will stay very low.

There are many parallels with NZ's milk situation and Australian iron ore.

Common characteristics are massive oversupply and ever increasing marginal cost of production.

My pick is the price is going to stay low and may go lower for quite some time with pain like we have not seen since 1987 for those old enough to remember.


The astonishing thing is how little planning these extraordinarily highly-rewarded, apparently highly-regarded, people seem to have done. They give the impression of being completely blind-sided, floundering, grasping at any idea.

Have they done no scenario planning? Did no-one in Fonterra, DairyNZ, MFAT, the Ministry of Primary Industries, any level of government, or any other relevant organisation, ever consider the possibility and implications of commodity over-supply?

It is plain that government ministers have no idea about the commodity business. Having collapsed Solid Energy via the same ignorant indifference to the triangle of debt, market demand and price vulnerability, they have now put the nation’s entire economy at risk.

But one would have assumed that Fonterra’s leadership had some understanding of the commodity cycle, its highs and lows, and had taken some responsible view of the dangers of continuing, accelerated expansion. If ministers have been yapping at them to expand, expand, surely they were capable of warning them of the risks?

Fools are always enthusiastic about growth and potential, but leading a business with the national influence of Fonterra surely requires some measure of intelligent caution.

No-one with this level of exhibited incompetence should be in business. They should be in sheltered accommodation.


No they don't do "planning to fail" and contingency stuff is a waste of meeting time for something that if we all do our jobs right will never happen.

Remember these aren't the people working on the coal face, they dont get their hands dirty, never built anything and aren't technically minded. They're social people, hired because of great attitude, doing well at school, and corporate culture fit - they don't hire people "who arenegative or argumentative" "as that just brings down the team". They make great meeting coordinators, and have some great ideas/vision but actualy being limited by facts is a filter out factor for the job.

they hire people to write reports for that. And the reports are increasing shiny and well written, and information free. How do you tell the boss/contractor that they've been making the wrong decisions for the last 2 to 5 years, and that everything they said in the press for the last year is complete hogwash?? How do you say it, if they've been working directly from your boss's report....

the minister yap, then threaten, and the government departments lay down the law and the reports, and so they all do a big dog'n'pony and hand it off to the minions to make happen.

And that's what gets them hired, and that's why they change jobs like nappies, and they're rated on how well the last company they were with did.

six day brew...

Dateline 5:00 AM Saturday Aug 8, 2015:
Fonterra chief executive Theo Spierings and chief financial officer Lukas Paravicini began work on the deal five to six days ago along with a couple of the co-operative's farmer directors.
- Fonterra's top brass cooked up a $430 million parachute so that the dairy co-operative could offer farmers a cushion for yesterday's brutal cut to the forecast milk payment....

Its called panic. And they have thrown sharemilkers under the bus. Not only are they not available to get these loans, the cost of this money will further reduce the payout to them. The industries youngest and brightest and hardest working.

Playing devils advocate here - what is the difference for Fonterra sharemilkers who will get their share of $3.85 and no interest free loan and an Open Country supplying sharemilker getting a $3.65 - $3.95 milk price? None, other than some Fonterra supply sharemilkers may have the benefit of receiving GMP and various degrees of share of dividend. Of course some will not but then that puts them on a more equal basis with non Fonterra supplying sharemilkers.

I saw this from a young sharemilker who started 50/50 this season:
Buy some cows, they said....
It's a good investment, they said.....
Budget on $6 payout, they said.......

'They' were their financial advisers including bankers. Young farmers are too trusting of their bankers and still have to learn - you can NEVER trust your banker.

OCD are perfectly welcome to copy what the "industry leader" is doing.

Fonterra are private company too. they don't have to offer anything.
Nothing is forcing or stopping other companies from doing the same.

In fact, I'd like Fonterra to put it in firm policy as a shareholder insurance scheme. Should gDT drop below price of production the private company Fonterra will support suppliers with interest free loans to a 50c a year.
This makes it in all processors interests not to play milk-wars with suppliers.

Now Fonterra is a Banker

With first call on the milk cheque. ;-) Will be interested to see the fine print of the loan.

