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Sunday
Oct262014

The Dairy Industry

I know that some readers feel that I bang on too much about the dairy industry, but just for confirmation of some of the issues that I have been endeavouring to highlight, I commend an article in today's Sunday Herald by the redoubtable Eric Watson.

Now many of you may be under the impression that the said Eric is a bit of a rich-prick gadfly, and hardly an authority on the dairy industry. Well you would be wrong - he and his brother dairy farm a vast acreage in Georgia US where they are apparently achieving somewhat better results than are being achieved by our top farms. Here is a summary:

"We are one of the largest pasture-based producers in the US, producing around 20 million litres of milk a year, farming more than 2400ha on which we grow pasture and produce, more than 20,000 tonnes of other feed crops to supplement our 8000 milking cows and replacement stock. It's a great New Zealand success story."

Watson goes on to admit that from a straight grass growth/utilisation perspective his Georgia farm is less efficient that New Zealand farms.

"We grow too much grass at times for our stock to eat, but the more efficient use of water and fertiliser means we are able to run higher stock rates than New Zealand and achieve high milk output per hectare without pushing the environmental limits to the extent New Zealand dairy farms are."

But he points out that value of land in Georgia means that they do not have to chase the level of intensification in New Zealand, and thus "minimise potential nutrient loading and its impact."

Watson re-quotes Massey's Mike Joy claim that New Zealand farms are becoming "over-intensified with ever decreasing marginal rates of return."

Here is the crunch, that supports my contention that the banks are primarily responsible for this gross over-valuation that leads to over-intensification:

"Farmland in New Zealand (US$30,000/ha or NZ$38,000/ha) is up to six times more expensive than land in Brazil (US$5000/ha), Argentina (US$7000/ha) and the US (US$9000/ha) according to a 2014 Global Farmland Index survey by Savills World Research." And:

"So although farmers and banks that have channelled billions of dollars into inflating the value of farmland through excess borrowing may not like to hear this or want to acknowledge it - rest assured it is happening."

Watson makes the point that it is only by exporting our skills and expertise to wherever suitable land is cheaper and in this manner grow our export markets. We can no longer focus for answers for growth in the dairy industry by relying on increasing the production on existing homeland units - that way lies ultimate disaster for both the industry, and the environment.

We are at the crossroads right now with disastrous potential 'pay-outs.' It is an appropriate time for our newly elected representatives to take note of what Watson has to say, and tweak policy. To delay any longer is just unacceptable, and indicate ignorance and denial of what is blindingly obvious to those who have grown increasingly concerned at our dependence on the industry, and the gross conversion of otherwise productive land into the chase after financial nirvana.

And just as a final swipe at the banks - it is high time that they took a 'hair-cut' along with their clients as values are brought back to a more realistic level. At projected 'pay-out' levels, that time cannot be too far away, and it won't be too long before the perennial demand for Government assistance to keep over-borrowed farms afloat begins with the Fed Dairy Section right at the forefront!

 

 

 

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Reader Comments (1)

Hear jolly hear Bill.

October 26, 2014 | Unregistered CommenterPeter

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