Dairy News 08 December 2015

A CUT ABOVE THE REST

Outrage over bobby calves footage. PAGE 3

Mow your own grass PAGE 34

ADDING VALUE Westland Milk outlines plans PAGE 16-17

DECEMBER 8, 2015 ISSUE 348 // www.dairynews.co.nz

ROBOTIC MILKER IN CLASSROOM Feilding High School students Brayden Whittaker and Tom Naqasima with the first robotic milker in a secondary school in the southern hemisphere . PAGE 8-9

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DAIRY NEWS DECEMBER 8, 2015

NEWS // 3

Outrage over bobby calves treatment PETER BURKE peterb@ruralnews.co.nz

OUTRAGE IS how Primary Industries Minister Canterbury’s cup runneth over.

PG.25

Give calves a great start.

PG.26

Nathan Guy describes his reaction to the treatment of bobby calves on Waikato dairy farms.

TV 1’s Sunday programme showed gross maltreatment of the calves, filmed by the animal rights group Farmwatch. It showed bobby calves left in open crates in the sun for hours, thrown onto a truck and thrown and kicked at a petfood plant.

Guy told Dairy News he’s had many phone calls expressing outrage at the mistreatment and calling for the people responsible be held to account for their actions including damaging the reputation of the whole dairy industry.

“Farmers have come a long way in a short time to improve their animal welfare standards onfarm.

But it takes only a couple of cowboys as we saw on that footage to damage the reputation of the NZ dairy industry,” he says Guy says he’s also disappointed that SAFE is deciding to make a big thing of this in our international markets. Animals and animal products are

worth about $25 billion to the NZ economy and scaremongering in our international markets is disappointing.

He says NZ is ranked first equal of 50 countries for its good treatment of animals. Under his watch the regulations and penalties for animal cruelty have been toughened. There is a five year jail penalty for wilful mistreatment of animals and a $100,000 fine for an individual and up to $500,000 for a company.

Guy says he also disappointed the animal rights people took so long to give the footage to MPI. This view is shared by MPI’s directorgeneral Martyn Dunne. He says he understands the footage was taken over two seasons (a fact confirmed by the animal right groups) and says MPI could have acted sooner if it had the footNathan Guy age earlier.

He is appalled it has taken so long for MPI to get the footage and is annoyed at what he saw on television, believing the days of leaving calves in crates had long gone.

Dunne says as soon as they received the footage of the mistreatment of calves on September 14 it began an investigation. He denies claims that MPI has done nothing.

“A lot of issues have had to be examined including the legality of [them] recording the footage and the various actions that needed to be taken.

We have to look at the viability of the footage itself and who’s involved, so there is a multi-pronged force in place for this investigation. But before we initiate a prosecution we have to establish all the facts,” he says.

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ONE OF the people who shot the footage shown on television says they didn’t hand over the first lot of video made last year was because they wanted to get greater proof of the widespread abuse of bobby calves.

John Darroch, from Farmwatch, told Dairy News that pictures of the calves in crates was taken last season and the other footage this season. They had difficulty filming some of the calves being thrown onto trucks and he personally saw at least eight instances of this happening but they were impossible to film .

“I can now confidently say that the rough handling of bobby calves onto trucks is widespread,” he says.

Darroch says they took their footage from the side of the road and at times feared for their own safety had farmers caught them doing this. A couple of times farmers challenged what they were doing but didn’t realise they were animal rights people.

Darroch says he’s worked on a dairy farm and he has met other farmers keen to show him how well they look after their animals.

“We’re not out there to demonise farmers and the dairy industry. I think there are some widespread issues that need to be tackled but certainly I haven’t got anything against farmers as whole. In fact I have massive sympathy for them for what they are going through with low milk prices and the stress this involves,” he says.

Darroch says he wants to scotch one suggestion that farmers didn’t know about the ways the calves were being thrown onto trucks. He says most of the crates the bobby calves were held in were clearly visible from the farmhouse.

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DAIRY NEWS DECEMBER 8, 2015

4 // NEWS

‘Opportunistic buyers’ know prices won’t last PAM TIPA pamelat@ruralnews.co.nz

OPPORTUNISTIC BUYERS taking advan-

tage of low prices were probably behind last week’s 3.6% overall rise in the GlobalDairyTrade (GDT), says Rabobank research analyst Emma Higgins.

“It’s likely this upturn in pricing is driven by opportunistic buyers who are aware that dairy product supplies at these low prices are unlikely to be as abundant moving into 2016,” she told Dairy News.

She is cautiously optimist regarding last week’s GDT result.

“The re-balancing of supply and demand funda-

mentals is a work-in-progress,” she says.

“Critical to this progress is the European milk supply, which continues to pump additional milk into the export market. More positive, however, is the slowdown in US milk production growth, which will help to ease the current over-supply situation.

“New Zealand will

also contribute to this supply contraction. Current production volumes for NZ are back 3% for the season to October 2015, compared to last season. Rabobank still expects a drop in NZ milk supply of around 7-10% by the end of the 2015-16 season.

“On the demand side, there is significant prod-

Buyers are taking advantage of low whole milk powder prices.

uct in global inventory pipelines to work through yet, which may take some time.

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stronger upward momentum in the second quarter of 2016 as the supply and demand dynamics improve.”

Federated Farmers dairy chairman Andrew Hoggard says it was a little rise but a positive sign.

Forward contracts for WMP rose 5% rise. But with US$3000/t for WMP still the “magic number”, there is still a way to go, he says.

“For farmers it holds off the risk of the milk price being dropped but it is still no guarantee. It will still need some consistent rises to guarantee the current milk price and hopefully add a bit to it.”

NZ’s milk production is tipped by several companies to be 5-10% down.

Everyone is saying it is going to be down, he says.

But from what he hears, the EU and the US still aren’t getting the signals significantly. “Or if they are getting them they are thinking they will go and protest and that will fix it,” he surmises.

Or they haven’t drawn the correct conclusion that if people aren’t willing

to pay more for milk you don’t produce more of it.

“In Europe the world price eventually flows through to them but it is often quite late in the piece. In America they struggle to see the proper world price.

The US has strong domestic markets but they are exporting a lot, he says.

“Every time they increase production it generally ends up in export markets.”

Everyone is talking about a pick-up in mid-late 2016, he says.

ASB rural economist Nathan Penny says they are sticking with the milk price forecast of $4.60kg/ MS. The latest lift at GDT was in line with expectations.

He says dairy prices will move higher over 2016 but at this junction dairy markets and buyers are not in a particular hurry.

However the NZ production shortfall will bite.

A market assumption that other producers like the EU will pick up NZ’s slack is misplaced. Lost NZ exports are too big to cover, he says.

DAIRY NEWS DECEMBER 8, 2015

NEWS // 5

Lower entries in dairy awards A TOTAL of 452 entries

are in for the 2016 New Zealand Dairy Industry Awards, a pleasing result given the economic climate in the industry, say the organisers.

Entry numbers are down on the 539 received last year and are the

lowest since 2010.

There are 119 entered in the Share Farmer of the Year competition, 164 for Dairy Manager of the Year and 169 for Dairy Trainee of the Year.

The awards are much changed for 2016: entry criteria are changed for all

three competitions, resulting in two being renamed.

“Given this we are happy with the result and pleased with the balance of entries in the three competitions,” general manager Chris Keeping says.

Entrants will first

compete in one of 11 regional competitions in February and March next year. The 33 winners will progress to the national finals in May. “The regions have worked hard to attract the entries and are rapt with the quality of entrants

and that all three competitions will be run in all 11 regions,” says Keeping.

“A positive factor is the good balance between the three competitions: the entry numbers are much more even than in the past. This means some of our changes have pro-

$141 million cheese factory in Oz FONTERRA IS moving to revamp its struggling Australian operations.

The co-op will spend A$141 million on building a new cheese plant at its Stanhope factory, replacing the hard cheese plant destroyed by fire in December 2014. The larger, modern facility will make cheeses for Australian consumer, foodservice and export markets.

And the co-op has a five year, multi-million dollar agreement with Bellamy’s Australia Ltd to make new baby nutritional powders.

Fonterra’s Australian business has struggled to make money in the face of intense competition among processors.

Oceania managing director Judith Swales says the new cheese plant will help Fonterra to get the maximum value out of every drop of milk, drive increased returns and “transform our Australian business to return it to strong and sustainable profitability”.

“We are focusing on areas where we can win in a highly competitive market, and that means

optimising our product mix and investing in higher value add products that will deliver the best returns for our farmer shareholders.

Rebuilding and expanding our Stanhope cheese plant is the key to this.”

The new factory will be able to produce 45,000MT of cheeses each year, including parmesan, gouda and mozzarella, an increase of 15,000MT on the previous plant.

“As the brand market leader in the A$1.95 billion retail cheese category – with Bega, Mainland and Perfect Italiano commanding 23% market share – the new plant will supply our Australian consumer and foodservice businesses, and export markets.” The deal will affect 100 markets, notably in China, Japan, and Korea where free trade agreements apply, Swales says.

She says the deal with Bellamy’s is the co-op’s “strategy in action for Australia where we focus on the areas we can win in a highly competitive market to deliver the best returns”.

“We are actively growing our nutritionals

business through strategic partnerships and agreements which will see the Darnum nutritionals plant move towards full capacity.

“Our Australian business has particular ingredients strengths in cheese, whey and nutritionals, complemented by our strong consumer and foodservice businesses; the announcement with Bellamy’s Australia – one of the fastest growing infant formula companies – reaffirms our strength in nutritionals.”

