The Weekly Dairy Report: Winter arrives to take stock, rebuild condition on the cows and lift pasture covers, and prepare for another tough season financially

The Weekly Dairy Report: Winter arrives to take stock, rebuild condition on the cows and lift pasture covers, and prepare for another tough season financially

Heavy frosts but clear days have followed the rains, but hydrologists warn that further moisture will be needed to lift the aquifer storage.

The past weeks rains has disappeared into the dry sub soils and those with wells will be looking for more to lift the low levels before next year.

Gypsy day came and went with very little fuss, as fewer transactions saw many staying put, and hunkering down in these difficult times.

Cows have now transitioned onto their winter brassicas of fodder beet and kale (sold for 20-23c/kg dm) as they rebuild body condition for calving with targets of 5 for m/a cows and 5.5 for younger animals.

Those wintering at home will have to grapple with the compomise of rebuilding BCS and achieving 2000kg DM pasture volumes at calving, often in conflict when tight cashflows and poor weather are involved.

Demand has been strong for grazing, but at these low rates some graziers will be looking at other options next year to achieve a better return.

New bobby calf rules are to be enacted this spring, and all in the sector will need to be acutely aware that public eyes will be watching how the industry is performing in this sensitive area, after last years disgraceful expose.

The latest milk auction lifted by 3.4% to now show five rises in the last seven, but disappointedly whole milk powder prices fell by 1.7%, and reinforces the sentiment that the recovery will be long and slow.

Synlait have posted next years prediction at $4.50/kg ms, but fallen in line with the other main players by reducing this years payout to $3.90, and like the others, promise to bring the payment forward to help the tight spring cashflow of suppliers.

The milk futures contracts have started quietly with sales low for this year, but mid $5’s for next, and offer another opportunity for farmers to secure milk price certainty in the future.

Farm input costs fell by 2.9% in 2015/16, (the largest fall since 2000) and were lead by interest rates and fuel, as the income needed to break even fell to $5.25/kg ms.

Sharemilkers are feeling the heat first in this downturn, but stock agents still report satisfactory sale throughput, even at these low levels.

Dairy debt is now calculated at $40 billion or $2/kg ms with a small percentage holding the biggest share, and analysts note that if interest rates rises, a 1% lift will increase the debt by .22c/kg ms.

A Federated Farmers survey showed about 80% of the farmers were satisfied how the banks were handling the present situation, and the support they have been given.

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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Unfortunately the Fonterra Volume vision is now failing as we see other countries bump up supply, something they underestimated. How long are they going to keep blaming other countries for oversupply when that's exactly what they have done? They already had a good supply base to work with early 2000's to focus on brand developments. Where would we be today had they taken that path? Dairy Farms half the size of what they are today run by owner operators. Thanks Fonterra

I agree completely.
Unfortunately now the bridges have been burnt, the average farmer has far too much debt to cut production so their only hope is that prices will rise to a sustainable level.
I think the problem is that now there is so much capacity world wide that prices will never be able to reach a level where most farmers can be making a profit again.
If there is a strong lift in GDT prices then the EU will release large amounts of stock from storage and the next auction will be dramatically lower again.
Also there is a time limit to how long product can be stored so it will have to enter the market at some point regardless of price.

yeah about 200,000 tonnes surplus, equivalent of 10 GDT auctions, which makes me wonder what Kool Aid Nathan Guy is drinking when he has come out and said yesterday that the supply/ demand balance is correcting and it no issue!

Mr Guy has assumed the role Fonterra was playing last season, trying to pump confidence into a sagging industry with no real evidence to back up his claims.
$5.40 milk price anyone?

Farmers rejected the Fonterra Governance Review recommendations. It needed 75% to get over the line and fell short. Hopefully all those involved will have learnt a lesson - do not try to railroad shareholders in to voting for something they don't want by taking an 'all or nothing' approach.