The Weekly Dairy Report: Managers adjusting systems to farming with lower costs

Some areas are returning to the dry as hot weather and low rainfall shows a return to typical February conditions.

The big dairy areas of Southland, Taranaki, and Waikato have however had plentiful summer rains and the eastern areas of both islands have used their irrigation systems to keep the milk producing.

National January milk flows are steady on last year as summer grass growth has been above average, and the Lincoln University dairy farm reports they found the break even point easier to achieve, with better than expected milk flows and a heavy pruning of costs.

More big numbers dairy livestock are being offered for sale, with cull cows and young heifers still flowing into the saleyards and processing works.

Such has been the clean out, if milk prices do turn around, future lack of supply will surely hinder any adjustment back upwards, although such has been the present pain many will not be keen to repeat the past years production focus.

Last weeks milk auction result showed the market was still in decline, but the lower than expected drop was the only weak positive in a financial climate that is becoming dire.

Average dairy farms are likely to lose about $141,000 this year and next, and after three years in a row of significant losses, some properties will be under extreme pressure from their financiers.

Some dairy analysts are doubting prices will ever return to $6+/kg  in the future as the US and Europe will keep producing and storing surpluses to sell when shortages arrive.

They are advocating NZ farmers trim costs back to $3.75-$3.80/kg ms and stocking at a rate relative to grass grown.

Farmers are voicing their concerns at the poor forecasting in this downturn, after early reports suggested it would only be short lived.

Fonterra went to the market with a $150 million bond issue to finance general corporate purposes, but some wonder if their loan to shareholders this year to be paid back when the payout reaches $6/kg, may come back to haunt them.

Landcorp announces they are not going to continue their sharemilking agreement with Shanghai Penguin after big losses for this Government SOE with a focus on dairy, forces them to  refocus on the more profitable parts of their business.

Another environmental challenge has been issued to the sector this week, as scientists warn intensive dairying areas could allow oestrogen levels to contaminate ground water and cause fertility issues in fish.