Darnum is the leading nutritionals plant in Fonterra’s global network, Swales says.

“Leveraging our Fonterra research and development centre in Palmerston North – the largest dairy innovation centre in the southern hemisphere – we will bring innovation to the Darnum plant and the nutritionals market to capture growing demand.”

Bellamy’s is one of the fastest growing infant formula companies with strong brand recognition and expertise in the organic ingredient supply chain.

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duced one of the results we were after.

“Some tinkering will be needed as the awards programme continues to evolve, but overall we are happy with the result given the changes and economic climate.”

The Waikato region had the most entries (58), followed by Southland (54), Canterbury/North Otago (46), Central Plateau (44) and Bay of Plenty (42).

Most regions will hold an entrant event to better understand what to expect and how to prepare for

judging.

Judging will take place in late January and February. “It’s also an opportunity to meet other entrants in a social environment.”

The awards are sponsored by Westpac, DairyNZ, DeLaval, Ecolab, Federated Farmers, Fonterra Farm Source, Honda Motorcycles, LIC, Meridian Energy, Ravensdown and Primary ITO. More information on the awards can be found at www.dairyindustryawards. co.nz.

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DAIRY NEWS DECEMBER 8, 2015

6 // NEWS

Fert co-ops take it on the chin, back farmers FERTILISER MAKER

Ballance chief executive Mark Wynne.

Ballance says it will continue to absorb the impact of a weaker New Zealand dollar and hold prices for most major nutrients through

December.

Urea and DAP prices will remain unchanged from spring, and potash will reduce $20 per tonne; superphosphate will rise $3 to $330.

Ballance chief executive Mark Wynne says the decline of nearly 9% in the value of the NZ dollar over the past five months had put the co-op under pricing pressure,

but it decided to keep prices as low as possible during its December 1 price review.

“We carefully considered our options to offset the currency impact, however right now we are aiming to support farmers by absorbing as much of this volatility as possible.”

Wynne said Ballance had held pricing from September 1, especially given high demand for nitrogen from farmers wanting to build feed supplies ahead of an expected dry summer.

He said some adjustments may become necessary between now and the next price review in March.

“What we can guarantee is that we will keep a close watch on international commodity prices and forex so our customers have access to competitively priced farm nutrient essentials.

Ravensdown returned savings of about $1.3 million to its farmers.

Since September 1, when Ravensdown capped its spring season super price at $320 per tonne, the value difference compared to the only other superphosphate maker in NZ has been $7 per tonne. Some products, such as sulphur superphosphate, differed by $13 per tonne during the three months.

“Keeping prices capped and that low for the crucial spring months adds up to an early rebate for customers who needed the money more than we did,” says Greg Campbell, Ravensdown chief executive.

From December 1, Ravensdown is taking the lead and reducing potash by $20 per tonne and keeping other products such as urea and DAP unchanged at $575 and $875 per tonne

“Our aim is to balance value through competitive pricing.”

“We know our customers can shop around and there will always be some variations across product ranges and suppliers, but our aim is to balance value through competitive pricing with running a successful business that delivers consistently strong returns on their investment in the cooperative.”

With recent rain in many areas, Ballance was advising farmers to consider leveraging this with nitrogen products like SustaiN, to side dress crops and boost pasture covers before heading into the potentially drierthan-normal summer; or SustaiN K, containing added potash to promote clover growth as well as grow more feed onfarm.

Meanwhile the other major fertiliser co-op Ravensdown says the difference between the two superphosphate manufacturers’ web-listed price for customers buying super-based products between September 1 and December 1 has meant

respectively. “By moving superphosphate up $10 to $330 per tonne from December 1 we effectively delayed the impact of any price rise during those important spring months,” says Campbell.

“Even with this move, we continue to shield shareholders from the full cost of their superphosphate. We’ll continue to monitor global commodity prices and the falling exchange rates over summer.

“Despite exchange rate pressures and short term volatility, we are seeing gains in our operational efficiencies and our global suppliers supporting us as we strive to deliver all-year value to shareholders.”

As farmers may face an El Nino summer, early superphosphate application is advisable to miss the rush before autumn rains hit.

Meanwhile N-Protect, which is a coated urea product that reduces losses of nitrogen to the atmosphere, is proving valuable in hot and dry conditions.

DAIRY NEWS DECEMBER 8, 2015

NEWS // 7

Fonterra guilty of breaching contracts FONTERRA SAYS it is

considering its options after losing a High Court case taken by former suppliers of a failed South Island processor.

Fonterra group director governance and legal Mark Cronin says the judgment refers to complex and difficult issues about special contracts with farmers outside the co-op.

“We are now reviewing the reasoning as well as the implications of the decision,” he told Dairy News.

Fonterra bought the New Zealand Dairies Ltd Studholme plant from the receivers in 2012.

It offered the former suppliers to the plant ‘growth contracts’ on inferior terms in order to placate its existing farmer suppliers; the former

Former suppliers of NZDL took Fonterra to court over milk supply contracts.

suppliers took the co-op to court.

In a written decision, Justice Matthew Muir says Fonterra’s reasons for doing so stemmed from a “perceived need to assuage internal politics within its supplier base and included also an element of ‘messaging’ for the benefit

of other farmers who might in the future be persuaded to leave Fonterra and support an independent”.

Cronin says Fonterra is disappointed with the ruling.

“We’re disappointed in the outcome.

“Fonterra’s acquisition of the former NZDL plant ben-

efited Fonterra and the supplying farmers who’d been left out-of-pocket by NZ Dairies Ltd, enabling significant retro-payments owed to them to be paid and ensuring ongoing milk collection.

“We’ll be considering all our options, including the option of appeal.”

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Last warning on waterways THE LAND and Water Forum

(LAWF) is proposing time limits for farmers to fence waterways on their properties, with dairy farmers among the first to be affected.

A report by LAWF makes 60 recommendations; one on fresh water quality proposes that all ‘intensive’ farmers exclude stock from waterways. This is critical economically and environmentally, LAWF says.

From mid 2017 dairy cattle must be excluded from waterways, grazing owned by a dairy farmer by 2020 and third-party dairy grazing by 2025. This is also the date for intensively farmed beef and deer to be excluded.

Pigs were to have been excluded by mid 2015.

Primary Industries Minister Nathan Guy says the report talks about some flexibility on animals on steep hill country.

“So we need to have a consultation period on this early next

year,” he told Dairy News.

“The Government hasn’t firmed up on some of the detail including how far and how fast this will happen. But I think these guidelines are something we could live with.

“Dairy farmers have come a long way in a short time. About 96% of them have stock excluded.

When I last had a look the fencing done was roughly equivalent to the distance between NZ and the UK and halfway back again,” he says.

Guy says it’s a challenge to get the last few percent of farmers to comply but he is optimistic they will do that. Farmers have seen these changes coming, won’t be surprised at them and will accept them, he says.

In fairness, other intensive farmers on lowland areas should be faced with the same rules as dairy farmers, Guy says.

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DAIRY NEWS DECEMBER 8, 2015

8 // NEWS

Robot to give kids’ t SUDESH KISSUN sudeshk@ruralnews.co.nz

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Farm manager Mike Goodson with students Brayden Whittaker (centre) and Tom Naqasima.

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Feilding High is no stranger to farming: the school set up its own farms in 1921 at the request of local farmers keen to send their children to learn agriculture.

Manawanui is an 81ha sheep and cattle farm on flat-steep hill country on the outskirts of Feilding; Ngakaunui is a 16ha dairy farm adjacent to the school on Churcher St and houses the robotic milker.

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However, the Government ceased funding the farm several years ago, leaving the board of trustees to shoulder the burden.

“Our hostel manager is getting enquiries from farming families, so there is a lot of interest being generated.”

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milker in a southern hemisphere high school is running at Feilding High School, Manawatu.

The DeLaval robot started milking the school farm’s 52 cows two months ago and is being hailed as the latest tool to lure the ‘PlayStation generation’ into dairying.

The school’s board of trustees chairman Geoff Walker says the robot is generating strong interest among students and the farming community.

“With robotics, students get to do their PlayStation bit as well as dealing with animals in fresh air; many see this as a career path,” he told Dairy News. “I am in no doubt this will attract more young people to the

dairy industry.”

Walker says the robot leaves students with “eyes wide open”. “They never thought this would come to our school.”

more financial support from the Government and the industry.

Chairman Geoff Walker says recent investment on the dairy farm resulted from the school board’s prudent and frugal use of money.

Last season the farm’s 52 milking cows produced 400kgMS each; profits were ploughed back into the farm.

“We are putting any profits from the dairy unit straight back into it; we could do a huge amount if funding was there.”

The school has a “grotty old tractor without a passenger seat” to teach kids how to drive tractors.

Walker visualises a tractor distributor leasing or lending a new model to the school to teach students.

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“We pre-date Massey University; we were the agricultural education centre for this part of the country back in 1921. A boarding hostel allowed farmers in remote areas to send their children here to get educated.”

With the robotic milker the school board has come full circle, he adds. And with centenary celebrations coming up in 2021 Walker says the board wants the facility to be “as relevant to secondary agrieducation as we were back then”.

Going hi-tech ties in with the school’s new agriculture curriculum

Feilding High School students visit the robotic milking shed.

to be launched next year, designed with Saint Paul’s College, Hamilton.

“Our hostel manager is getting enquiries from farming families, so there is a lot of interest being generated. Dairy is not perceived as a sexy industry to be in for the PlayStation generation but the robotic milking system is changing that.”

