Dairy Focus - December 2016

Dairy Focus DECEMBER 2016

SPREAD THE WORD ouse of earing

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Farming Dairy Focus

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EDITORIAL COMMENT

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PAGE 4-5 MOZZARELLA YOU?

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DECE MBER

2016

Linda Clarke

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Read the latest Guardian Farming online at guardianonline.co.nz We appreciate your feedback.

Editorial Email your comments to Linda linda.c@theguardian.co.nz or phone 03 307 7957.

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Post Ashburton Guardian, PO Box 77, Ashburton 7740.

GIVEAWAY Fancy a little summer reading? We are giving away a copy of Catherine Knight’s book New Zealand’s Rivers, thanks to our friends at Nationwide Book Distributors at Oxford. It is a history of how rivers have shaped our landscape, from the time of the Maori and European settlers to how water has been used for hydroelectricity schemes, boating and for agriculture.

SENIOR REPORTER

Where’s your Christmas tree?

It was a question from my super-organised Christmasloving friend whose perfectly decorated tree makes my eyes pop.

When the kids were little I did make an effort, we had real trees decorated with the ornaments they made, then big tinsel trees, then just the top of the tinsel tree, and for the past year or so a plastic one designed to stick on a window.

Sad, I know. I think back fondly of the little pines we flogged from the land beside the railway line in State Highway 1. Mum would saw it down quickly in the fading daylight while we kids kept watch. And no harm was done, I believe these would be

referred to as wilding pines now and they’re a pest.

It is hard to engage the Christmas spirit sometimes, especially when Christmas Day is just another working day – dairy farmers will still have cows to milk but in between they can spend time with the people that mean the most to them.

There will be a happier atmosphere for many, thanks to the milk companies raising their forecast dividend – signs that global demand and supply are beginning to show signs of stabilising. It is good news but dairy farmers will be sticking to the new leaner versions of their operations for a while yet.

MPI’s situation outlook for December confirms that while milk production is down for the season, it is on the rebound. It expects increases in global dairy prices to last until 2018.

Money aside, remember to take time for your family on Christmas Day, and not only that day but every day.

Christmas trees are great, but people matter most.

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Spreading the good word Mid Canterbury dairy farmers Mark and Devon Slee are among the first topperforming dairy farmers to share their expertise with other dairy farmers under a new Government programme called Farm Systems Change.

A case study of the Slees’ 2600-cow operation at Ealing is one of three studies released this month as the programme is rolled out.

Primary Industries minister Nathan Guy says the case studies on top dairy farms will help other farmers drive their economic and environmental performance.

Government last year allocated $800,000 towards the project which is focused on understanding the drivers of farm performance and sharing that knowledge with others.

“A key focus in these case studies is how high performing farms keep their working expenses well below $4 per kilogram of milk solids.

This includes the availability of feed, how efficiently it’s turned into milk solids, and how much is wasted.

Linda Clarke

SENIOR REPORTER

“Animal health is another area of focus in the case studies. Well cared for cows are more productive and lead to fewer cows required to produce a given quantity of milk solids.”

Guy thanked the farmers who had been willing to share their experiences and knowledge.

The Slees are former winners of the Ballance Farm Environment Award and have been shining examples for the dairy industry. They have hosted field days and happily shared their sustainable dairy business template.

Their operation, Melrose Dairy, focuses on farming quality crossbred cows and feeding them well to consistently achieve high

Mark and Devon Slee.

per-cow production. The cows produce close to their weight in milksolids, with an average production level of 472kgMS/ cow from a 475kg animal.

Mark and Devon have run the property for many years and over this time have continuously improved their systems and infrastructure towards greater resource use efficiency. They, and their team, use agricultural technology to optimise the use of water and effluent application through their

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irrigation system. With a passion for running the farm sustainably, they’ve invested in technology and infrastructure to support quality decisions, and improve the precision of their farming.

