Manawatu/Rangitikei Federated Farmers sharemilking chairman, Richard McIntyre said it had been a tough three years, but the dairy industry was turning a corner and he was feeling more positive and less stressed.
«For me, it feels like a weight is lifting off my shoulders. But I am mindful of this being the start of the lift in prices and it could reverse. However it is good news for sharemilkers and the dairy industry.»
A herd-owning share milker owns the cows and pays for running costs on the farm, but does not own the land of any shares in the dairy company.
McIntyre said cow prices had lifted from $1400 last year to about $1800 and he had heard of good cows being traded for $2300.
He said there was bound to be a shortage of cows this year as some farmers rebuilt their herds.
«But the things we have learnt in these tough times, we would be wise to to carry on with. I personally learnt a lot. I learnt a lot about financial discipline, financial reporting, and I developed a close relationship with my bankers.»
McIntyre said herd-owning sharemilkers had seen their equity fall as cow prices in tough times fell to about $1400.
«But everything is on the improve. The banks have more confidence in sharemilkers now. But with most of us it is cautious optimism. It is still early days. We have to remember that there has only really been three months of increased prices.»
McIntyre warned against the feeling of positivity leading to unsustainable prices being paid as it could mean increased pressure when dairy prices ease.
Meanwhile, the banks had conservatively only increased cow values by $100, he said.
«But if cow prices remain high, you have to think the banks will increase their value.»
He said that would mean more equity and pressure coming off sharemilkers.
PGG Wrightson South Island livestock manager Paul Edwards said good quality stock tended to come in early in the season, hence there had been good sales and expectations were promising.
The prices were not confined to one region, but were across the board. In the South Island a whole jersey herd had sold for an average of $1975.
Edwards said the national herd had declined in the past two years as farmers had got rid of their poor performers. They were now looking to improve the genetics in their individual herd.
Some cash-strapped farmers were also mating part of their dairy herd to a beef bull to capitalise on strong international beef prices.
Amid calls from farming leaders for farmers to be wary of the boom and bust dairy cycle, the ASB has revised its 2016-17 farmgate forecast to $6.50 per kilogram of milksolids, up 50c/kg on Fonterra’s price set on November 18.
At the beginning of the year, the ASB had set its forecast at $6/kg. Analyst Nathan Penny said this had demonstrated confidence that this season the milk price would turn.
«However, now we have come full circle and revert back to a forecast of $6.50. At the same time, we nudge our 2017-18 forecast higher by 25c to $6.75.
Penny said he could already see the next dairy cycle taking shape.
«Indeed, should prices overshoot our current expectations and lead to a large global production response, a low milk price could follow in 2018-19,» he said.
Source: Stuff
Link: http://www.stuff.co.nz/business/farming/dairy/88119738/sharemilkers-hope-hard-times-over-as-cow-prices-rise