LOTS TO LEARN FEILDING HIGH School farm manager Mike Goodson says the robotic milker has been a learning curve for him as well.

He has managed the school farms for nearly six years, working with four students each day.

Goodson told Dairy News the robotic milker is a novelty for the students. “It has been bit of a learning curve for me as well, moving from an 8-a-side herringbone to this.”

“It’s a whole new ballgame; hands off the cow and hands on grazing management and computer. This system generates a lot of information and this helps manage the animals and farm better.”

DAIRY NEWS DECEMBER 8, 2015

NEWS // 9

’ thumbs a rest

MORE SKILLED WORKERS NEEDED DELAVAL SOLUTION manager for automatic milking systems Graham Hardy says 7000 cows are milked by robots in New Zealand.

He says companies supplying robots to the industry have noticed a shortage of qualified people to work alongside robots.

Workers on farms with robotic milkers need good skills in technology including computers, electronics and hydraulics. Many people learn on the job but this takes time, Hardy says.

However, Feilding High students coming through the robotic farm will be qualified from the word go.

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Walker says the DeLaval voluntary milking system (VMS) has boosted the school’s robotics department, and 12 faculties will benefit from its work.

“For the accounting

class, rather than sitting in a classroom and doing accounts for a dairy farm they can walk down there and see first-hand what they are accounting for.”

The board spent $700,000 upgrading the

dairy farm and installing the robot; DeLaval sold the unit at a discounted price and provided extras such as the online cell counter free of charge.

The idea of installing a robotic milker at the

school was initially discussed 18 months ago by one of the school’s rugby coaches and a DeLaval staffer who attended Feilding High.

Walker admits the robotic milking concept was new to them; a presentation by DeLaval to the school board and management convinced them to go ahead.

He says the school is treating the robotic

milking unit as a partnership with DeLaval.

The company will run training for students at its Hamilton office and provide technical support to the farm. In return the school allows DeLaval to bring prospective clients to see the robot operating.

The facility will be opened early next year to coincide with the Central District Field Days.

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DAIRY NEWS DECEMBER 8, 2015

10 // NEWS

Supplement break-even price drops PAM TIPA pamelat@ruralnews.co.nz

THE BREAK-EVEN

cost of supplementary feed is 3.5% of the milk price, says DairyNZ principal scientist John Roche.

This is revised down from DairyNZ’s previously proposed 5% rule because

this overestimated the response from the feed, says Roche in his paper ‘Resilient farming systems – surviving volatility’.

The paper was put together with Irish scientist Brendan Horan and released earlier this year.

Roche presented key findings at a recent Northland Agricultural Research

Farm field day.

Roche told Dairy News that the cost of supplementary feed has represented a major change in the cost of production over the last decade.

Analysis in UK, Ireland and New Zealand to determine associations between feeding and cost of production indicate

that for every 1c spent on feed, operating expenses increase by 1.3 to 1.6c, the paper says.

“This means that 1kg of supplement must be purchased for considerably less than the value of the milk it produces,” Roche and Horan say in the paper.

“Under ideal circumstances, supplementary feeds result in 7.5g MS/ MJ ME consumed (ie 80g milksolids/kg DM for a 10.5-11 MJ feed).

However, recent farm systems analyses indicate that onfarm responses

are only two-thirds of those achieved in research experiments (~55 g MS/kg DM).”

DairyNZ proposed a ‘5% rule’ to help farmers decide about supplementary feeding: to be profitable, feeds needed to be bought for no more than 5% of the milk price.

“This rule accounts for the increase in nonfeed costs, but assumes a response of 80g milksolids/kg DM, 50% greater than the estimated response on the average dairy farm.”

If instead the aver-

age milksolids response achieved onfarm is used, then the breakeven cost of feed is actually 3.5% of milk price. This means: at a $6 milk price, supplements must be bought for no more than 21c/kg DM, at a $5 milk price, supplements must be bought for no more than 17.5 c/ kg DM. Roche says it is also important to consider the amount of supplement the farm system depends upon.

In analysing the requirement for supple-

John Roche, DairyNZ.

ment – the risk of exposure to economic forces external to the farmgate – they proposed to limit the use of supplements to no more than 500kg DM/cow.

All resilient systems must be low cost PAM TIPA pamelat@ruralnews.co.nz

ALL RESILIENT farm systems need to be low cost, says DairyNZ principal scientist John Roche.

“It doesn’t need to be a particular system but whatever way they farm they need to be low cost,” he told Dairy News.

“Volatility is the new norm – we need to be able to farm within that volatility.”

Roche this year published a paper on ‘Resilient farming systems – surviving volatility’ with Brendan Horan from the Animal and Grassland Research and Innovation Centre in Ireland. Roche presented key findings at a recent Northland Agricultural Research Farm (NARF) field day.

Roche has seen a lot of attention to his previous comments about rising feed costs eroding New Zealand’s competitive advantage. But in Northland he talked about the whole concept of resilient systems, which are possible every year – not just when milk price is high, he says.

“They need to be environmentally

benign, they need to allow sufficient time out for everyone in the business. On the human resource side we focus very much on staff by means of timesheets etc. But the sharemilker or farm owner also needs sufficient time off.”

Resilient systems need to generate sufficient cash in the good years to take advantage of the opportunities which generally arise in the bad years, he says. “The balance sheet has to be in [a state] to take advantage of opportunities when they come up. That was our definition of a resilient system.

“Resilient systems maximise the productivity of all the resources in the business – land, cows and the people and people skills.”

It avoids a boom and bust situation, he says. “The DairyNZ mantra at the moment is ‘thrive at five’. If you can thrive at the $5/kgMS payout you can survive at the $4/kgMS payout,” he says.

A NARF trial which began in June this year looks at how to limit the exposure of the business to external feed costs.

“We already are exposed to the milk price and we can’t do anything

about that but if we set up a system to allow for a lot of feeds purchased we can get caught between a low milk price and high feed costs,” he says.

“So the Northland situation is trying to look at stabilising the feed supply.”

The trial looks at three systems: all pasture with no supplements, all supplements grown onfarm and all supplements purchased and brought in.

In the trial where all feed is grown onfarm they have turnips through late December-January and maybe into February; fodder beet through February-March into April; maize silage through April, May and June – with pasture as a base also during those months, then pasture as the primary feed through winter, Roche says.

The need is to stabilise the feed supply onfarm rather than having to buy it in, Roche says.

No economic results are available yet from the trials.

“It will run for three years to make sure we cover different biological years and different milk price years so we will get a good impression of the likelihood of these different farming systems in the long run,” he says.

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DAIRY NEWS DECEMBER 8, 2015

NEWS // 13

Oz heifer exports to China hit turbulence THE RECENT slowdown in Chinese demand for live

dairy heifers has many Australian exporters and traders questioning whether the boom is over, according to a new industry report by agribusiness specialist Rabobank.

In its report ‘Chinese dairy heifer demand – has the ship sailed?’ Rabobank says structural changes in China’s dairy industry have dampened demand for dairy heifers, and volumes and prices are expected to remain much below 2014 levels in the medium term.

“Last year we saw Australia’s exports of dairy heifers hit record levels,” says the report author, senior dairy analyst Michael Harvey, “with China accounting for 90% of Australia’s heifer exports.

“However, Chinese demand has since dropped off, trade volumes to China falling sharply throughout 2015 and prices also taking a hit – about 30%.”

Harvey says despite the subdued Chinese demand outlook, China will remain a major destination for Australia’s dairy heifers, with potential for future spikes in demand.

The Rabobank report says China has been the “engine room of growth” for dairy heifer trade in recent years, driven by its growing appetite for dairy products and aspirations to lift its local milk supply by investing in the supply chain.

“Since the 2008 food safety crisis in China (where melamine contamination was found in infant formula, other dairy and food stuffs) there has been a marked shift to large-scale dairy operations supported by government assistance and tax incentives,” Harvey says.

“But in recent months we have seen a deceleration in this trend fuelled by pressure on farmgate margins – stemming from lower milk prices and persistently high costs – as well as the increasing challenge of raising funds in equity and debt markets for new developments.

“Reduced profitability has seen some new large-scale farm developments postponed or cancelled, leading to a backlog of dairy heifers in global supply chains.”

Harvey says China’s dairy sector is increasingly selfsufficient in raising heifers, aided by improvements in fertility rates and herd management practices, reducing the need for local producers to replenish their herds by importing heifers.

EXPORTERS, TRADERS NEED TO REFOCUS THE RABOBANK report says while China remains an opportunity for dairy heifer exports, some of the structural changes taking place in its dairy market will permanently impact trade.

“We expect China to remain the cornerstone of trade, however their demand is likely to be at a lower rate than in recent years,” Michael Harvey says.

“The Chinese government’s five-year plan calls for transformation in the country’s growth model by… stepping up agricultural modernisation, so we expect to see small farmers keep leaving the industry [and their places taken by] larger operators.”

Harvey says in light of this trend, volatility has increased in the dairy heifer market and prices have fallen, so exporters and traders will adjust their strategies accordingly.

“For example, we are seeing Australian producers retain heifers and replace older and less productive stock – which has also been encouraged by attractive cull prices.”

With Australian exporters and traders looking to other market opportunities for dairy heifers, Harvey says it is important not to neglect China but to ensure channels are there to supply alternative markets.

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DAIRY NEWS DECEMBER 8, 2015

14 // FOCUS ON THE WEST COAST

The rise of the O’Regan farm Westland Milk Products chairman Matt O’Regan is a burn and bred West Coaster. Reporter Peter Burke went to the West Coast recently to talk to O’Regan about his farm and plans for the second largest dairy co-op in the country.