As the farm has expanded, the focus has been on achieving efficiencies across their farming operation. The inclusion of dairy support land within the home unit supports efficiencies in the day-to-day running of the farm. In addition, investment

in technology to effectively use the irrigation system has contributed to a cost-effective, sustainable and resilient business.

The couple monitor their business performance using a range of benchmarking tools to identify areas for further improvement and to support their business decisions.

The case studies are available at: https://www.mpi.govt.nz/ growing-and-producing/dairyanimals/farm-systems-change/

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Ministers welcome major Fonterra Primary Industries ministers Nathan Guy and Jo Goodhew have welcomed Fonterra’s announcement that it will be investing $240 million to build a new mozzarella plant at its Clandeboye site in South Canterbury, driven in part by the success of the Primary Growth Partnership (PGP).

“This will be the single largest foodservice investment in the history of New Zealand’s dairy industry, and comes thanks to the success of the Transforming the Dairy Value Chain PGP programme,” Guy said.

“This has developed worldleading technology that can produce natural individual quick frozen mozzarella in six hours, a process that traditionally took three months. This has given Fonterra the confidence to invest in a new plant, in addition to the $72 million expansion in 2013.

“This is another success story for the Primary Growth Partnership and for innovation in the primary sector.”

Associate Primary Industries minister and MP

Architect’s impression of the new IQF mozzarella plant at Clandeboye.

for Rangitata, Jo Goodhew, says the investment will be a major boost for the regional economy.

“I went to school next door to the Clandeboye factory,

which is now the education centre for the expanded site, so I know how important Clandeboye is to the local community,” she said.

“All of this investment and

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investment

PGP programme co-funded by industry and the Ministry for Primary Industries. It is helping to create new dairy products, increase on-farm productivity, reduce environmental impacts, and improve agricultural

education.

The new mozzarella plant will make Fonterra Clandeboye the largest producer of natural mozzarella in the Southern Hemisphere.

Robert Spurway, chief

operating officer Global Operations, says demand for this mozzarella out of China and wider Asia continues to grow as more consumers seek out natural dairy products.

“This new plant, like the two before it, uses patented

technology to produce a high quality, natural mozzarella without using chemicals in the production process,” he said.

“It is the only process of its kind in the world that can significantly reduce production time while still remaining 100 per cent natural – something our customers and their consumers place great value in.”

“It is one of our key product differentiators and has helped make mozzarella one of the most in-demand of our foodservice products. Once this expansion is complete, Fonterra’s mozzarella sales will have increased by more than 60 per cent since 2008 when the first IQF plant was built.”

The world-class innovation behind the IQF mozzarella reduces the processing time from three months to just six hours, and is one of the cooperative’s most tightly-kept secrets.

Spurway says prioritising these types of value add investments is central to the co-operative’s strategy.

The new expansion will

capture every cent of value from the milk. New plants will process the whey and lactose created in the cheese making process – both valuable dairy ingredients.

A new wastewater treatment plant will ensure the plants operate sustainably.

Fonterra chief operating officer Global Consumer a nd Foodservice Jacqueline Chow said Fonterra’s IQF mozzarella is already topping more than half the pizzas in China and continues to grow.

“Forty per cent of people in urban China now eat at Western style fast food outlets once a week, and the use of dairy in the foodservice has grown by over 30 per cent in just five years.”

Work has already begun on the expansion, with the first product destined for markets due to come off the line in September 2018. More than 1000 people will be involved in the project during this time, with the plant creating fulltime employment for 100 people in and around South Canterbury.

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Farming Dairy Focus

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Farmgate security keeps pests and d

By Linda Clarke Farmers are being urged to limit their exposure to devastating threats like velvetleaf and herbicide resistant ryegrass by having their own farm biosecurity plans.

Biosecurity has traditionally been a Government response but farmers should have their own border security at the farm gate, be it a footbath for visitors, a washdown area for contractors or simply a log detailing who was on their farm, where and when.

