Sunday, 20 July 2014

Stark Differences Between NZ and Australian Dairying......But Why?

The visual & financial differences between the New Zealand & Australian dairy industries at the current time are stark and startling! 

Why is the NZ dairy industry booming and Australian dairy farmers under so much pressure & having to dig deep to remain profitable. Both dairy industries supply into the same international market and Australia has a much bigger domestic population and local market. A strong local market is often argued as being a strength and likely to lift dairy farmers farm gate price. The economy in both countries is relatively strong & to a large extent was not greatly affected by the world financial crisis. Yet one dairy industry is hanging in by their fingernails while the other is buoyed (perhaps unrealistically!) by higher milk prices.

Visually as you drive through both countries, you can’t help but see that the New Zealand dairy farmers are doing well but that their counterparts in Australia look to be up against it. NZ dairyfarmers are expanding, investing and generally have had a very profitable year. Milk price has been high and apart from some areas of drought e.g. Waikato (now floods in Northland) the season has been kind. Farmers are out spending on machinery & infrastructure. Apparently numbers at winter industry meetings have been depleted due to record numbers of dairy farmers holidaying overseas. There have been record amounts of imported feed as farmers chase higher per cow production. In NZ there continues to be land use change out of sheep & beef and forestry into dairying. The intensification continues despite looming regional council environmental regulations, urban & political protests. I’m personally very concerned about the NZ environment & the impact of dairying. You could argue that “a dairy farmer with money in his pocket is a dangerous beast” but it does reflect the current wealth of dairy farmers.

One has to be careful generalising about any industry as there is huge regional & between farmer variations especially in Australia as the country is so vast & dairy farmers so spread. Climate change and extreme weather events continue to impact on Australia’s large land mass. Farms that once were dairy farms now run extensive beef enterprises. To survive in Australia dairy farmers need to be tough, resilient and have a range of risk management strategies. Australian dairy farmers are more capable and have better risk management ability than possibly any other nation. Right now the industry is losing farms, profitability is generally low, cashflows are under pressure. There is a loss of confidence despite high international prices. I saw little or no new on-farm investment and beef where I once saw dairy cows. Dairy farmers are changing milk buyers looking for a better deal. In NSW where there were once over 4000 dairy farms there are now just over 700 farms. The industry financial bench marking data for the year just ended has yet to be processed.

So why the huge difference between the two industries when world dairy prices have been at record high levels? I’m not sure I have all the answers. Both the NZ$ and the Aust$ are at record high levels which tends to depress farmgate prices and lift imported expenses. Dairy farmers in both countries are rushing head on into high input, complicated systems with more infastructure, more purchased feed & generally lower profit margins. In NZ land prices are increasing at a frightening rate. Dairy Research Foundation Symposium 2014

The definition between different farm systems is getting blurred & confused. Calving patterns (especially in Australia) have become very spread and herd fertility is dropping. These changes are apparent in both countries but more advanced & obvious in Australia. Everyone talks about pasture based dairy farming but in reality the pasture/grazing skill base & farmer knowledge is declining. Consultant John Mulvaney suggests that many dairy farm businesses are being propped up by the milk price i.e.they are very vulnerable to drops in farmgate milk prices. There are important lessons to be learnt from some of the best Dairy Farmer performances.

Dairy companies in NZ are profitable, efficient at manufacturing & marketing with SE Asia firmly in their sights. I was surprised to see in Australia major Co-ops investing heavily into the liquid market. Are the Australian dairy companies internationally competitive? Have farmers become production focussed (vanity) rather than profit driven (sanity)? Farmers in both countries (for slightly different reasons) may be coming more at risk, less resilient and more vulnerable to exchange rates, extreme weather events, more variable milk price & input costs. Boom & bust cycles have different impacts but create similar risks for dairy farmers. 

A strong cash flow, high profit margins, soundly based productive investment and a strong ability to service debt are more important than ever in this unstable & volatile world. OneFarm research into Resilience of New Zealand Dairy Farm Businesses
What do you think?

Wednesday, 14 May 2014

How Should Dairy Farmers React to Sensitive Social Issues

The public all have strong opinions about on-farm issues of Animal Welfare, Water Quality and TB. Individual Dairy farmers and Rural Professionals need to take a Public Relations leadership position. Social Media provide powerful tools to take a lead position. We need to make the running and not be forced to play catch-up on sensitive social issues. Defending the indefensible is not very smart.