MATT O’REGAN a

born-and-bred ‘coaster’, farming the land his forbears settled on nearly 100 years ago. He and his wife Carmel are genuine hardworking, unpretentious people who have worked hard to achieve what they have today.

The Coal Creek Valley where they live is often

wreathed in mist and bird song breaks the silence.

The O’Regans have been here over 100 years.

“My father’s greatuncle was a drover who brought cattle from Nelson to feed the goldminers. He used to rest the stock in this valley.

“In the 1920s my grandfather moved here and

uncle continued working in the bush and built up a native logging business.

This continued until the late 1980s.”

O’Regan came to the farm in 1978 and at the time live-capture deer was a big business. The property is surrounded by native forest and he set traps to capture deer to earn enough money to buy a share in his uncle’s and father’s company Mangawaro Enterprises.

He also worked in an open cast coalmine to earn extra dollars. While his

with his father’s support purchased the property and then worked in local sawmills to earn enough money to develop a small dairy farm. He milked a few cows until the late 1940s when he went out of dairying and started cutting mine props from the native forest for local coalmines. My father and

Westland Milk chairman Matt O’Regan on his farm.

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attention to developing and managing their sheep and beef farm that had grown from the bush that had been logged. In 1990 he bought his uncle’s share of the business.

“In 1994 we took up the opportunity to go dairying by purchasing the neighbouring dairy farm which was separated by the Inangahua River. We milked 160 cows in the first year.

We developed that to the point where we had 280 cows by 2000.

“When another neighbouring property came up for sale that was milking around 300 cows we purchased that as well and have got it to the point where it now milks 465 cows.”

Further land development and purchases followed over the years.

Today he and Carmel have the original drystock block and three farms milking a total of 1500 cows producing 580,000kgMS. Sharemilkers Tim and Mel Wratt run two of the farms, Matt and Carmel and a manager look after the remaining property.

“Tim and Mel have been with us for 17 years and they are the backbone

and strength of our operation. We couldn’t have done what we’ve done without them,” he says.

Over the years O’Regan has converted bush and poor land into highly productive dairy pasture. He has cleared scrub and bush and in wetter areas used the traditional West Coast ‘humping and hollowing’ drainage technique to reduce pugging.

“If you have land on an existing dairy farm that you can develop into dairying pasture the cost of development is probably less than 50% of the value of the land once it’s developed. You can develop land and maintain strong equity by borrowing 100% of the development costs.”

O’Regan says this is not only good for farmers: the whole community benefits from the extra employment it creates.

Today O’Regan modestly surveys his and the achievements of the O’Regan clan. The farm looks great and the stock are in excellent condition.

His story tells about the success of hard work and resilience.

• More on pages 16-17

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DAIRY NEWS DECEMBER 8, 2015

16 // FOCUS ON THE WEST COAST

Coasters make good in value a PETER BURKE peterb@ruralnews.co.nz

THE WEST Coast is a challenging place to live and farm. High rainfall is a feature of the region and it has always struggled to develop a strong economic base. Isolation is another issue. Coal, gold and timber were the region’s original economic strengths but now it seems dairy farming and tourism are backbone of the local economy.

In 2001 when Fonterra was formed the ever parochial West Coast dairy farmers voted to create their own cooperative and not join the northerners.

About then Westland Milk

chairman Matt O’Regan, who farms at Inangahua, became interested in the future of the dairy industry. In 2005 he was elected to the Westland Milk Products (WMP) board, becoming chair six years ago.

“In 2001 when we went out on our own we were probably the most commoditised dairy company in New Zealand. We were recognised for quality powders but were very commoditised, but it’s grown through that period and we have now moved to… produce high value food products such as our nutritionals and UHT. These are game changers for us and it is a big move for WMP.”

One issue O’Regan says Westland faces is whether to grow the volume of milk it collects or grow the value of the products it produces. Westland stayed on its own in 2001 partly to grow the dairy industry on the Coast. Now milk production is double that of 2001.

“We have also taken on shareholders milk from Canterbury to ensure our commodity plants operate with efficient milk volumes. The returns farmers now require for their milk mean future processing facilities will Westland Milk chairman Matt O’Regan.

need to add value above commodity products.

“If we continue to be a volume processor we will always have a fair majority in commodity processing, whereas if we take some of commodity processing and turn it into value add

we can lift the payout for existing milk. It’s a crossroads I think Westland is coming

to – one we are going to have robust debate about, to make sure our sharehold-

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DAIRY NEWS DECEMBER 8, 2015

FOCUS ON THE WEST COAST // 17

added products ers are informed and get advice on.”

O’Regan is a strong cooperative man, building on the advice he’s received over the years from former directors. He believes WMP will stay as a pure cooperative but he won’t rule out the possibility of the company acquiring subsidiary companies that could add value and increase returns to farmer shareholders. He points to the decision to buy the EasiYo yoghurt company in 2010 but says it may be possible for WMP to be a part owner of another consumer brand type company.

“Being a cooperative we are financially constrained because all the money has to come from the shareholders or bank debt. It’s a structural issue we are going through at the moment and once we have a discussion paper prepared we’ll take this to shareholders and see what come through as the best options,” he says.

O’Regan believes WMP punches well above its weight as a company. He points to the challenges of collecting milk from farms in the region – the collection area is 440km long.

Then there is the issue of transporting the finished product to Christchurch.

He says despite the costs of processing milk on the Coast WMP is a very profitable cooperative.

As WMP moves down the value add path developing new products is a

must. It has its own innovation centre.

“It’s not so much coming up with flash ideas but rather being able to take on ideas and requirements from customers and having the ability and innovation to commercially make products that suit their needs,” says O’Regan.

WMP has an office in Shanghai, crucial to its China strategy. If you are serious about doing business in China, you have to be there to build relationships, O’Regan says.

Unlike many other countries where emails and an occasional visit will suffice, the Chinese want to see a commitment – people on the ground who will understand their requirements. But WMP is by no means China-centric and is looking to other Asian markets, the Middle East and Australia.

WMP is customer focused and works to build relationships from farm to consumer. Not surprisingly customers want quality, safe food traceable back to farm or factory. And they want to know how the food was produced and be reassured the environment, people and animals are well treated.

“The Westland culture is very much relationship focused and I’d like to think that starts with our shareholders right through to the consumer. As we get bigger that gets harder but we work hard to keep our

shareholders informed.

But the reason you have a board is to make decisions and sometimes because the directors are the only ones who can have all that information you have to make decisions and talk more about it afterwards. It’s not perfect but it’s better than any other

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Grow the value of milk or grow the value of products? That’s the dilemma facing Westland Milk.

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DAIRY NEWS DECEMBER 8, 2015

18 // OPINION RUMINATING

EDITORIAL

Idiots of the dairy world

MILKING IT...

Tainted by a few

TELEVISION NEWS coverage of terrible bobby calf treatment by a callous minority of people reminds us of a harsh truth: the dairy industry has committed enemies who will ruthlessly use such coverage to taint the entire industry – even those who play by the rules.

Animal rights activist Hans Kriek and SAFE were involved in the hidden camera operation that led to the story, so they knew when the TV coverage was coming and on the night the story ran were already bombarding social media with pre-prepared material saying the dairy industry abused animals – not a minority of farmers, the entire industry! Predictably next morning they spoonfed journalists with the same messages.

That’s how these groups play this game, making it all the more vital that the decent majority of dairy farmers do everything they can to weed out the indecent minority who give the knockers and haters the ammunition they seek to harm dairying.

Short book short on vision

ANTI-DAIRYING CRUSADER and academic Mike Joy is taking his campaign further.

His book Pollution inheritance- New Zealand’s Freshwater Crisis recently landed on our desk.

The publisher, BWB Texts, boasts that it publishes “short books on big subjects from great New Zealand writers”.

The book claims intensive dairying has degraded our freshwater rivers and lakes and it issues a call to arms to New Zealanders.

We ask, what about the urban wastewater systems daily pumping into waterways?

Fatter and fatter

US RANCHERS are letting cows gorge in feedlots for up to 60 days longer than usual.

And this is translating into good news for burger lovers: the price of beef is expected to fall soon, ending its run of record high prices just in time for the outdoor meat-charring season next year.

Feedlot owners are taking advantage of cheap grain feed to minimise losses by keeping cattle in feedlots longer, letting them put on weight so they fetch higher prices.

The gluttonous cattle are thus getting fatter than ever—last month the average beast sold to slaughter weighed 630kg, an alltime high.

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ABC audited circulation 27,589 as at 30.06.2015

Humans next

ISSN 1175-463X

THE WORLD’S biggest cloning factory being built in Tianjin, China, will begin cloning cattle in seven months.

It will have technology sufficiently advanced to replicate humans, the head of the company, Xu Xiaochun, told AFP. It aims to clone a million cows a year by 2020 to help meet the rising demand for beef in China, he says.

The scientist and entrepreneur says cattle are only the beginning: they plan to clone thoroughbred racehorses, pet dogs and police dogs for searching and sniffing.

ALL THOSE involved in this latest scandal of mistreatment of bobby calves redefine the meaning of the word idiot.

What were they thinking and how can they justify such cruelty to helpless animals? No excuse, no apology is good enough and the individuals and their companies need to take a long, close look at themselves.

It is terrible to mistreat animals, and equally bad that these individuals have damaged the reputation of New Zealand. Is this tantamount to treason? The industry does not need these people, be they farmers, transporters or whatever and they should be fasttracked out.