The Foundation for Arable Research (FAR) has templates it is encouraging them to use as part of a three-prong plan to keep pests and plants that could seriously hurt farming businesses at bay, or at least stop them spreading.

FAR’s CEO Nick Pyke said unwanted pests could hitch a ride to New Zealand on high profile imports such as palm kernel, but there were plenty of low profile threats too.

Biosecurity is divided into

FAR CEO Nick Pyke urges farmers to stay alert for pests.

three areas – pre-border, border and post-border.

Pre-border was not an area farmers could influence because Governmentnegotiated trade agreements allowed seed and agriculturalrelated imports from known trouble spots to come into the country.

PHOTOS LINDA CLARKE 071216-LC-0071

The arable industry will partner the government in the future to improve biosecurity at the border, where upwards of 50 pests and diseases pose a threat to our farming business.

Pyke said post-border was an area that farmers could control – by making sure farm visitors did not bring pests or

disease on the property.

Regional councils also have a part to play fighting pests; Environment Canterbury is spending $ million trying to eradicate wilding pines and it is also warning farmers to be alert for Chilean needle grass, which affects pastures and causes animal welfare issues

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with its barbed tip penetrating pelts.

The needle grass was contained in North Canterbury but has now been found in West Melton.

Pyke said farmers needed a farm biosecurity plan. “It might not be just for pests coming in, but for things you

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7

disease out

071216-LC-0287

don’t want on your farm but you know your neighbour has.”

Farmgate biosecurity would be increasingly important to stop the spread of herbicide resistant weeds. “We need to start thinking about washing down the contractor as he comes to the gate.”

Being prepared for an incursion is half the battle containing it.

Mid Canterbury farmers were on high alert after fescue seed contaminated with the pest black grass blew off the back of a truck travelling on roads around Methven in 2013. A dedicated surveillance

and roadside mowing programme for the next three years has meant the weed has never established.

But the seed industry was worried.

There are similar concerns about the spread of pea weevil (found in the Wairarapa) and velvetleaf.

Pyke said Mid Canterbury had been given the all clear for black grass. “But that involved a huge amount of work from MPI and contractors doing surveillance on roadsides to make sure it did not establish. And there was a positive response from PGG Wrightson (the seed carrier) at the time. But it is a constant threat to us and it was picked up again in a line of ryegrass seed in Mid Canterbury.”

He said the most recent incursion had been contained and a surveillance programme was under way looking at areas in the field where it had come from. All the straw that had come from the fields had been destroyed. “Hopefully it will not escape the borders of that farm.”

Herbicide resistant ryegrass has been found in a couple of sites in Canterbury and a management/containment programme is also under way to stop it spreading.

Farmers had an important part to play in managing it.

“If you are having problems controlling week and you think your herbicide is not working, talk to your reps who will test for herbicide resistance. This is where the farmer’s border biosecurity becomes important.”

Pea weevil has struck in the Wairarapa. Farmers there are banned from growing pea crops this season and next as part of a significant biosecurity response to try and stop it establishing or becoming a problem elsewhere.

“Hopefully for the Wairarapa it will be eliminated over two years. It has caused a lot of angst and farmers have had to find other crops to grow.”

The weevil had not been detected in the South Island.

“There is detailed surveillance underway with netting over a large number

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of paddocks in Canterbury. If it arrives, it will be detected.”

Pyke said there had been criticism that MPI was slow to react to the pest.

“Whilst some of it is justified, it is really hard to respond rapidly when they are dealing with something they don’t know much about but is someone’s crop and livelihood.”

Pyke said there were lessons to learn for all involved in the response, but accurate information was vital.

“We need to make sure the information going around is accurate and not relying on someone thinking they saw something that looked like a pea weevil.”

Velvetleaf is the third pest incursion that has drained resources.

A programme is under way to make sure it does not establish and there are herbicide trials occurring on how to best contain it.

Pyke said all three incursions this year should have been detected sooner if good biosecurity had been in place across the industry.

