2 Overview of the Dairy Sector
The 2005/06 season saw an improvement in production but not profit for dairy
farmers. The increase in milksolid production (up about 4 percent compared with
2004/05) did not lead to an increase in profitability due to a lower payout and
rising expenses. At the time of monitoring, the Fonterra payout for 2005/06 was
$4.07 per kilogram of milksolids. Since then it has been finalised at $4.10,
well down from the $4.59 paid
in 2004/05.
In general, climatic conditions were favourable throughout the country in
2005/06, contributing to the rise in milksolids production. The 2005 winter and
early spring periods were mild and dry, which saw good pasture growth and good
pasture utilisation, resulting in very good milk production. In most areas
mid-spring temperatures turned quite cool, resulting in poor pasture production
and a drop-off in milk production. Early summer was wet and warm, with good
pasture growth and a lift in production. Most areas then saw the weather turn
dry, before generally quite favourable weather through April and May. A
prolonged cold snap during June saw minimal pasture growth and heavy utilisation
of supplementary feed. This was particularly so in Canterbury, which suffered a
heavy snowfall.
The poor climatic conditions during the spring also affected mating management,
causing a slight lift in the average empty rate in cows. This is a continuation
of an upward trend, although it has been exacerbated this year with a number of
farmers removing bulls after a set period in order to keep the calving spread
tight. With high empty numbers and a shortage of heifers due to the China trade,
availability of stock is tight and prices have risen through the year.
The lift in milksolids production has resulted in a 10 percent increase in gross
farm revenue, despite the drop in payout. Better returns for stock sales also
helped. Farm working expenses lifted by 14 percent, with significant increases
in wages, animal health, feed, fertiliser, and repairs and maintenance.
Expenditure on most items across the board increased, with proportionally
significant lifts in such items as fuel (up 18 percent) and rates (up 14.5
percent). Taxation was also a significant cost on many farms, especially those
that did not take the opportunity to re-assess taxation during the year. Capital
purchases remained high, although much of this relates to purchase of Fonterra
shares, as a result of increased production.
The average property has recorded a disposable loss, offset by new borrowing and
off-farm income. Of the 100 farms monitored, 71 recorded a disposable loss, up
from 59 in 2004/05.
Farmers are not expecting much improvement (up 1 percent) in gross farm revenue
in 2006/07. Although farmers are budgeting on an overall 3 percent rise in
milksolid production and an 8 percent increase in cattle sale returns in
2006/07, they expect this to be offset by a lower payout. While farmers are
budgeting on the expected payout of $4.05 per kilogram of milksolids, most
expect a lift in this during the season.
Farm working expenditure is budgeted to increase by 1 percent overall, although
input prices are expected to increase in most areas. Expenditure per kilogram of
milksolids is forecast to fall from $2.77 per kilogram of milksolids in 2005/06,
to $2.72 per kilogram of milksolids in 2006/07, due to the expected increase in
production. Most farms are again budgeting for a disposable deficit from their
farming operations, offset by other cash sources. This is a direct reflection of
the difficulty of farming with a $4.00 payout, with the current on-farm cost
structures and ever-increasing prices of inputs.
Overall, farmers remain confident that the industry is heading in the right
direction, despite the current payout level. Aside from profitability, major
concerns relate to the availability of skilled labour, general environmental
issues, and issues around water: both impacts on quality and availability for
irrigation.
Figure 2.1 Quartile analysis – monitored farms
Figure 2.2: Agricultural Production Statistics,
June 2005 – North Island
Northland
| Stock Type | Stock No |
| Dairy cows in milk or in calf | 277 000 |
| Beef cattle | 469 000 |
| Sheep | 553 000 |
| Deer | …s |
| Pigs | 7 000 |
Bay of Plenty
| Stock Type | Stock No |
| Dairy cows in milk or in calf | 272 000 |
| Beef cattle | 108 000 |
| Sheep | 357 000 |
| Deer | 59 000 |
| Pigs | …s |
Gisborne
| Stock Type | Stock No |
| Dairy cows in milk or in calf | 4 000 |
| Beef cattle | 301 000 |
| Sheep | 1 717 000 |
| Deer | 30 000 |
| Pigs | …c |
Hawkes Bay
| Stock Type | Stock No |
| Dairy cows in milk or in calf | 62 000 |
| Beef cattle | 527 000 |
| Sheep | 4 048 000 |
| Deer | 120 000 |
| Pigs | 5 000 |
Manawatu-Wanganui
| Stock Type | Stock No |
| Dairy cows in milk or in calf | 315 000 |
| Beef cattle | 697 000 |
| Sheep | 6 739 000 |
| Deer | 148 000 |
| Pigs | 22 000 |
Wellington
| Stock Type | Stock No |
| Dairy cows in milk or in calf | 76 000 |
| Beef cattle | 171 000 |
| Sheep | 2 044 000 |
| Deer | …s |
| Pigs | …c |
Taranaki
| Stock Type | Stock No |
| Dairy cows in milk or in calf | 507 000 |
| Beef cattle | 131 000 |
| Sheep | 679 000 |
| Deer | 5 000 |
| Pigs | 16 000 |
Waikato
| Stock Type | Stock No |
| Dairy cows in milk or in calf | 1 415 000 |
| Beef cattle | 679 000 |
| Sheep | 2 555 000 |
| Deer | 142 000 |
| Pigs | 50 000 |
Auckland
| Stock Type | Stock No |
| Dairy cows in milk or in calf | 99 000 |
| Beef cattle | 170 000 |
| Sheep | 333 000 |
| Deer | …s |
| Pigs | …s |
Source
Agricultural Production Survey, June 2005, Statistics NZ.
Symbol
...s Suppressed
...c Confidential
Figure 2.3: Agricultural Production Statistics,
June 2005 – South Island
Marlborough
| Stock Type | Stock No |
| Dairy cows in milk or in calf | 21 000 |
| Beef cattle | 64 000 |
| Sheep | 638 000 |
| Deer | …s |
| Pigs | …s |
Canterbury
| Stock Type | Stock No |
| Dairy cows in milk or in calf | 485 000 |
| Beef cattle | 539 000 |
| Sheep | 7 656 000 |
| Deer | 483 000 |
| Pigs | 189 000 |
Otago
| Stock Type | Stock No |
| Dairy cows in milk or in calf | 130 000 |
| Beef cattle | 282 000 |
| Sheep | 6 185 000 |
| Deer | 199 000 |
| Pigs | 15 000 |
Southland
| Stock Type | Stock No |
| Dairy cows in milk or in calf | 272 000 |
| Beef cattle | 202 000 |
| Sheep | 5 951 000 |
| Deer | 371 000 |
| Pigs | 3 000 |
West Coast
| Stock Type | Stock No |
| Dairy cows in milk or in calf | 118 000 |
| Beef cattle | 32 000 |
| Sheep | 75 000 |
| Deer | …s |
| Pigs | …s |
Tasman
| Stock Type | Stock No |
| Dairy cows in milk or in calf | 53 000 |
| Beef cattle | 45 000 |
| Sheep | 326 000 |
| Deer | 32 000 |
| Pigs | - |
Source
Agricultural Production Survey, June 2005, Statistics NZ.
Symbol
...s Suppressed
Contact for Enquiries
Farm Monitoring Programme Manager
Monitoring and Evaluation
MAF Policy
PO Box 2526
Wellington
NEW ZEALAND
Phone: +64 4 894 0623
Fax: +64 4 894 0741
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