They have sullied an industry that earns about $14 billion dollars a year and provides the lifeblood of the NZ economy. How dare they damage this? By far the greatest number of farmers – be they dairy or whatever – care for their animals and so they should. There is enough information out there to tell them why and what to do.

This dopey criminal action feeds the PR machine of the animal rights activists who leap with glee at this situation. They in turn add fuel to the fire by creating mischief within NZ and overseas.

We saw on television one nutter saying farmers are “taking babies away from their mothers” and that people should boycott milk. If he had any respect for the facts, the words calves should replace babies and cows’ mothers, but what might you expect.

There are plenty of people out there waiting to pillory the dairy industry. Fish and Game’s ‘dirty dairying’ is a good example. Outrageous publicity is the lifeblood of many NGOs and this latest saga is a transfusion from heaven.

It was great to see Andrew Hoggard of Fed Farmers front up so promptly and professionally on Radio New Zealand’s Morning Report on the Monday after the TV programme. He defused the situation with smart responses and it was a pity MPI wasn’t so quick off the mark.

This episode highlights the fragility of our primary-industry economy and the need for everyone to stand as one and not break ranks and do dumb criminal things.

Technically farmers are at the front line but all those in the supply chain are a part of the game and no-one can afford to slip up.

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DAIRY NEWS DECEMBER 8, 2015

OPINION // 19

Hashtag slogans no way to fix climate change The global climate change conference in Paris drew a record number of world leaders to the opening last week.

Federated Farmers dairy industry group chair Andrew Hoggard looks at the debate.

THE LEVEL of rhetoric is heating up along with the climate.

A lot of the debate on climate change in New Zealand concerns agriculture – dairy in particular.

NZ has a unique profile in the world: half our emissions are agriculture related. This immediately starts an argument on whether or not agriculture should be in the emissions

A lot of the simplistic arguments thrown up by the likes of Greenpeace might reduce NZ emis-

sions, but that could lead to more ‘less efficient’ production globally, and thus higher global emissions.

Andrew Hoggard

respect of various agricultural products – encouraging more production where it can be done efficiently and less where it occurs inefficiently or where this will encourage greater efficiency. With such a scheme, a big challenge is to get everyone to agree on the standard accounting methodology.

In the dairy industry, globally, this has been

“Climate change is not a simple issue to be fixed with slogans and hashtags.” trading scheme (ETS). But we should step back and look at the big picture: this is a global issue.

Climate change doesn’t recognise national boundaries. NZ emissions don’t just sit above NZ and only warm us; if they did I would have bought a V8 this winter.

So because this issue is global in scale the solution needs to be that, and consistent.

One big challenge I see is population growth: more people equals more demands. Unless Greenpeace comes up with a culling list to help match demand against supply, it is fair to assume not much will happen to control world population.

So the expectation is that everyone will still get fed and that food will still be affordable. This means you have to treat biological emissions differently from industrial emissions. The logical way to do this is to set efficiency targets.

Global benchmarks must reflect the efficient and the less-efficient in

done. So the NZ dairy industry needs to discover promptly its carbon life cycle analysis under the framework developed by the international dairy federation; then we can debate with reference to relevant data rather than studies from a decade ago.

In the dairy industry globally there is a lot of inefficient production. Some countries are too focused on being selfsufficient in dairy production; this would be like NZ deciding to be self-sufficient in banana production. We could achieve that but with huge waste of resources; we can import them much cheaper from Central America.

Trade barriers and subsidies also drive inefficient global food production; ironically, note that countries most in support of tackling climate change are often those most at odds with trade liberalisation.

Climate change isn’t a simple issue to be fixed with slogans and hashtags.

LATEST STORIES EVERY DAY www.ruralnewsgroup.co.nz

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DAIRY NEWS DECEMBER 8, 2015

20 // AGRIBUSINESS

Payout too hard to predict Fonterra eyes Oz revamp WESTLAND MILK Products

chairman Matt O’Regan says it’s very hard to predict a payout price given the volatility of the international market.

O’Regan told farmers at his company’s recent annual meeting that until the present world surplus of milk is worked through he doesn’t believe the present predictions will change much. And he warns that if the price falls at the next GDT auction it will put pressure on existing predictions.

“Farmers are in a survival mode but they recognise this is an industry thing and not to do with any one company. Farmers turned up at the AGM to see whether there

NEW DIRECTORS

TWO NEW directors have been elected to the Westland board following the retirement of two previous directors.

The new directors are Rebecca Keoghan and Peter Morrison. Keoghan and her husband farm near Westport and she is the business manager for Landcorp’s dairy farms in the area.

Morrison lives in Canterbury and has dairy farming interests there and on the West Coast. He is the son of Pat Morrison who served for many years on the former Wool Board.

is any light at the end of the tunnel and to find out how the company was progressing with its added value strategy on nutritional and UHT products.

“I think the mood was sup-

portive of the company direction during this tough time.”

O’Regan says farmers understand the problems of market volatility and he warned them that the current payout level may last

longer than predicted some 18 months ago.

He says he briefed farmer shareholders on how they propose to change the capital structure of the cooperative and changes to the way they will report on the payout.

The co-op will announce an ‘average cash payout’ which will more accurately reflect what farmers will actually receive, excluding colostrum, bulk lepto tests and retained earnings.

About 140 farmers attended the annual meeting in Greymouth which is roughly the centre of the Westland region. WMP predicts only a 3-4% drop in milk production in the region this season.

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FONTERRA SAYS it has a clear plan to return its Australian business to strong and sustainable profitability.

As part of the revamp, last week it announced a five year, multi-million dollar strategic agreement with Australian infant formula player Bellamy’s to manufacture a range of new baby nutritional powders.

Fonterra managing director Oceania Judith Swales describes this as part of Fonterra’s transformation of its Australian business.

“This is our strategy in action for Australia where we focus on the areas we can win in a highly competitive market Judith Swales to deliver the best returns,” says Swales.

“We are actively growing our nutritionals business through strategic partnerships and agreements which will see the Darnum nutritionals plant move towards full capacity.

“Our Australian business has particular ingredients strengths in cheese, whey and nutritionals, complemented by our strong consumer and foodservice businesses; and today’s announcement with Bellamy’s Australia – one of the fastest growing infant formula companies – reaffirms our strength in nutritionals.

“The Darnum plant is a leading nutritionals plant in Fonterra’s global network.

“Leveraging our Fonterra Research and Development Centre in Palmerston North – the largest dairy innovation centre in the southern hemisphere – we will bring innovation to the Darnum plant and the nutritionals market to capture growing demand.”

Bellamy’s is one of the fastest growing infant formula companies with strong brand recognition and expertise in the organic ingredient supply chain, the co-op says.

“Bellamy’s has grown for many years and financial year 2014-15 has been exceptional, achieving revenue growth of 156% from the year prior; infant formula comprises 88% of Bellamy’s sales.”

The proposed move will help support the growth of Bellamy’s Organic in Australia and abroad, says Swales.

DAIRY NEWS DECEMBER 8, 2015

AGRIBUSINESS // 21

Switch from grass to people, profits IT TAKES courage and

commitment to deliberately choose a role requiring full-time focus on problem solving and conflict resolution. However focusing on these two aspects of business leadership offers the greatest reward by underpinning business resilience -- the key characteristic of sustainability for long-term success in the modern environment.

That is my key learning from challenging times for New Zealand dairy as I reflect on 2015.

At first glance this proposition may not offer the most attractive role. It certainly isn’t a recipe for a comfortable professional and personal life. However it goes with the territory of being the boss and is fundamental to bringing to life fiercely held aspirations and desires for personal family and business success.

Growing resilience is especially important as a business expands and confronts complexities such as multiple owners, involvement of succeeding generations and larger operational teams. It requires business leaders to get close to, rather than avoid, problems through an unrelenting drive for excellence in two key areas -- people and relationships and financial management and business performance.

The disciplines required to achieve this become embedded in business routines through their commitment to key processes.

Getting the best from people requires effective delegation while staying suitably close to the action: it’s all about having a clear and credible sense of what is going on through sufficient contact to see what others are missing, and asking the hard questions. This needs to be done without cutting across delegated authority or undermining trust.

It must be build on a platform of clear expectations where collective performance responds to team values along with feedback to keep everyone focused on their role in hitting targets.

At an individual level this means regular performance reviews, encouragement and planned

training. These tools are especially important for those who are new to supervision and people management. They require discreet overview by business owners and leaders who can pass on their experience and give those who are new to people management confidence to challenge the

performance of those who are not meeting expected standards.

Clarity on business and team values creates the culture for quality relationships. In lean economic times this is fundamental for achieving essential economies and efficiencies. When the team can focus collectively on smarter ways, gains can be captured without risk to sustainability and job satisfaction across the business.

Business growth and bigger teams bring greater complexity in relationships. This is especially the case with a family business where succeeding generations are given more responsibility or seek autonomy to make their contribution. If formality and structure are important for best practice relationship management in an arms-length business they are crucial to the success of a family enterprise.

There is no room for complacency or avoiding people issues when family staff are involved.

Systems and structures that enable open communication, meaningful consultation and foster cooperation based on generosity of spirit are critical. The absence of these will almost certainly lead to conflict and dysfunction for only superficial harmony.

Achieving optimum financial performance has similar dimensions. It requires a clear plan that captures the vision of the owners and communicates how this will be executed to internal and external

stakeholders.