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Farming Dairy Focus www.guardianonline.co.nz

Report farm theft

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More than a third of Kiwi farmers have been a victim of theft in the last two years, a recent survey has revealed.

When Federated Farmers surveyed 1000 farmers in October, about 350 respondents said they had been targeted by thieves.

Chainsaws, shearing gear, generators and fencing tools were the most commonly stolen items. More than a quarter of thefts involved livestock been taken and nearly two per cent of respondents said they had had firearms stolen.

Forty six per cent of farmers had a story to tell about poaching. Some said they heard gunshots at night while others told of confronting armed trespassers.

Nearly 60 per cent victims of stock theft said they had not reported the crimes to police and neither had 38 per cent of farmers who had property stolen. Many respondents said they thought police would not be interested in the crimes, while others only discovered the theft days or weeks after it happened.

Federated Farmers rural crime portfolio leader Rick Powdrell said by reporting thefts to police farmers could prevent theft and catch offenders.

“It helps the local police build a comprehensive picture of what crime is happening, where and at what time.

“

Nearly 60 per cent victims of stock theft said they had not reported the crimes to police and neither had 38 per cent of farmers who had property stolen.

We have to play our part. Police can’t do it on their own. Rural people can’t do it on their own.”

Police had emphasised their interest in information about thefts “time and again,” Powdrell said.

Many farmers were complacent about property security, the survey found.

Just less than half of respondents admitted to leaving their sheds unlocked. But 38 per cent said they had installed sensor lights and one fifth had security cameras.

Only 22 per cent belonged to a rural support group.

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Check for leaks, it’s important Spring has lived up to its expectations this year – being as unpredictable as ever! By now, we should be well into the swing of irrigating, but nature has reduced that need somewhat. The great thing about a cold, wet spring is that it saves you money - not irrigating until you need to reduces operational costs and therefore increases profitability.

The other great thing about this spring has been the absence of those dry, damaging nor ’westers. No doubt they’ll arrive soon enough but before they do make their unwelcome appearance, it’s a good opportunity to ensure your gear can withstand their effects.

Despite the slow start to the irrigation season, forecast drought and predicted low groundwater levels, particularly in eastern parts of the country, mean irrigating farmers must ensure their equipment and irrigation schedules are up to scratch.

Now is a good time to check the performance of your

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irrigation assets so they will perform to their maximum efficiency when summer finally hits.

1. Check flows and pressure.

Pump impellers wear over time. Replacing worn gear will help ensure your flow and pressures are within 10 per cent of operating design - this is critical for application efficiency 2. Check for leaks. It’s not rocket science – water not being applied in the right place is water wasted.

3. Do a bucket test. Even better, download the CheckIt Bucket Test app. Bucket tests let you know how much, and how evenly your application is. The CheckIt Bucket Test app walks users through an annual

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weather forecasts will mean the odd day off for your irrigators while nature does the work for you!

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Weeding out the weirdos Spending any amount of time on a social media platform like Twitter is akin to having all your conversations in a community hall, everyone can hear you and anyone can chip in. Actually, judging by some of the opinions sent in my direction it’s more like talking in a public bar, I swear half the people are well on their way to being drunk.

There’s something about the relative anonymity of a computer screen and keyboard that emboldens people to share their view on everything. I’ve seen people explain earthquake proofing to civil engineers, describe the Electoral College system to political scientists who live in America, and of course not a week goes by without some urbanite educating me on best practice farming methods.

You have to learn to ignore the bulk of the interruptions or you risk being sucked into never ending arguments about the right way to peel an orange or, far worse, endless lectures on exactly why Andrew Little is the saviour of the Labour Party (spoiler:

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ELBOW DEEP @dairymanNZ

he’s not).

There are some gems out there, and some fantastic advice on all manner of things if you just ask the right questions. And that’s the flip side; it’s also much easier to ask for advice from the relative anonymity of the computer screen than it is in real life.