How should farmers respond to Ugly public stories in the media? I don’t think angry rejection is the right response to these stories in the press. Letters of denial usually imply a cover up. Best to agree with the outrage, then state very firmly that these incidents are totally unacceptable. We must engage with those who are upset and seek a joint understanding and find community agreed solutions.
I understand farmer’s anger and outrage at all being accused of animal cruelty, malpractice or being environmental vandals. But we need to change our public response. We need to set the agenda and present our stories in a powerful and effective way. We should not allow sensational press to create crisis events without notice. Most of these sensitive issues are not only predictable but inevitable.

Every single farmer & rural professional is responsible for the image & goodwill of agriculture. Every farmer and every rural professional has a responsibility to improve and protect the image of agriculture and the food we produce. We need to promote what we are rightly proud of in our professions and businesses. Equally important is that we smarten our act if we don’t meet community/consumer expectations. We need to publically & ruthlessly reject offenders who are non-compliant. The non-compliant seriously damage the image of every farmer and every rural professional.
The vast majority of farmers all around the world deeply care for the animals they work with daily on their farms. Every farmer has a huge respect for the environment in which they farm. They fully understand that if they look after their natural resources, soil & water then nature in turn looks after their farming operations. We need to regularly talk to the public, the urban consumer and children about the core values of agriculture & farming.

A very good example is David Barton's UK TB Farmer's Blog

TB and badgers is a very emotive issue in the UK. Badger support groups, the media and politicians have dominated the agenda. Now David has made a bold & very powerful blog to graphically make a farmer statement & to tell his story. Over 200,000 views world wide of the TB Blog Farmers Guardian Tb Blog success article

Where are our champions? More farmers & rural professionals need to stand up and actively promote what is good & exciting about their farms, farm practices & agricultural industries. We need to promote excellence and good practice. Some individual farmers create the most fabulous genuine public images for their farm businesses.
Have a look at these examples of Farmers proudly telling their positive stories

Watch Stuart talking to Rosie the Cow in NZ Stuart & Carol Edmeades, Putaruru, Waikato

On Twitter Follow William Morrison, Marton @MorrisonFarming  or Colin Grainger-Allen @NZCows

Every so often, (not that often) Farmers and Rural Professionals are confronted by an ugly story that has outraged the press and members of our community or worse still our customers. Unacceptable farmer behaviour or practices e.g. Animal Welfare or an Environmental pollution incidents that hit the press headlines. Part of the problem today is that the community reaction is not just in the letters to the editor section of our newspapers. Social Media goes wild with these stories quickly trending worldwide.

Farmers & Rural Professionals need to be part of the conversation. Lots of people are talking about farmers and the way food is produced.

You can’t be part of the conversation if you are not at the table.

Farming professionals need to join Social Media   Join Twitter

Farmer reaction and official industry response in my view has been unhelpful and may well have been detrimental to the image of farming in NZ. Recent incidents include cruelty to dairy calves on NZ dairy farms in Chile, Animal cruelty to exported Australian beef in Indonesian abattoirs and a New Zealand survey published by NZ Fish & Game Survey Results regarding public perception of NZ dairy farmers and river water quality. Let’s not shoot the messenger but rather address the problem.
Maori Trust farms in New Zealand have a “Quadruple Bottom Line” business objective of “Culture, People, Environment and Profit” not solely a profit motive that is driven by self-interest and an individual approach.
Much could be learnt from the Maori worldview and the ethic of Kaitiakitanga….or stewardship to emphasise and illustrate the interconnectedness of life. This is an Indigenous people’s wisdom that is consciously created through reciprocal relationships with both people and ecosystems. It is a long term view for all people (both inside and outside the farm gate) and the environment so that their business has real relationship strengths.

Sunday, 13 April 2014

What is Your Dairy farm Profit?

What is dairy farm profit? Is profit a dirty word? Too few New Zealand dairy farmers know their profit? Discussion groups rarely discuss or compare profit. Few farmers financially benchmark. Why do farmers and consultants continue to use profit per hectare to compare farms?


Non-Cash Adjustments include changes in feed & livestock inventory, inclusion of Family labour & Management and depreciation. See NZDairybase

Why do so few NZ dairy farmers know what their profit is? Profit per hectare is not enough, although every farmer should calculate Profit/hectare. 

Operating Profit Margin (OPM) is a better measure of financial efficiency. Dairy farms should aim to have a consistant OPM of greater than 40% i.e. Operating Expenses (which include Family Labour adjustment and depreciation) not to exceed 60% of Gross Farm Revenue (GFR). 

Return on Equity (RoE) and Return on Assets (RoA) are very important profit metrics.