The agreed strategy must be converted to an annual plan and budgets that ensure timely planning and robust monitoring to identify variances and anticipate challenges. The result will be more effective allocation of resources and clearer understanding of where

wastage can be eliminated or successes celebrated.

With up-to-date information there is increased opportunity for continuous improvement that captures efficiencies and builds effectiveness.

Concentrating on these two areas enables business leaders to be ahead of the game. Rather than reacting

to challenges they can proactively downsize problems and convert them to more manageable bite-size projects.

The big payback is greater focus by working on the business while growing leadership capability through a more entrepreneurial and less operational focus. This

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achieve their potential by shifting their focus to people and profits. It’s a transition that requires a fresh mindset and competencies that are well worth striving for.

• Kerry Ryan is a Tauranga agribusiness consultant available for face-to-face or online for advice and ideas. www.kerryryan.co.nz.

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DAIRY NEWS DECEMBER 8, 2015

22 // MANAGEMENT

Resilience in farming ERIC JACOMB

LOW DAIRY prices combined with the impacts of last season’s drought – plus high risk of drought this season – are putting the pressure on farm systems and highlighting the need for resilience.

Many farmers are assessing how resilient their farming business is and, because the pressure is expected to remain for some time, are looking at how they can improve.

My definition of a resilient farming business is one that has the strength to withstand financial, environmental and climatic stressors, and come out in a productive position with a balance sheet in good shape.

Good financial understanding and management can go a long in way helping to use debt wisely to attain business goals.

Key factors in assessing financial resilience A simple way of looking at financial resilience is to benchmark a business against others – looking back on financial accounts and also forward with forecast budgets. The data referred to in this article for benchmarking examples is

taxation also need to be from the DairyNZ Economic considered. Interest covSurvey 2013-2014. Dairybase and Redsky can be used also. erage ratio is used to deterBenchmarking highlights mine how easily a business areas of difference, opporcan pay interest expenses tunities and risks. Assessing on outstanding debt. This is trends over several years is calculated by dividing busigenerally preferred as farmness earnings before income ers tend to spend more with Eric Jacomb tax (EBIT) by the business higher milk prices. interest expenses for the Debt to asset ratio same period. The lower the ratio, the Fundamentally, the higher the debt/ more the business is burdened by debt asset ratio the less resilient a business is expense, e.g. 1.5 or lower will mean a – due to the higher risk in committing questionable ability to meet interest to pay interest on debt. Businesses with expenses. higher debt (as shown on right of graph) In rural lending, drawings, tax and are more. minor capital expenditure (for plant Cashflow and liquidity replacement) are subtracted from EBIT Cashflow is simply the cash coming before calculating interest cover. For into a business and cash going out. It forecast budgets, the status quo interindicates the ability to meet commit- est rate has a significant impact on this ments on an annual basis. ratio. An interest cover of 1.00 indicates The current low levels of advance no free cash, while 1.5 indicates the free payments and retrospective payments cash equates to half the interest bill. are making dairy businesses less resil- Interest cover is more useful than the ient, so cashflow timing is also impor- commonly quoted debt/kgMS, interest/ tant in assessing a business’ ability to gross farm income ratios as it includes operate within overdraft limits. drawings and plant replacement.

Liquidity is the ability of a debtor to Operating profit pay debts as they fall due.

Operating profit provides the best Capital expenditure, drawings and indicator of how profitable a business

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is. It includes depreciation but excludes debt servicing. Comparing operating profit per hectare, per kgMS and per capital percent are all useful measures for benchmarking.

Cash breakeven milk price This is simply the sum of farm working expenses (FWE) plus interest and rent, less stock and other income. FWE of $4.00/kgMS plus interest and rent of $1.00/kgMS, less stock sales of $0.30/ kgMS and other income of $0.30/kgMS provides a cash breakeven milk price of $4.40/kgMS. Drawings, tax and minor capital expenditure can then be added to determine what milk price a business can sustain without increasing debt.

Financial management Proactive, good quality budgeting,

monitoring actuals to budget, reporting to financiers, consulting with advisors, and governance all contribute to financial resilience.

Managing banking relationships in a positive manner is a key to this. Financiers do not like surprises – particularly negative ones. Keep them in the loop.

This article has focussed on financial resilience but having plans and systems to manage risks such as death or incapacity, drought, flooding, disease and earthquakes are all part of a resilient business. We are seeing a push for improved governance in farm business.

Managing risk is a key component of that.

• Eric Jacomb is FarmWise consultant in Canterbury. Tel. 027 563 7818

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DAIRY NEWS DECEMBER 8, 2015

24 // MANAGEMENT

Feed focus pays off in Oz RICK BAYNE

Casey and Bonnie Taylor pictured with Casey’s dad Peter.

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farmers Casey and Bonnie Taylor are noticing the

difference after changing their cows’ diets from Freddo Frogs and low G.I. bars.

That’s not to be taken literally of course, but the

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shift to a feeding regime designed to slow the metabolism of the cows is one of many initiatives improving the farm’s operations.

The cows are now grazing more high quality home-grown grass, with grain fed to complement the on-farm feed.

“It’s like the difference between eating a Freddo Frog and a low G.I. bar: if they eat the Freddo they get the same energy but they’re hungry again five minutes later,” Bonnie said.

The Taylor farm at Heathmere near Portland in south-west Victoria has changed a lot in the past two years as part of the WestVic Dairy business focus farm programme.

Changes include more perennial pastures and cropping, more detailed management of feed, and using the existing feedpad to help through the winter wet period.

A three-way cross breeding programme was in place so condensing the calving pattern and bringing it forward from the traditional May become the main calving focus.

DairyBase data shows the changes have worked.

In 2013-14, the Taylor farm had a 4.5% return on total assets compared to a south-west Victorian average of 7.10%.

In 2014-15 that was reversed with the Taylors achieving a 4.80% return vs a 4.60% regional benchmark in the wake of tougher environmental conditions and a lower milk price.

In 2013-14 the homegrown feed was 6.2 t DM/ha, the same as the regional benchmark. The following year it was 6.5 vs 5.4 regionally.

Milk production increased from an average of 460 to 491/kgMS per cow.

Total feed costs went from A$2.67/kgMS to A$2.43, well below the regional average and achieved mostly on the back of a big saving on purchased feeds. Total costs went from A$5.74/kgMS to A$5.07, now well below

the south-west average of A$5.59.

The farm has 460 cross-bred milkers on a 340ha milking platform and 120ha calf and heifer development area.

The feeding changes designed to maximise dry matter intake led to marked improvements, particularly in countering the traditional JuneAugust hurdle caused by wet paddocks.

The farm has gone from being a low-medium grain feeder.

The Focus Farm group had a big input into the feeding programme, which included more grazing on high quality pastures, use of the 180-cow feedpad to feed silage or cereal hay, and targeted grain feeding with secondary starch and fibre sources aimed at slow implementation.

“By slowing them down and utilising better quality feed, the cows weren’t as hungry when they hit the paddocks. It’s not just about feeding and cow condition, it’s also about paddock management,” Casey says.

The move included planting 30ha in a mix of cereal crops and legumes and maize later in the year to add starch to the diet.

The decision to grow and conserve more high quality grass has helped the farm to become more self-sufficient, to avoid pasture damage in winter and to have some grass available in summer.

They are growing about 28ha of lucerne and the summer cropping covers 35ha of peas and oats and peas and sorghum for dry cow silage, and maize.

“We’re continually scoring pastures to make sure the quality is high,” Casey said.

“DairyBase has been excellent for that but it’s also looking at the animals and the condition of the pastures. We wanted to see production increase but it wasn’t production at all costs.” The farm’s threeway cross-breeding system aims for hybrid vigour and has resulted in definite improvements for the herd.

DAIRY NEWS DECEMBER 8, 2015

MANAGEMENT // 25

Canterbury’s cup runneth over RICHARD COSGROVE

THE MILKING shed at Keswick farm is a short drive from Rangiora’s bustling town centre and like the town’s mainstreet there’s a tight squeeze on parking when the cows come for afternoon milking.

This 530-strong herd owned

by Richard Stalker indicates why North Canterbury outperforms the national averages in the milk stats.

In the latest DairyNZ 2014-15 statistics North Canterbury cows topped annual milk production, averaging 4706L and 416kgMS. Given the long drought in parts of North Canterbury, Dairy News has visited a top-performing farm to find out how they are able to produce 10% more than the national average.

The operations manager on this 160ha farm, Bob Bolanos, puts this difference down to a few things – size, better weather and farmers more open to sharing and learning.

Canterbury dairy farms tend to be larger than North Island farms; and while bigger isn’t necessarily better, Bolanos says it brings with it economies of scale you can’t get on a smaller farms especially in stockfeed deals and silage, and this gives you more ‘elbow room’.

During his ten years as a dairy farmer in New Zealand, Bolanos has come to believe that Canter-

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bury’s more settled weather helps the cows achieve better milk stats.

With Otago and Southland generally getting colder weather and the West Coast getting the nor-westers, North Canterbury is ideal for feed growth when combined with irrigation.

And Bolanos, in his time working on nine different NZ dairy farms, finds Canterbury farmers keener to use outside consultants and experts for advice. They also are ready to try new things, for example talking about his farm’s transition to fodder beet as a winter feed.

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Fodder beet was a revelation to them Bolanos says, with results that give them 40 tonne/ha at a cost of 9c/kgDM, this maintaining cow condition and milk production at much lower cost than the equivalent grass.

Keswick farm is a member of two dairy advice groups where farmers can share ideas and issues.