Asking for advice can be hard, especially in your professional life when you know you’re doing your best and can’t for the life of you see how you could be doing anything different to improve things. Finding the right advice for you can be harder still.

For decades now DairyNZ have provided discussion groups as a means of getting ideas and advice to farmers,

but I always found they were much like Twitter: a nice day out with lots of opinions floating around but hard to pick the right advice for me.

As an infrequent user of DairyNZ resources I was surprised to get an email from them asking to interview me. They wanted to know how I’d taken a Mid Canterbury dairy farm from average performance to a sustainable 18 per cent increase in production with a corresponding drop in expenses. They’re interviewing a whole range

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Taking stock of where you are and where you want to be can be scary, but taking the first steps and doing it can be exhilarating. Just take the time to find the right people to listen to, and filter out the weirdos on the internet!

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New dairy course pays dividends A group of Mid Canterbury dairy farmers have made history by being amongst the first to graduate from a national agricultural training course designed to boost them into management.

The New Zealand Certificate in Primary Industry production Management (Level 5) is run by AgITO and is for experienced operators looking to move into positions with more responsibility on farm.

The 12-month course involves online learning as well as 16 days of presentations and students learn while holding down fulltime jobs.

Tutor Allan Ramsay said two of the six on the Ashburton course graduated at the start of the month and the remainder last week.

Ramsay said two hard workers who were the first in the country to graduate with the new qualification were Ben Devereux, second in command for Mid Canterbury dairy farmer Jeremy Duckmanton, and Matt Hoets, who manages a Landcorp dairy farm at

AgITO tutor Allan Ramsay says the new dairy training course has been a hit.

PHOTO ASHBURTON GUARDIAN 011216-CE-0140

Maronan.

He said the pair had to study their dairy farm systems, analyse, benchmark and recognise improvements; they also had to develop, implement and maintain a

feeding, breeding and animal welfare plan to achieve production goals.

Ramsay said as well as the online work and presentation days, the students met weekly and “cross-examined” each

other about what they were doing and how each farm was going.

He said the online learning was demanding, and involved Google spreadsheets and documents. “They have to

do their work on top of a 40-hour working week. They get tired and exhausted and it shows. They have to set priorities.”

The hard work pays off though. Ramsay said the course content had been designed by farmers, including Duckmanton and DairyNZ, to make sure the end result was a trainee that someone wanted to employ.

He said Devereux, who has worked his way up several AgITO courses over the years, had recognised that training was needed to progress in the industry.

He had been well supported

by Duckmanton, who has also been involved in developing dairy course content for the training organisation. “The course was well thought out and the end result is a trainee with skills that someone will want to employ.”

Ramsay said the pair worked on projects specific to their operations and were role models for those considering the course next year; there is already a waiting list of students.

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Farming Dairy Focus

www.guardianonline.co.nz

2016 set to be warmest on record With just under two weeks until the end of the year, NIWA climate scientists say 2016 is set to be New Zealand’s hottest on record, breaking the previous record set in 1998.

Temperatures for the rest of the year would have to drop markedly to be more than 1.0°C below normal for the next three weeks to avoid the record. However, NIWA forecasters say warmer than average temperatures are likely for the rest of December in the east of the both islands, with near average temperatures everywhere else.

NIWA climate data shows more than 70 places across the country are poised to set new mean temperature records.

Auckland and Hamilton will most likely record their warmest year on record and Wellington its second warmest.

The national temperature observations date back to 1909. New Zealand’s mean temperature for 2016 is currently (January to November) running at 0.94°C

“

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above the 1981-2010 average.

The previous warmest January-November year on record is 1999, when the temperature was 0.88°C above average.

The first seven months of the 2016 were all warmer than normal. Only August has been below normal this year.

Since the start of the national record in 1909, 35 years have been warmer than

the 1981-2010 average. And this century only four years have recorded colder than average temperatures (2004, 2006, 2009, 2012).

NIWA principal scientist climate Dr Brett Mullan says the figures are in line with global average temperatures and confirm the longer-term trends of climate change.