LOL stopping the auctions wont change the price of milk. It's about as effective as putting your head in the sand. This really shows how irrational people have become. In reality hearing the bad numbers every week is making people panic, and coming up with crazy suggestions like stop having auctions so we don't have to listen to the bad numbers.

Farmers must be delighted knowing they have an additional ~ 3,000 staff hired over the last few years.
Just what are they doing that wasn't done 3 years ago ?

Here's a few bold money saving tips that would deliver some BIG savings. These guys need to take immediate and bold moves instead of fiddling around the edges which will have no impact of scale.

They are in survival mode - they just haven't realised it as yet.

Free milk in schools sounded a nice idea when the payout was over $ 8 - not looking such a brilliant marketing tool today. A dumb program form the start.

Fonterra should sack sufficient staff to bring them back to numbers in place 3 years ago

All salaries over $ 100,00 slashed pro-rata by 5 - 50 % up to the CEO.

Stop the free milk program - not next year - NOW - Farmers borrowing from Fonterra who then give their product away doesn't seem to make a lot of sense.

Flogging the new HQ downtown building and moving staff back to low cost tin sheds in the regions close to their manufacturing plants.

You can not solve a debt situation with more borrowing - Just kicking the can up the hill.

First you must survive - then you can plan to prosper.

salary slashes are illegal under NZ law. Again part of the massive risk when trying to build abusiness in NZ, you can lift it but if things don't go well you can't pull it back - and can't even use bonus system under current rules because it can be considered "a regular expected payout and therefore part of the regular salary".

Sadly they really need to measure things on a value add scale and putting pressure ON the NZ government to be businesslike (does Fonterra even know how to do real business?) rather than playing politics. FIGHT MBIE against foolish expenses, rather than apologetics - this is the age of the internet - we can actually look up directly what is happening in other markets.

Things like the big regional meetings, sponsoring meetup groups that provide zero return to shareholders or sharemilkers.
Recognition of sharemilkers as an equity-partner to their shareholder-suppliers would be a "great leap forward".
Stop playing bloody bureaucrat/government-department-like meeting behaviours with their memo and fancy reports. Are Fonterra and shareholders _actually_ getting MONEY back from the flash magazines and publications that Fonterra pay for? receiving ad revenue from your own company's departments and those organisations you pay levy funding to, is not revenue!

On the money, workingman and cowboy.

Is anyone else a little concerned with the interest free loan offer of up to $430m and that the trigger point for repaying this debt is $6/KG MS?

First, I don't know how these loans will be structured (guarantees, security) but maybe some cause for concern when land values start to plummet and the bank is secured.
Second, there's no timeframe around when $6/KG MS will be reached.
Third, I wonder what stress tests Fonterra are running on their balance sheet around this new risk profile.
Fourth, last week Fonterra Chair Mr Wilson stated that low global milk prices are 'totally unsustainable'. I'll have to check my notes but I don't recall Mr Wilson stating that high global milk prices were unsustainable when c.$9/KG MS was being achieved.
Fifth, I wonder when the last time one of Fonterra's Management Team set foot on one of their supplier's farms and the purpose of the visit.
Finally, does the Board believe that all the current Management Team are appropriately experienced to hold their relevant portfolios or have there been occassions in the past two years when due to extraordinary circumstances, some appointments have been made through convenience rather than a strict analysis of position requirements and merit?

I think there is going to be a sea change in the way milk is going to offered as a commodity, and far better planning with the sudden undeniable shock that demand limits are very real, and others will manipulate the market.
The NZ folk I have met in NZ. while in hotels, bars and airplanes seem quite smart - if naive. If anything I think this drop, and double drop, will do the company much good. Wake them up to fact that they have been patting themselves on the back for a great working system...when in reality the market was just in a bull run.

Yes there will be much pain to come - but Fonterra _has_ been setting up to handle excess powder for the last two years, AND that is much better planning than buttermilk lakes. Also hopefully they'll realise that it's actually more profitable to pay farmers to produce at good rates, than it is to encourage farms to produce to maximum levels and then have to face expensive storage/losses to dispose of the excess. Fonterra has the production per hectare numbers to talk to the over producers....but will they and the shareholders council have the guts to see through that change?

