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UDDER FACTS

Paul Brown
MANAGING DIRECTOR

This year is starting very differently to last year - with uncertainty, but hopeful of good prospects.  Payout recovery is faster than the fall, with relief, but a number of parameters have changed.

Last season, credit was freely available with plenty of competition between banks to offer their packages.  However, this has been rescinded to a level of over conservatism - the pendulum effect.  Cash flows are squeezed, effectively placing debts / unpaid bills onto industry service companies to carry.  This is still a regular occurence, often with little thought to the outcome.  In many cases, these companies share the same bank as the farmer, with the bank saying ‘no’ to the farmer, putting the debt back within the same bank.

Payouts have jumped significantly and this season’s payout looks promising.  However, the dilemma is that Fonterra / farmers /  banks alike, need as much money as possible left in their own accounts.  Compromise and retention of some form will probably be the result.  Most farmers I have spoken to are happy with consistency for 1 - 3 years at $6 - $6.50 and would request Fonterra to control the highs and low.  Removing the highs also removes the price hikes with on-farm costs.  These would rise again if payouts increased.

Another changed parameter is that more dairy farmers now have a better understanding of all cost structures - I would have refrained from saying this last year.  As payouts increase, increasing costs to produce extra MS will be closely analysed - great! Making money from dairying is about more than turn- over and production;  it’s about the ‘leftover’ or net return.  This downturn has enabled the industry to look closely at the way we want to manage farms, regardless of the options of others.  The invincibility factor of the dairy industry and human greed factor in bankers / farmers / service industries alike, has been clearly shattered.  Good sensible business practices are now securely in place.  It is interesting to observe new initiatives resulting from the adverse situation.

2010 is an interesting year to monitor how the industry adjusts to the initiatives.

UDDER FACTS

WINTER GRAZING

Winter grazing is the current hot topic  even though it is too early for anybody to commit.  The parameters are relatively simple: alternative land use options make gloomy reading (lamb, beef, cropping) so effectively there should be little reason for grazing to alter much from last season.  From the dairy farmers point of view, bankers may have some influence in the amount of cash available for winter.  I believe the terms of trade will be altered as a result of a number of farmers’ slow payment last winter.  Each situation will obviously be judged on its merits, but there is concern amongst ‘support’ farmers as to payment credibility.  Clearly, this point will be discussed and negotiated fully at point of sale.

UDDER FACTS

Cull cow numbers will be light compared with last years high cull as budget cows and young empties will be in strong demand to fit the quandary of tight cash flow versus MS production.

UDDER FACTS

Cull cow numbers will be light compared with last years high cull as budget cows and young empties will be in strong demand to fit the quandary of tight cash flow versus MS production.

UDDERLY INTERESTING

I have purposefully delayed writing this issue of Herd The Latest until now as stock prices fluctuated wildly pre Christmas.  There was a threat of prices rocketing.  However, commonsense prevailed and banks, while causing issues in some areas, have kept composure and are starting to lend to realistic levels.  At the end of 2009, $2,000 / cow was talked but since then market forces have removed this possibility.  Top herds BW 100+ are receiving interest around $1,800+/-.  In cases where purchasers cannot stretch to this level, options of half recorded heifers and second calvers may have to be considered even if quality is slightly sacrificed.  But production may not suffer.  It is possible this year to put a reasonable herd together for $1,300 - $1,600 using various classes of cows and in calf heifers.

The demand for cows and heifers is unexpectedly strong especially from conversions, but the majority is from existing dairy farmers.

Last year most herd numbers of cows and heifer replacements were cut to the bone to survive and hence there are very few surplus ‘anythings’ around compared with past seasons. While cows are being listed, often the numbers on offer are less than last year and this is for both North and South Islands.  We anticipate stocking rate increases on farms as the payout situation has changed completely, putting the emphasis on producing further profitability.

UDDERLY INPORTANT

PRICES (as at 20 February 2010 - please refer to Dairy Interesting for update)

ANUDDER PROFILE

SHELLEY KRIEGER  - Otago

I started in the dairy industry 12 years ago when I met my husband Phil. We moved to Invercargill to a Contract Milking position, progressing to 50 / 50 Share-milking in Balclutha. We sold our herd at the end of the 08 / 09 season.

I have a background in Customer Service / Sales and I have survived the pleasure and hardships of milking cows, rearing calves etc with two young boys in tow.

I am enthusiastic and committed to providing excellent customer service to my clients.  I  would like to thank those clients with whom I have worked, for their great attitudes and for accepting me in this role.

I would also like to thank Paul and Julie Brown  for giving me the opportunity to work as a Dairy Stock Specialist with SIDF.

Shelley