“What we are seeing is the stark reality of global

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NIWA climate data shows more than 70 places across the country are poised to set new mean temperature records

warming.”

Dr Mullan said exceptionally warm conditions for the first six months of this year were a consequence of two main factors – the long-term regional warming trend due to greenhouse gas increase in the atmosphere, plus local natural variability adding extra warming.

“Natural variability acts like a tail wind or head wind, pushing local temperatures either above or below the longterm trend. In 2016, sea surface temperatures in the Tasman were exceptionally warm and there was more northerly flow than usual over New Zealand, pushing local temperatures above the trend.”

This late in the year it is evident that no weather station will record its coolest year on record.

Globally, the World

Meteorological Organisation says 2016 is set to be the hottest year on record by a significant margin with temperatures 1.2°C above preindustrial times. A new high will be set for the planet for the third year in a row.

The level of carbon dioxide in the atmosphere which has been steadily increasing for decades, also broke records this year, with May seeing the highest monthly value yet 407.7 parts per million (ppm) - at Mauna Loa, in Hawaii.

At NIWA’s Baring Head Clean Air Station near Wellington, the 400ppm threshold was passed in June 2016, about three years after the 400ppm threshold was first broken at Hawaii.

Carbon dioxide is the primary greenhouse gas contributing to warming of the atmosphere.

www.guardianonline.co.nz

13

(Right) A swimmer exits the water at the Mayfield Hinds Irrigation Scheme’s storage ponds in Carew after an open water swim earlier this month.

The Ashburton Masters Swimmers organised the swim, which held 1km and 2km races around a triangular course. The scheme has three ponds, full because there has been little demand for irrigation over spring and 34 swimmers tried the course and gave it the thumbs up. The swimmers were allowed on the site under strict conditions with MHIS general manager Hamish Tait on hand to observe.

Swimmers, who braved the 16-degree water, said it was a perfect venue for PHOTO SUPPLIED an open water swim.

(Below) Friends of the Tinwald saleyards gathered for its last sale recently, with past and present livestock reps and farmers trading stories about the glory days. The yards have now closed, after 138 years, and will be disassembled and the land sold. PGG Wrightson Mid Canterbury livestock manager Greg Cook, who had been selling at the yards for the past 24 years, said a big yarding of 1200 sheep was a fitting farewell. PGG Wrightson organised a special lunch for staff and clients to mark the occasion and a beer trailer parked by the special marquee suggested many tales would be recounted after the last store sheep PHOTO LINDA CLARKE 131216-LC-9-8 was sold.

(Above) Errol Stewart on a John Deere 4020 from the 1960s was part of a convoy of old tractors that took part in a Mid Canterbury Vintage Machinery Club trek around Mid Canterbury this month. Peter Butterick on a Nuffield follows, with PHOTO SUPPLIED Murray Elliott opting for a warmer ride next in line.

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2 14

Farming Dairy Focus

www.guardianonline.co.nz

ADVERTISING FEATURE

Environmentally friendly, low cost energy Kea Energy is a Leestonbased electricity retailer using solar energy to help farmers lower electricity costs and be environmentally friendly.

Kea installs its own solar panels and the customer agrees to buy electricity they generate at a discounted price; excess energy is exported and if more energy is required, Kea has back-up supplies.

The business is the brainchild of Campbell McMath, who worked for Orion on its network management control systems.

McMath started researching generation from renewables for his family farm and it has led to a generation network rivalling some of the traditional retail electricity players.

He said he looked at wind, solar, bio-gas and hydro as options to power the family’s entire dairy farm, from houses to irrigators and the dairy shed. “I found for our situation, hydro was best suited for the farm. After installing one turbine it became slightly addictive and we built another three. Now

Campbell McMath.

PHOTO SUPPLIED

we export 80 per cent of our power.”

With the price of generating solar power falling, Kea put in a few test sites and began gathering data.