Things are very bad for NZ farmers, a little relief for Fonterra shareowners. Not for sharemilkers...yet.

But our cost of production _can_ be lower if MBIE and NZ government let it.
And if we allow our cost of production to return to sane levels rather than what is clearly unsustainable expectations on the behalf of government for our primary major economic support.

If we do let that cost go lower in line with what is needed to make commodity businesses work, then looking at the massive oversupply from foreign producers will not be such an issue, as their models of business are much much higher cost structures than NZ, and rely on subsidies.

Things are in the hands of the NZ government, whether they still want a dairy industry in NZ....

For this investment, heads should roll. Read the comment at the bottom.

This payment will not have been in the interim results, just released. Together with the further FX hedging losses between January and July the 2015 annual results should show a significant increase in net debt. Now with this news about further lending support to farmers I would be surprised if the ratings agencies weren't all over them

Aj, like most Fonterra investments - there is always a story behind the story. Beingmate is no different. ;-)

''Everyday survival, why smart people do stupid things' is not only the title of an enlightening book by Laurence Gonzales, but a question we could well benefit from asking ourselves.

With hindsight it's easy to see that most everyone bought into the hope (mania) of the unending China growth story.

However, it required the suspension of common sense as all jumped on the express of the 'trees do grow to the sky' easy money.

Does anyone remember Chuck Prince, Citigroup's then CEO, warning in July 2007, 'When the music stops, in terms of liquidity, things will be complicated, but as long as the music's playing you've got to get up and dance.'

The liquidity he refers to is the gushing of under priced credit into the global economy (can you say goosed) to create demand (bring future growth forward) so as to 'generate' profits for said liquidity creators.

Simply put, we all (were) got onto the globalisation dance floor and boogied until we dropped.

Think Wall St bucket shops and their mantras greed and fear, pump and dump, rinse and repeat, take the money and run........

Well, we've been done like the turkeys we are.

Now, that it's time to sober up, we can be grateful we've still got our heads, the challenge is to use them for something better than a place to park our hats.

That'd be smart!

All that's left is to figure out how to pay for the damage.

Wake up NZ, your country is less yours than you think

Where is the economic mystro aka John Key? Why has the trader remained silent over the last few days? Is he briefing Judith on the prime ministership? I see no real legacy there which positively impacts the average kiwi - just the 60 billion dollar bill he has racked up in the name of political gain.

If everyone things the GDT is anywhere near its bottom then they will be sadly mistaken. Expect another 25% fall from last week folks - this will end up with a final payout of $3 or there abouts.

Such is the deflationary world we live in. Milk is one of the last commodities to suffer, next year you will see sub $3 payout and that will push many into bankruptcy and finally push the supply down.

The fact that supply is still "ramping up" is an absolute tradgedy - it will take far longer to recover and the milk powder mountain will grow to unprecedented levels.

3 years of this to go. the bottom is likely to be $2.50 MS KG by this time next year. Kiss goodbye to 12B export earnings, and that will have a multiplier effect on the GDP figure. If this comes to pass we will see -3% GDP and a rise in debt to GDP levels from its current 152% (public and private).

Govt surplus? Not this decade.

Makes one want to weep, for all the family farmers in these schemes

and not far away, while also being Fonterra suppliers, all systems are go......

At 31 December 2014 the Group has a $220,000 interest free advance from Fonterra Milk Australia Pty Ltd which has a maturity date of 30 November 2015.
- page 20:

The NZ economy is essentially made up of the following in order of GDP value
a) Real Estate - exposed to interest rises
b) Financial services - exposed to real estate
c)Tourism - exposed to falling global demand and very "discretionary" in nature
d) Agriculture - exposed to falling global demand
e) Education Services (international students etc) - exposed to global demand and level of wealth.
f) Govt services and transfer payments - exposed to govts ability to tax and "borrow".