Knowledge shared between these groups lead to Bolanos attending an irrigation seminar, which enabled them to tweak their irrigation to maximise grass growth.

Bolanos praises owner Richard Stalker’s willingness to learn as a

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The quest for improvement has kept Bolanos at the farm; the three years he has stayed here is his longest stay on one NZ farm. This culture of improvement in Canterbury is why Bolanos believes they can outperform other regions.

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DAIRY NEWS DECEMBER 8, 2015

26 // ANIMAL HEALTH

Calves’ great start pays dividends MARK DANIEL markd@ruralnews.co.nz

IT’S A long way to Methven, particularly if you come from Devon in the UK or Wairarapa, as have Andrew Furzeland and Rebecca Langley, who recently set up a calf rearing business called Homelands Farming in the shadow of Mt Hutt.

After working in the area for some years they bought 66ha that had been leased for cropping for ten years, settling in May. Their business model goes backs to basics, working on the premise that giving dairy calves the best possible start results in high quality animals reaching production age then going on into herds to pay their way.

Rebecca cites the four ‘C’s’ they try for – consistency, colostrum, cleanliness and comfort.

Calves arrive at 4-7 days old and leave when they reach a target weight of 95kg. On arrival the calves are inspected for general health, navels are checked, feet disinfected and they are weighed.

They are then housed in a new purposebuilt complex of two 68 x 9m buildings

Andrew Furzeland and Rebecca Langley with their calves.

split into 32 pens, and capable of holding 512 animals.

The calves are housed in light airy pens with lie-down areas with wood shavings treated weekly with disinfectant, and a concrete stand-off area cleaned and washed off daily.

Animals are fed colostrums twice

daily via compartment feeders for the first six weeks and depending on meeting weight targets are moved to a oncea-day feeding as they move outdoors.

Regular weighing tracks each calf ’s progress and yields reports to their respective owners. Working with the farmer and local vet enables them to

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tailor health plans to best suit the calves.

In one season Homelands has reared 1100 calves. They are reared on contract to local dairy farmers, companies wanting dairy heifers for export and FirstLight Foods for Wagyu beef production.

Losses during the season have not exceeded 1% thanks to the rearers’

attention to detail. While most calves are moved on at target weights, Andrew and Rebecca retain some on a Dec-May grazing contract which complements their system and reduces the stress of stock movements.

Commenting on the future Andrew says “our key focus is that we stay in control; we don’t want to grow so large that we lose the attention to detail that makes the difference”.

He says they strive to find premium contracts fair to both parties, but reflecting the above-average time they put into the calves. Their goal for next season is to continue to develop systems to allow them the most time with the animals with the aim of developing them to their full potential, and to build strong working relationships.

Meanwhile plenty of work remains to be done on the new block, including replacing about 12km of fencing; 5km has already been done. Add to that resizing paddocks and installing an irrigation system and there’s plenty of work for this ambitious young couple, although they will need to take a break for their wedding in April. @dairy_news facebook.com/dairynews

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DAIRY NEWS DECEMBER 8, 2015

28 // ANIMAL HEALTH/FEED

Arable farmers can help RICHARD COSGROVE

ARABLE FARMERS

were last week called to help dairy farmers.

Visiting English academic Professor Mike Wilkinson, University of Nottingham, issued the call when discussing supplementary crops for dairy cows at the Foundation for Arable Research’s (FAR) Arable Research in Action (ARIA) open day at Chertsey.

Almost 500 farmers attended.

Wilkinson said arable farmers have enough feed on their land to help livestock farmers cope

the world’s strictest diversity, improving with the coming dry environmental laws? potato yields through spell; they just need to Wilkinson and better understanding collaborate to match each Arnaudin’s presentations of the soil and how can other’s demands. were of special interest Wilkinson and to dairy farmers as FAR’s Elin Arnaudin they discussed FAR were presenting FAR has been research into fodder in 30 degree heat trialling fodder beet and irrigation, at FAR’s arable beet for about 12 and the benefits research site.

Twelve 30-minute months, at this stage of cereal silage to ruminants. presentations were seeing the highest FAR has been spread around the trialling fodder beet site, three underway yields when the for about 12 months, at any one time. Each crop is having full was repeated after evapo-transpiration at this stage seeing the yields when lunch. replacement weekly. highest the crop is having full Topics included evapo-transpiration disease management replacement weekly. in cereals, how The results of this Denmark capture market grazing animals affect the trial will be fed into share in the world seed distribution of nitrogen DairyNZ’s Forages market while they have in soil, building on farm

Farmers at FAR’s open day at Chertsey.

for Reduced Nitrate Leaching programme now underway.

The value of fodder beet was recently stated

by North Canterbury dairy farmer Bob Bolanos: he said he doubted his operation would have broken even if it weren’t for the yields and cost

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FAR has been trialling fodder beets for 12 months.

savings they got from fodder beet.

Wilkinson is sometimes branded a heretic for claiming that grass is not a balanced diet for dairy cows. He considers fodder beet – a low-protein feed – a perfect complement to a high protein grass diet. He

also says one benefit of a low protein diet is that it dilutes the nitrogen.

Question-and-answer sessions after each presentation extended their value to farmers.

Their access to the scientists meant the sharing of information was ‘undiluted’.

DAIRY NEWS DECEMBER 8, 2015

MACHINERY & PRODUCTS // 29

Chlorinator to give shed water a good clean TONY HOPKINSON

WITH THE increasing standards required for water used in farm dairies Singh’s Engineering Services of Hamilton, have developed and will soon release onto the New Zealand market their Se-Tech Chlorinator to reduce e-coli and other bacteria in farm and dairy shed water.

It is believed that Fonterra is the prime mover and other dairy companies are also requiring more stringent standards. Some companies are randomly testing suppliers’ farm water so they are aware of their present status and what steps can be taken if there is a problem. These higher standards will be mandatory within three years.

Singh’s Engineering Services have been in business since 1979, manufacturing their Se-Tech in-line dispensers since 1988. These are used to put graduated doses of chemicals, minerals and nutrients into farm water lines for stock health and to minimise or eliminate drenching for bloat and Facial Eczema.

“These dispensers have been proven over nearly thirty years but in design-

ing and building the Chlorinator we had to have a far greater degree of accuracy, moving from dosing percentages to doing micro doses,” said assistant manager of Singh’s Engineering Services, Darl Singh.

The firm has been getting a lot of enquiries for a chlorine dispenser that lead to the development of the Chlorinator.

The chlorine dispenser can be adjusted between 5 to 50 ppm accurately depending on the level of treatment needed. It is accurate with water flows between five litres per minute up to 6000 litres per hour and works in a pressure range from 10 psi to 210 psi.

The commercially available chlorine solution generally about 15 per cent is purchased by the farmer and is connected directly to the Chlorinator so there is no handling of the material.

A computer controlled pump takes the solution from the bulk supply to a pre-mix chamber.

The computer is easily adjusted by the farmer and maintains the correct levels of chlorine. A set amount of water is added in the pre-mix chamber to standardise the solu-

Toyota, DoC wants kids outside THE DEPARTMENT of Conservation and Toyota

New Zealand have agreed to work together to support a new conservation programme for Kiwi kids.

Over the next five years they will work together to motivate Kiwi kids and their families to get out and explore special places right on their doorstep.

Studies have shown there are positive links between direct experiences in nature and children’s mental, emotional and physical health and wellbeing.

Lou Sanson, director-general of conservation said, “Our work with Toyota will encourage a new generation of young people to become guardians of our land and sea.

“Inspiring Kiwi kids in this way is aimed at futureproofing conservation in NZ. “Toyota is providing DOC with invaluable assistance to develop a programme that will appeal to families, and their support will help us spread the message and get Kiwi kids and families actively engaged.”

The scheme is expected to be launched in early 2016.

tion, and then a modified Se-Tech dispenser injects the solution into the water line.

The combination of low volume, high accuracy computer controlled pump and high volume

and high pressure capable Se-Tech dispenser ensures the system maintains the correct amount of chlorine in the water regardless of varying water flows or pressures in the pipe lines.

If there is already a SeTech dispenser on the farm delivery line the Chlorinator can be connected separately or in tandem. www.ses.net.nz Tel; 07 849 3108

Se-Tech chlorinator.

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DAIRY NEWS DECEMBER 8, 2015

30 // MACHINERY & PRODUCTS

Going for a Guinness MARK DANIEL markd@ruralnews.co.nz

THERE SEEMS to be

Samasz set a grass mowing record earlier this years

a Guinness world record for most things, whether eating hotdogs or flipping playing cards, so it’s no surprise to see one record set that leans towards agriculture.

Earlier this year the Polish company Samasz set out to establish a record for the most grass mown in eight hours using its Megacut 9.4m triple set-ups coupled to a Deutz Fahr 7250 TTV tractor producing 263hp.

On 140ha set aside for the attempt near Walewice, Poland, the team

completed the eight hour marathon, cutting 96.29ha at a work rate of 16.83ha/hour, average forward speed of 17.9km/h – though peaking at around 25km/h – and consuming 1.8L of fuel per hectare.

Conditions were described as typical Polish countryside with rough undulating ground.

In one event the tractor bogged down and caused the front mower to bulldoze, but a quick intervention by the support crew kept the attempt on track.

One thing’s for sure: with a host of other manufacturers out there somebody will be along shortly to better this result. www.toplink.co.nz

Amazone fertiliser spreaders.

Argus twin makes the target a bull every time MARK DANIEL markd@ruralnews.co.nz

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Apply mag-oxide evenly with no waste resulting in no under-dosing or over-dosing of your cows during the spring.