“Possibilities opened and we came up with using a Power Purchase Agreement for solar sites.” This means on some sites Kea pays for the solar generation facility and the landowner agrees to buy electricity.

The company works across the Canterbury region and has been building its assets over seven years.

“At the start there were

some very high prices for power, which made things relatively easy, but with the fall in the spot price in the last few years, we have had to look at other options to sell our power, which was worrying . . . but I looked at this as a challenge,” McMath said.

“The size we are allows us to be very agile with pricing and plans. You are constantly reviewing where your company is and how you can make it competitive and economical. You are looking for a balance.”

He said customers needed to know they had options. “As

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He says being an “outsider” in the industry was an advantage an allowed him to have an open mind, offering personalised service to clients.

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“Each one of our customers has a different electricity demand; we match the best system for the customer and us, to maximise energy savings. Some require lots of panels, some require a backup system.

“We work in conjunction with the traditional suppliers of power as we both offer back-ups for each other. When a customer needs reliability, it is far better to have two sources than one.”

He said it was a great feeling showing customers how much power was coming from the sun and how it was powering their business.

His advice? Look around.

Things are moving quickly in the industry, in terms of products and services.

“Who would have thought that the power company, us, now takes the power station to you, at not just a cheaper rate, but also at no cost to the customer.”

He said the most rewarding aspect of his job was saving the customer money, getting a return and the bonus of reducing pollution.

www.keaenergy.nz | E: campbell@keaenergy.nz P: 0800 289 287 - ATS Energy Account Manager, Tracey Gordon *Terms and conditions apply

www.guardianonline.co.nz

15

Looking ahead to 2017 The Ministry for Primary Industries says a rebounding dairy industry has helped the outlook for the primary sector.

Dairy export revenue is forecast to rise 3 per cent in 2017, but is expected to increase 24 per cent to $17 billion in 2018 as milk production is forecast to return to previous levels after two years of decline. In addition, recent increases in global dairy prices are forecast to be sustained into 2018.

“It’s very pleasing to see the global dairy market rebounding after a difficult few years. The average payout for dairy farmers is now expected to be above breakeven for most, and there is also continued strong growth for sectors like horticulture, forestry and arable” said MPI director of sector policy Jarred Mair.

The latest Situation and Outlook for Primary Industries says growth also continues for horticulture and forestry, while meat and wool decline. Total primary sector export revenue is forecast

to be $36.7 billion, down from the previous year, but forecasters say it will rise to $47.9b by 2021.

Dairy highlights Global demand and supply are beginning to show signs of stabilising, with average prices traded at the Global Dairy Trade auctions at their highest

level since March 2015.

New Zealand’s all company average farm gate milksolids price (including Fonterra’s forecast dividend of $0.50 to $0.60) is forecast to rise to $6.41 per kilogram of milksolids for the year ending May 2017.

Opening dairy cow numbers are expected to fall for the second year in a row, down

1.7 per cent for the 201617 season, following a 2.3 per cent fall in the previous season.

MPI expects New Zealand’s milksolids production to fall 1.7 per cent in the 2016-17 season before rebounding in the following season.

MPI is keeping a close eye on happenings in the EU, where annual production is up,

despite incentives for farmers to reduce supply.

The European Commission announced a voluntary milk supply reduction scheme earlier this year, offering a package of 150 million euro to their farmers. For each litre of milk that EU farmers do not produce, they receive a direct payment of 0.14 euro.

Recent Global Dairy Trade auction results are beginning to reinforce the idea that global supply and demand are rebalancing. Both a reducing global milk supply and increased Chinese demand are contributing to higher dairy prices. Fonterra has also announced plans to divert more milk into value-added products, leaving less available for lower-value powder manufacturing.

This changing product mix is illustrated in New Zealand’s exports to China. In the June 2014 year, 83 per cent of our dairy exports to China were milk powders. This has fallen to 65 per cent in the June 2016 year as exports of other dairy products such as liquid milk and ice cream have increased.

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