Grim news for dairy farmers on West Coast as financial trouble hits

By Brendon McMahon -
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Cash flows for farmers were "pretty grim" after Westland Milk payouts were announced. Photo / File
Cash flows for farmers were "pretty grim" after Westland Milk payouts were announced. Photo / File

About 20 per cent of West Coast dairy farms could be in serious financial trouble, Federated Farmers heard at its quarterly meeting in Greymouth yesterday.

Provincial president Peter Langford said farmer sentiment was currently low with Westland Milk Products' poor performance and many dairy farmers having had to borrow just to continue.

With plenty of upheaval and "negative thoughts" around Westland Milk management, governance and performance it was fair to say that dairy farming "with low and no payout" for two months, was difficult.

He was hearing grim news about farmer debt which, after a tough year with the depressed global dairy market now lifting slightly, was making it "even more difficult".

"The bank comes knocking because global dairy trading auction has risen a little and things must be on the up and up - so let's put your farm on the market now and take advantage of it," Langford said.

"I have had one farmer ring me with this scenario but how many more are there? It could amount to 20 per cent of West Coast farms. No one wins if there is a crash in land prices."

The pressure to sell was in spite of evidence that West Coast farm listings were not moving.

One agent had refused to accept more farms, because they had "too many unsold listings now".

Like many other farmers, Langford, a dairy farmer from Karamea, said he had extended overdraft facilities because Westland Milk had paid no income for two months this winter.

He called for vigilance with the banks.

"BNZ have sent letters saying they won't be supporting (some) people after the end of the end of this season," Langford said.

"There is a lot of worry out there that there could be 20 per cent of West Coast dairy farmers under pressure to move on."

Westland Milk needed to be part of the solution, particularly as some shareholders would be considering their options.

"We really need the dairy company to be the most successful one in the country, not dragging last.

We really need to be the one with people queuing up to join."

Langford said the prospect of Westland Milk's Canterbury suppliers being "door-knocked" by competitors was real.

"One risk we face is that Canterbury farmers do have choice when it comes to who they supply, and in some cases would make a million more by doing so."

Federated Farmers dairy section chairwoman Renee Rooney agreed, noting that cash flows were "pretty grim" after Westland Milk finished on a net average cash payout of $3.80 a kilo, topped up by 26c a litre from Westland's balance sheet - which she said had to be paid back from somewhere.

In early spring, even though payouts and the weather were miserable, farmers were generally prepared, had their eyes wide open with budgets and cash flows prepared and good communication with bankers, Mrs Rooney said.

But the 2016-17 opening advance of $3.80 seemed to be "the 'magic figure' that suppliers have become accustomed to".

"My report card for (Westland Milk Products) performance in recent years is a rating of 'poor'," she said.

Farmers had been "keeping the faith" waiting for the company's value added strategy to start showing results, but it was very disappointing - particularly when farmers had been obliged by the company to lift environmental and milk production standards in order to continue supply.

Westland Milk Products chairman Matt O'Regan - who last week announced his resignation as chairman and director - was present at the meeting. He conducted a question and answer forum, on condition the media were excluded.

- Greymouth Star

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