In NZ there is a trend to more intense farming systems (more System 4 & 5 and less System 1 & 2). New Zealand farmers have a comparative advantage in growing pasture. So pasture efficiency & grazing management remains a core fundamental (in NZ) and is directly linked to profitability. NZ does not have a comparative advantage in TMR, cereals or purchased feeds. The choice of farm system, high or low input, TAD or OAD milking, is a personal decision.

System 1 - All grass self-contained, all stock on the dairy platform No feed is imported.  No supplement fed to the herd except supplement harvested off the effective milking area and dry cows are not grazed off the effective milking area.

System 2 - Feed imported, either supplement or grazing off, fed to dry cows Approx 4 - 14% of total feed is imported. Large variation in % as in high rainfall areas and cold climates such as Southland, most of the cows are wintered off.

System 3 - Feed imported to extend lactation (typically autumn feed) and for dry cows Approx 10-20% of total feed is imported.  Westland - feed to extend lactation may be imported in spring rather than autumn.

System 4 - Feed imported and used at both ends of lactation and for dry cows  Approx 20 - 30% of total feed is imported onto the farm.

System 5 - Imported feed used all year, throughout lactation & for dry cows Approx 25 - 40% (but can be up to 55%) of total feed is imported.

*Note: Farms feeding 1-2kg of meal or grain per cow per day for most of the season will best fit in System 3.

OneFarm Research has shown that the difference in profitability between systems is insignificant. Operating Profit was a poor tool to compare different systems because it doesn’t take into account the additional capital invested as farms intensify.  

Farms must be profitable to be sustainable in an increasingly turbulent world. Sustainability in dairy farming includes being environmentally, people and animal welfare sustainable as well as profitable. 
Which farming system you chose for your business depends on what you most like doing, the lifestyle you wish for your family and your attitude toward risk.

 All farms face both environmental risks e.g. droughts and market risks e.g. milk price or world cereal prices.

There are both upside risks (e.g. opportunities like increased milk price or excellent grass growing season) and downside risks (e.g. negative impacts like milk price dropping, droughts or interest rates rising) in agriculture. The farm businesses that capture upside risks/opportunities are different from the farm businesses that best cope with adverse or downside risks. 

The most important Key Performance Indicators (KPIs) are Operating Profit Margin (OPM) and Milk Solids per hectare.

Resilience is a prerequisite for achieving sustainability in a turbulent environment. There are five critical factors. Read the OneFarm: Dairy Farm  Business Resilience Research  

1. Technical efficiency….Milk Solids per hectare and per person.

2. Financial efficiency ….OPM and higher Return on Assets (RoA).

3. Available Farm Cash Surplus….more available discretionary cash or free cash…Cash is King.

4. The ability to manage debt servicing capacity…always having sufficient funds to meet debts.

5. Farm cost control is critical.

In NZ, System 3 farms which are neither high nor low input tended to be more resilient over different seasons and had greater ability to flex with the season.

Profit alone (or worse still at any cost) should not be sole purpose for being in business. Rather it is an essential to enable farmers to achieve their personal & family goals. A balanced business scoreboard is the target not just profit. Increasingly society will impose a ‘license to farm’ on all farmers that will include environmental, animal welfare and people sustainable objectives. 

What is your business mission or vision? Is your farm business vision written? What are the values that drive & steer your farm business?

Much could be learnt from the leading Maori Trust farms in New Zealand that have a “Quadruple Bottom Line” business objective of “Culture, People, Environment and Profit” not solely a profit motive that is driven by self-interest and an individual approach.

Tuesday, 8 April 2014

"Agriculture, science …. And stuff like that"… A New Blog

"Agriculture, science …. And stuff like that"

Hello I’m Jill Walcroft from AgResearch NZ. I’ve been invited to write this blog.

“Agriculture,science and stuff like that”  is a new blog created by AgResearch scientist Jill Walcroft as part of an action research project investigating the ins and outs of science communication with social media.

I believe that science ideas are worth exploring and discussing, especially science to do with land. I feel that sometimes science is not very accessible.  So I’ve given myself a challenge, “can I present the stories in such a way that people’s eyes don’t glaze over after the first sentence”.  I am also keen to understand the reasons scientists may or may not see social media as a good avenue for communicating their scientific findings, and to hopefully find ways of enabling scientists to uptake up these technologies with some confidence.

Check out the first three stories I have posted.

Explore the blog in general at

Help with the study by giving me your opinion.  Please answer the 10 question survey after you read any of the stories.  Also - Comment on the blog if you’d like to share your ideas with other readers.

