Dairy industry faces tough time before improvement

Dairy farmers will experience the tightest cashflows in 25 years over the coming months, and the Timaru community will suffer, a dairy leader says.
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Dairy Holdings chief executive Colin Glass, who manages the country’s largest dairy enterprise, said things will get worse for the industry before they get better, and cautioned dairy farmers to reduce costs and prepare for an even tougher few months ahead.
«There will be no cash coming in for any dairy farmer between now and October,» he said. «It is the tightest in terms of cashflow the industry has seen since the early 90s.
 
«Dairy farmers will be lucky to get $4/kg of miksolids this upcoming season and most of that will come around Christmas. Farmers have been enjoying cashflow from last year and it’s only just starting to bite.
«China has been buying very low volumes of milk powder the past 12 months, so there has been a massive reduction in dairy trade prices. Until we see China re-enter the market, it’s going to be tight.»
New Zealand’s competitiveness in the world scene has changed quite markedly, Glass said, and today is a difficult time for operators who don’t have costs under control. Farms that buy in feed (palm kernel, grain, silage) are the ones under greatest pressure.
Winter grazing costs are also high, reaching $28-$30 per animal in some areas, and rising at a greater rate than the milk price. These aren’t expected to soften due to increased supply and demand from new conversions.
«A lot of dairy businesses have just been milking platforms, but value can get captured elsewhere,» Glass said.
Since 2010, Dairy Holdings has invested heavily in dairy support systems. The company is «nailing down» its wintering grounds and trying to be self-sufficient. This has enabled it to take control of its costs and most of the appreciation in farm cost of production has been in grazing.
«Dairy Holdings has chosen the ‘pasture approach’ and is driving towards simple systems that can replicate performance year after year. We are not good enough to operate the giant dairy barns because there are too many systems to run and that’s not where the company’s strengths lie.
«The key to why New Zealand has been so strong in dairy is because our scientists have led the world in pasture growth and management. We have taken a long-term view and think New Zealand’s competitive advantage is in having cows outside on pasture 12 months of the year. Any time you introduce a machine between the cow and her feed, you introduce costs, which diminish your competitiveness on the international stage.»
Glass said the success of Dairy Holdings is closely aligned with its stakeholders. The company used to tender for everything, but now long-term relationships are all-important.
«We need confidence in our suppliers, and during tough times both businesses need to survive.»

Source: Stuff
 

Mirá También

Así lo expresó Domingo Possetto, secretario de la seccional Rafaela, quien además, afirmó que a los productores «habitualmente los ignoran los gobiernos». Además, reconoció la labor de los empresarios de las firmas locales y aseguró que están «esperanzados» con la negociación entre SanCor y Adecoagro.

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