Easily oversow pastures with seed at the same time as a nitrogen application.

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AMAZONE FERTILISER spreaders, well respected for many years, have won their maker a Machine of the Year Award at the recent Agritechnica show.

The Amazone ZA-TS featured the new Argus Twin lateral technology where each disc uses radar sensors above each unit to monitor the spread pattern, automatically adjusting the delivery if any deviation is detected from the required setting.

Mounted rigidly and with no moving parts, the system is said to be robust and maintenance-free in what is typically a harsh environment. The system will compensate for changes in spread pattern that might be caused by fertiliser quality, start-off speeds or braking, travelling on slopes, or even when spreader vanes are worn.

The technology will operate during border spreading or section control and aims to ensure the most effective use of the fertilisers and easy operation.

Argus Twin can be optioned on all mechanically or hydraulically driven machines in the ZA-TS range and is said to complement other automated technologies such as auto-calibration and tilt-sensing, and inasmuch gives the operator the ability to set the rate and drive off.

The automated systems then check actual delivery rate against the set target. Tilt sensing detects any deviation from the centre of gravity and electric shutter control ensures an even three dimensional spread regardless of terrain. www.landpower.co.nz

Check out our websites www.ruralnews.co.nz www.dairynews.co.nz

DAIRY NEWS DECEMBER 8, 2015

MACHINERY & PRODUCTS // 31

Tow and Fert: two into one will go THE TOW and Fert prod-

has a mixing tank that uses a powerful agitation system which accommodates water and fine particle fertiliser in a 1:3 ratio.

The boom assembly has a unique re-circulation system that operates con-

ticle form when applied as a solid.

Neither process is easy to do with a conventional sprayer and tends to fall into the ‘too hard’ basket, the company says.

The Tow and Fert

uct range from Metalform offers a different approach to crop management by applying soluble or insoluble fertilisers either as a spray or fine particle blend rather than in a coarse par-

tinuously irrespective of whether or not application is taking place.

The system can deal with blends of, say, fertiliser and trace elements, resulting in fewer passes during the growing season, saving time, money and ground compaction.

The set-up handles water soluble products,

The Tow and Fert mixing tank has a powerful agitation system.

insoluble materials mixed to a slurry, liquid fertilisers and biologically active products such as compost teas.

A range of linkage mounted or trailed

machines from 1200 to 4000L capacity combine with booms 8-24m; coverage per load ranges from 8-40ha depending on application rates.

Options include

hydraulic or petrol engines, specialised wheel equipment, hydraulic lifting cranes and task specific nozzles.

For information visit www.towandfarm.com

HALF THE COST OF A CHOPPER HOPKINS FARMING Group, Manawatu, has used a Tow and Fert system to cover 1000ha over six separate units.

Applications costs have been calculated at around $15/ ha for applying a mix of urea and ProGib in one pass versus previous helicopter applica-

tions, which can only apply one product at a time at $30/ha.

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DAIRY NEWS DECEMBER 8, 2015

32 // TRACTORS & MACHINERY

Three eyes for driver safety TRACTOR MAKER

SDF believes many accidents are caused by reduced visibility from today’s larger tractors and cites reports that Germany alone reported 42 tractor-

Reduced visibility from large tractors may be causing accidents, tractor maker SDF says.

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related fatalities in 2014.

A new SDF camera safety device, designed to eliminate blindspots at the front and sides of the brand’s tractors, is called DEE (driver extended

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eyes); it comes from the safety conscious automobile sector and is a first on a tractor.

Three cameras (front and each side) relay pictures to the tractor’s I-Monitor 2, which combines with an audible alarm to alert the driver to anyone stepping into these danger zones. In addition the tractor will not move until the endangered person gets out of harm’s way.

The system is also said

to be particularly useful when pulling out of road junctions, as creeping forward will give a full 180 degree field of view from the two side cameras and alert the driver to approaching traffic.

The front camera is said to be great for hooking up front mounted implements or attachments. Available during 2016 for 7 and 9 series tractors. www.samedeutzfahr. com

More power allows longer, productive days in field CASE IH started the trend towards rotor separation with

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2 auxiliary spool valves with a high hydraulic flow of 65 litres per minute

Fully synchronised shuttle for easy operation Large 3,000 kg rear 3 point lift capacity to handle big jobs

the Axial Flow combine harvesters as far back as 1977, and over the years have developed a machine of high output, low maintenance and easy to operate.

Updates to the 240 series for the coming season will see improvements aimed at performance, productivity and profitability.

The three model range comprises the 7240, 8240 and 9240 delivering 498, 571 and 634hp respectively via FPT engines that do not require AD-Blue or any EGR to meet emission requirements in New Zealand.

The power increase over the previous season should see longer, more productive days and is further supported by larger fuel tanks.

Up in the cabin the operator has a new multi-function control lever which takes care of header, rotor, cleaning and residue functions and the drivetrain. Grain tanks are bigger (14,400L) on the largest machines and modifications to the clean grain auger promote even filling and durability.

Getting the clean grain away from the harvester into trucks or trailers is by a 10.4m folding auger with a pivoting unloading spout for accurate load placement.

And at the rear of the machine, redesign of the straw chopper sees a reduction to 24 blades from the previous 28, which is said to give better chop quality. www.caseih.co.nz

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DAIRY NEWS DECEMBER 8, 2015

34 // TRACTORS & MACHINERY

Maxam – a cut above

Don’t get scammed online – TAMA

MARK DANIEL markd@ruralnews.co.nz

WHILE THE bulk of the

grass harvest falls to contractors, small paddocks or late cuts can often be done by farmers with their own machinery.

Sometimes the choice is difficult when choosing a cutting system, because the machine will likely need to be dual purpose for mowing as well as topping or pre-cutting before grazing.

Maxam mowers, designed and built in New Zealand by Farmgear, offer a different perspective from the mainstream in that they can do all the above tasks and can also be used to spread cut crop in the same pass.

A range of machines offering in-line, offset or front mounting offers cutting widths 2.1-3.3m; they have a drum-style design carried on a full length skid assembly, and swinging replaceable blades that operate at tip speeds in excess of 300km/h.

The drum design allows an unobstructed flow of grass through the machine, even in heavy crops, and the swinging blades move back if they

Maxam mowers are designed and built in New Zealand.

encounter any foreign objects; they are inexpensive to replace. The skids give good ground following characteristics, especially as they work in conjunction with a spring loaded top link system called ConTour.

Another point of difference with the Maxam mower is the ability to use the wilter attachment which spreads the cut crop in a carpet across the full width of the machine. Smaller rotors set behind the main cutting drums carry spring steel tines that lift the crop and throw it

rearwards, with heavier material being thrown further, and landing above the shorter, drier material, getting more exposure to the wind and sunshine for quicker drying. This

drying increases dry matter and ME and helps eliminate moulds which can spoil the conserved crop.

For more information visit www.maxam.net.nz

KIWI FARMERS need to be cautious when buying farm machinery direct from overseas vendors, warns the Tractor and Machinery Association of NZ (TAMA).

President Mark HamiltonManns says the organisation knows of several dubious incidents, including a South Island farmer who paid a deposit and transport costs for a tractor advertised online, only to find the listing was a scam.

Some received their goods but had problems: one got a $20,000 bill for cleaning a second-hand mower imported from Europe. The vendor claimed to have cleaned it but biosecurity inspectors found foreign matter.

Many online scams have been reported, Hamilton-Manns says.

“A farmer saw a second-hand tractor he liked online, checked out the website of the company listed as selling it and rang the phone number in the advert.

Everything seemed alright, so he paid a 30% deposit plus transport costs. Then the ‘vendor’ asked for additional transport costs.

The buyer contacted the company named in the advert and found a fraudster had created a fake advert using the details of

the genuine company and the machine they had previously sold. Only the phone number listed was that of the fraudster.

“Not just scams are the problem. One farmer dealt directly with an overseas dealer to buy a new baler wrapper which then broke down. The buyer’s local farm machinery dealer had replacement parts but the warranty wasn’t valid in New Zealand. The parts had to be shipped from the original dealer – leaving the machine out of action for some time.”

Check that you’re dealing with a genuine and reputable dealer and confirm if any warranty will be valid in NZ, TAMA advises. Find out whether parts are readily available and get a copy of the operator’s manual.

A buyer must be sure a second hand purchase has been cleaned properly as any costs of cleaning at the port will be passed to the importer, or if it is too dirty the machine may be denied entry and sent back to the country of origin. If so, rather than saving money you could end up tens of thousands out of pocket.

Remember the adage ‘if it seems too good to be true, it probably is’.

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DEALERS NATIONWIDE

THE NEW Zealand tractor market continues to feel

the effects of a depressed dairy economy as overall sales have declined by around 14% on the same period last year.

Tractor and Machinery Association (TAMA ) president Mark Hamilton-Manns says, “Certainly dairy payouts have impacted traditional sales. However, many customers are now choosing tractors with less expensive options to ensure plant replacement continues.”

Dairy-dominated markets have seen reductions in sales volumes: Waikato is down 19%, Taranaki 36% and Southland 31%.

“Although we expect tractor sales will lag behind last year, we are confident the buoyancy in viticulture, beef and sheep, and contractors, will ensure we finish the year strongly with around 3200 unit sales.

“Marlborough’s viticulture sector alone has created industry growth of around 7% and we expect this will mean demand for tractors.

Hamilton-Manns says despite the lower numbers, TAMA member companies are introducing new products and investing in parts support and technician training.

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