That is the conclusion Satwant Singh has come to after studying this issue as part of her 2015 Nuffield Scholarship.
Singh travelled around the world, talking to farmers and dairy companies to see how they coped with volatility, and what lessons could be learned for the New Zealand industry.
It was a common issue facing all dairy farmers and many were trying similar techniques to what New Zealand farmers were doing to combat this issue.
These included reducing on farm costs and saving money during the high payout years in preparation for when it fell.
«There were a lot of the every day technique that have been discussed in the last few months within New Zealand while I have been away, especially with DairyNZ and their tight times seminars.»
Singh learned about Ireland’s fixed pricing tool for farmers, where the dairy company offers farmers a set milk price over a three year period, similar to Fonterra’s guaranteed milk price system.
In the United States, farmers were using financial tools such as utilising the futures market to help them manage milk price fluctuations.
«The thing I learned from the whole process and everywhere I travelled is that there is no one solution. Every farm is different.»
«One of the things I learned when I was travelling was that we are so similar. We have got so much in common around the world, we have got similar passions, and challenges with the environment and public perception.»
However all farmers were completely different on an individual basis, she said.
«That’s something I realised that everywhere I went everyone had different views, which is similar to New Zealand dairy farmers as well.»
The issue of volatility was a hot topic wherever she went, she said.
«All farmers are feeling the pain.»
Singh felt it was an issue that needed closer scrutiny at an industry level so farmers would be able to work smarter not harder.
She was interested how farmers could use financial tools, such as NZX’s milk price calculator to their advantage to help better manage milk price volatility.
Making sure farmers were aware of volatility and possessed the financial literacy to be able to cope was also important and while most were aware of volatility, Singh questioned how many were proactive and planned for it.
«We still take it as it comes,» she said.
While Singh lives with her husband Sunil Krishna in Auckland where she works for Fonterra, on the weekends she is back working on the 230-cow family dairy farm near Gordonton.
Singh works for the dairy giant in their commodity risk and trading team and played a central role in developing the co-operative’s guaranteed milk price programme.
Singh travelled to France, Ireland, the United Arab Emirates, Australia, Singapore, Hong Kong, China, Canada and the US, Netherlands and Lithuania.
The majority of the countries she visited operated under a subsidy system. Those farmers viewed subsidies as a given and had a positive impact on their ability to be profitable, helping them over the past few months with the low payouts.
Within Ireland, there was a lot of competition among the dairy companies with the removal of quotas earlier this year.
«There is a lot more competition within the co-ops in Ireland at the moment with the quotas coming off, so there’s a lot more competition at the farm gate to retain farmers.»
Singh also spoke to wheat growers in the early part of her travels when she undertook a global focus programme with five other Nuffield scholars from Australia and Ireland.
Their responses varied hugely, but they were facing the same challenges as dairy farmers, she said.
All of the farmers she spoke with are pushing for their milk to be processed into value-added products.
«We are in a global market, we are all trying to export, we’re all trying to get into that value add areas and it’s not easy.»
People defined value add and commodity differently. The industry produced basic products but these could also be tweaked to suit individual customers needs which turned it into a value added product.
«There’s a lot of money in value added, but it’s a harder space to get into.»
Singh will outline her findings in a report to the New Zealand Nuffield Farming Scholarship Trust in January.
Source: Stuff