You can drive through many regional towns outside the main centers and you will see there has been little or no growth in these towns for over 30years. A new road or a new subdivision here and there but nothing of significance and above all, very little jobs.

You can look at the economy and see many "bubbles" all holding each other up in some form or another. dairy bubble - bursting. Housing bubble - fuelled by ultra-low interest rates. Education bubble helping to fuel housing. Govt debt bubble, private debt bubble.

Everything is interlinked. NZ is not isolated from the world. China is the next GFC and simply because it is a communist state, the information will be slow to come out but rest assurred, it will come out and it will be the causation of the next GFC. NZ exports 42% of its products to Australia and China. X% to Eurozone and USA/Canada and Japan. Very little to anywhere else. All of these countries are in trouble and this threatens not only Dairy but our who economy.

Govt has not done anything to prepare us for this. They allow housing speculation and blame supply. The true problem is financial illiteracy and economic illiteracy.

I had high hopes for National and its leader in 2008. But they have proven they have not had the best interests of NZ as a whole at heart. They have proven to serve the minority that fund their adgenda as the nation once again over 7 years is successfully fleeced of more assets and brought back into high indebtedness. All of this undoing the good that Helen Clark did for the nation. It was her government that nearly eliminated the national debt created by previous national governments. Her current job at the UN is another example of her genuine interest to help people.

The irony of it all is National claims to be fiscally responsible. The truth is they have failed to take the nation in the direction where NZ is again a wealthy country - instead they have taken the easy approach - to borrow and deflect attention from the real issues such as the diversion of "a changing of the flag".

We need a government that acts in the best interest of NZ. I dont think we can honestly say we have had that since Helen Clark left office.

One final example of this - a prime minister should be flogged for voting down an opposition bill to feed all hungry kids in poor schools. The cost was very minimal, and it could have been "sponsored" by major companies as a tax deductible expense to make it even cheaper. But there was no debate, no consideration. No deal. That is just one of the many disgraces under this prime minister's watch.

after 7 years of blaming labour for everything under the sun I tend not to listen anymore its a bit boring
the new one is its Chinese farms fault for not having foot and mouth disease
maybe that should be rephrased to foot in mouth

I heard that exporters expected China to cull their herd when they had the high levels of foot and mouth a year or so ago. Of course China doesn't kill cows with foot and mouth - and China is not alone in this. Foot and mouth can be farmed through - it is purely a trade blocking tactic to ban dairy from countries with foot and mouth. As a consequence of not killing their cows, China is producing higher volumes of milk than the 'kiwis in the dark' were expecting and hence the increase in export market volumes never happened -and were never going to,

With you on the foot and mouth. In South America it's like a minor nuisance. They are meant to vaccinate but most of the vaccine stays in the fridge.

Met up with a young UK dairy farmer mate yesterday. They are no better off than NZ farmers. They milk 1200 cows, keep some milk for their own cheese production and I was told the only thing keeping their heads above water is their non dairy investments. NZ farmers are not alone in facing tough times.

CO, where in the UK are you? I'm in the South West if you are close lets catch up.

Surrey Aj.

Well if you want a drive and some pasties Im just by Par Cornwall. Just got in from some successful fishing at sea.

Oo Arr :)

My family farms down that way. Tough times for sure.

With the cost to enter into NZ dairy market many dairy farmers don't have off-farm investments, as it is too risky in NZ regulation and certification environment. Most of the 3 and 4th generational farmers have that income, often from wife's family side, or as inheritances.

Which of course, means the dairy business is being run as a "hobby" not a proper business.

That is what I found shocking about that Far North posting the other day 3900 cows, 50 staff, 1.2M kgMS,
If dairy land is >$30,000/ha and net yield is 4% on business assets (considered good) then it's going to take 25 years just to pay that land off under good conditions.
With the Far North numbers 639kgMS/ha vs the 950kgMS/ha I was doing, it's going take 40 years just to pay off the _land_ alone.
that's based on $5.50 payout. On $4.85 it would take well over 100 years just to pay off the land. not re-invest or develop, not build extra training or non dairy investment speculation, not buy invest in new capital equipment.

Am I the only person to see such things?