Jamie Gray

Jamie Gray is a business reporter for the New Zealand Herald and APNZ wire agency

White gold amid green pastures

Miraka CEO Richard Wyeth says milk flow is ahead of budget. Photo / Alan Gibson
Miraka CEO Richard Wyeth says milk flow is ahead of budget. Photo / Alan Gibson

As the turmoil from the Fonterra whey product contamination scare starts to subside, dairy farmers face improved prospects for production thanks to a warm winter, say industry sources.

It is still early days - the season does not get into full swing until this month - but the initial signs so far have been favourable, said DairyNZ's regional team manager Craig McBeth.

"We have had an exceptionally good start to the season, coming out of the drought," McBeth said. "We are now faced with tremendously good on-farm pasture cover," he said.

McBeth said it was looking like farmers could be in for a strong season, both in terms of high prices and increased production.

In terms of price, dairy farmers have the prospect of record, or near record, payouts this year.

Fonterra said last week that it had raised its forecast farm-gate milk price for the 2014 season by 30c a kg of milk solids to $7.80 per kg - which would be a record if it comes to pass.

Westland Milk Products, the country's second biggest co-operative after Fonterra, raised its forecast payout for 2013-14 to a range of $7.60-$8.00 per kg - just short of its record payout of $8.29 in 2008.

While farmers may get bigger cheques, many of the more highly leveraged participants also face big interest bills.

"It's a great opportunity for farmers to secure a potentially extraordinary profit this year and to use that to retire some debt to make their businesses more resilient," McBeth said.

Westland Milk chief executive Rod Quin said West Coast farms had recovered from the drought.

A mild winter meant cows were in good condition. "It's early days but it's looking positive at 3-5 per cent ahead of budget," Quin said.

Westpac economist Nathan Penny said that only about 7 per cent of the season's milk production had been collected so far but the initial signs appeared favourable.

"At this stage we have pencilled in a 5 per cent rebound in production from last season," he said.

Last season's production fell by 2 per cent because of drought, while the season before that in 2011-12 was a record.

The 2013-14 dairy season started strongly for Taupo-based dairy company Miraka, said chief executive Richard Wyeth.

Maori-controlled Miraka, which runs a wholemilk factory at Mokai, 30km northwest of Taupo, was running ahead of budget and its farmer-suppliers were experiencing favourable growing conditions, Wyeth said.

"Our milk flows are up on budget, but it's a little bit early to tell whether that's going to carry on right through the season."

The previous season had also started on a strong note but hit trouble around January when most of the country was hit by drought.

Wyeth said the latest dairy auction, which put wholemilk prices for October and November in excess of US$5000 ($6465) a tonne, was a positive sign for continued strength in product prices.

Meanwhile, Fonterra faces a series of investigations over the testing of its product after a small amount of whey product turned in a false positive result for a botulism-causing bacteria, leading to widespread product recalls in early August.

Westland has its issues too. On August 19 the Ministry for Primary Industries said it had revoked export certificates for products made from two batches of lactoferrin produced by Westland Milk Products after testing by Chinese authorities found elevated nitrate levels.

"It has been one hell of an August," said Federated Farmers West Coast chairman Richard Reynolds.

"Our members who are busy calving will be happy they can concentrate on milking and not have to worry about the perceptions of their processor's milk quality."

- APNZ

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