Thanks Jill

Monday, 21 October 2013

Farming for the Future….Do we support Innovation by Leading Farmers?

Farming for the Future….Do we support Innovation by Leading Farmers.

Craige & Roz MacKenzie, are the Canterbury Farm Environment Award winners 2013. Very deserving winners....Congratulations.
The MacKenzie family (including daughter Jemma) are one of the most innovative, creative, Push-The-Boundaries, Farm & Research businesses I’ve ever seen. 

Andy MacFarlane (MacFarlane Rural Business) last week chaired a very successful Ballance Farm Environment Award fieldday at Greenvale Pastures farm near Methven in Canterbury, New Zealand.

 Greenvale Pastures Ltd Mission Statement – “Farming for the Future” That was our mission statement when we started out in 1994 and continues
today. Our aim is to be the best at what we do, maximizing
production and profitability while ensuring that the systems and
resources we use show an excellence in total farming practice
and that the methods we use have good scientific backing and are
sustainable for our family, farm and the environment.
We believe that:
• The environment in which we live is our legacy
• water is a valuable multi-use resource
• attention to detail is what gives us an edge
• understanding of costs is essential
• knowledge is the key.

The NZ Ballance Farm Environment Award regional competition rewards farming families who are working hard to minimise the environmental footprint of their farm. This is to be applauded as it identifies some imaginative &  innovative farmers who in their own right are very effective researchers and implementers of world best practice for the environment. Last week we saw some very advanced smart technology being used to reduce water use, mimimise fertilizer and maximise production for a range to crops & dairy.

I was excited, I could see a future through Craige & Roz’s vision and I can imagine the likely impact both in Canterbury and across New Zealand.

 However on the flight home I felt slightly gutted and left wondering about innovation in NZ and NZ innovators. Are we in New Zealand fully supporting these leading farmers who are at the forefront of Agricultural Science innovation? The research that the entrepreneurial MacKenzie family are energetically leading could not realistically be completed by a NZ institutional research facility.
Where are the R & D tax incentives for farms like Greenvale Pastures???

New Zealand has been constructively criticized by Shaun Hendy and Paul Callaghan (in their book “Get off the Grass”) regarding the lack of innovation or support for innovation.
The country’s lack-lustre economic performance following the free-market reforms of the 1980s is often cast as a paradox: why haven’t sound economic policies led to growth?  Shaun Hendy and Paul Callaghan argue that the New Zealand ‘paradox’ can be explained by our struggle to innovate. On a per capita basis, OECD countries on average produce four times as many patents as New Zealand. Why is this? What determines a country’s capacity for innovation?” Read about it
New Zealand struggles to innovate.
In addition to the 200ha Arable farm there is an interest in a 1200 cow 326ha dairy farm. 
Some of the smart technology we were privileged to see included :- Profit mapping, Electromagnetic EM Variability(soil moisture management), Variable Rate Base Fertilizer, Lysimeter Project, Pasture Mapping with “GreenSeeker” technology, Variable Rate Nitrogen, Variable Rate Irrigation and the BioBed-managing sprayer cleanout waste. 
The list of smart technology on this farm is very long.
BioBed-managing sprayer cleanout waste

Let’s not forget the environmental concerns like pollination & the  Honeybee…..responsible for approx. $50million in honey exports but a $3 Billion contribution to all of NZ food production.

On the dairy farm Variable Rate Irrigation was saving up to 30% of water used. Sure there is a need to invest in capital smart technology but really it’s a “#No-Brainer” if there are different soil types on the farm.

Pasture Mapping w/ GreenSeeker®
�� Mapping biomass variability
�� Identify high nitrogen areas
�� Reduce or eliminate nitrogen application from high N unproductive areas
�� Keep records of pasture
�� Average rate/ha decreased
to 49kg/ha with use of GreenSeeker & VR application
�� Savings = 21 kg/ha of Urea = $19/ha

Much of the commercial technology is managed through the family business. Agrioptics  Learn about this technology 

Craige also plays a leading role in Precision Agriculture in NZ.

This was one of the best days I’ve had in New Zealand….what is slightly amusing in that I was completely out of my depth most of the day but loving the discussion!   
Thinking as I reflect that most institutional research farms could not compete and may no longer be fit for purpose. Yet they have better access to funding.

 Quite unsettling is a conviction that leading innovative farmers don’t get the support they should in NZ.If we in agriculture, are to positively impact the environment this surely must change!