Finally some good news for drought-stricken Northland dairy farmers - increases to the milk price and faster advance payouts.
Fonterra Co-operative yesterday lifted its current forecast cash payout for the 2012/13 season to $6.12 for a fully shared-up farmer, based on a higher forecast farmgate milk price of $5.80 per kgMS (up 30 cents) and a forecast dividend of 32 cents per share.
The previous payout forecast - issued in February - was $5.90 to $6.00 per kg and the previous forecast milk price was $5.50.
Fonterra has also fast-tracked the advance payout, with an additional 50 cents per kgMS being paid out on April 19, another 15 cents in May, and 20 cents more in June.
Coupled with an interim dividend of 16 cents per share, up 4 cents per share, nationally the average farm will receive $100,000 earlier in the season. The money will be a welcome relief for Northland farmers struggling with the increased costs of coping with the worst drought in 70 years.
It follows a surge in world dairy prices as global buyers anticipate milk product shortages.
While the money will be a much-needed shot in the arm, farmers are not yet out of the woods as burgeoning feed costs continue and milk production falls.
"The extra money will be a big help to farmers," said Northland Federated Farmers president Matt Long.
"Northland farmers are facing huge bills due to the drought."
Supplement feed costs between $300-$600 per tonne, depending on the supplement being used. Smaller farms (150 cows) would be feeding at least one tonne per day, depending on pasture cover and availability of other supplementary feed such as silage, while larger farms (of 500-plus cows) could be feeding in excess of 10 tonnes per day. In addition, farm revenue would be down because of lost production, he said.
Rural Support Trust spokesperson Julie Jonker said that the drought, on average, had cost $100,000 per farm to date.
"It is a challenging time," she said.
Fonterra reported a robust performance from its NZ Milk Products division, while strong sales in Asia and Latin American helped drive net profit to $459 million in the first half to December, up 33 per cent on the previous corresponding period.
It is unlikely to be repeated in the second half of the year, though. Good spring and early summer growing conditions saw dairy production and record volumes in the first half of the season, but the widespread drought has since taken it toll.
Feed costs adding up
Supplementary feed is likely to be the biggest cost to Northland farmers this season as drought conditions drag on.
With at least 100mm of rain needed to break the big dry, showers possible this weekend will help, but are unlikely to have any immediate effect on pasture.
While supplies of feeds such as palm kernel expeller (PKE) are low, more is expected next month and again in May, and will be available under contract.
Northland Federated Farmers (FF) president Matt Long said importers were experiencing delays unloading the ships, but once unloaded the supply of PKE was expected to keep up with demand.
Without a good dousing of rain soon, autumn calving farmers will face decisions on what to feed their milkers. While PKE and hay will hold milking cows' condition, it is not high enough in energy value to maintain good long-term production.
Mr Long said farmers might need to consider mixes - PKE ($300 per tonne) and biscuit meal and/or cotton seed. The current cost of biscuit meal was $600 per tonne.
"Most autumn calvers will have grown a maize crop to feed as silage," he said. He expected production for the autumn season to be below normal and cost to be higher.