Dairy farmers face tough season

Rotorua/Taupo Federated Farmers Sharemilker Section chairman John Butterworth has said Fonterra's forecast for next season was "lower than expected". Photo / Stephen Parker

Rotorua dairy farmers are bracing themselves for tough months ahead after Fonterra announced a lower-than-expected forecast for next season's farmgate milk price.

Last Thursday, the company said it forecasts to pay $5.25 per kg of milk solids in 2015/16, down on a record $8.50/kg in 2013/14.

Fonterra also reduced its 2014/15 payout to $4.40/kg.

Rotorua/Taupo Federated Farmers Sharemilker Section chairman, John Butterworth, said sharemilkers and younger farmers were likely to be hit hardest by the reduced payout.

"It's lower than expected. No one likes to have their payout dropped, just like you wouldn't like to have your wages dropped," he said.

Fonterra claim the forecast is better than previously feared, but Mr Butterworth said farmers had been hoping for a higher payout.

"It's going to have quite a big effect for those that have a reasonable-sized debt - which is a lot of people.

"I have heard of some people going back into the sheds and milking themselves, when they used to have workers doing it."

DairyNZ chief executive Tim Mackle has said Fonterra's forecast could result in a $150,000 drop in milk income for the average dairy farmer next year.

There were short-term measures that dairy farmers could take to try and ride out the storm, Mr Butterworth said.

"We have got to balance everything, so that pretty much means stop spending. We can change our system."

He said that reducing stocking rates, increased grass feeding in place of supplements, and reducing fertiliser levels, were all possible strategies.

"If we can do that just for a year, that will help."

Many dairy farmers had become accustomed to the volatility of milk prices, Mr Butterworth said.

However, for sharemilkers and those who did not own their farm outright, the low payout would be especially tough to ride out.

He said that Fonterra management had a duty to ensure they were communicating with their customers, especially when dairy farmers were struggling.

"I know Fonterra farmers want to see more simple language coming out of head office, in terms of the future of the company," he said.

"Dairy farmers are pretty straight-up people and they just want to know where the co-operative is at and where management are taking it, so farmers have a better idea of how they are affected.

"Fonterra might be running a big business - but so are dairy farmers."

For Christine and Jamie Patterson, dairy farmers based near Kaharoa, the low forecast has already seen them tightening the purse strings.

"We have put the chequebook away. We are not doing any capital maintenance until we can see that things are going to turn around," Mrs Patterson said, admitting she had been "hugely" worried by the forecast announcement.

This view was shared by Hamurana dairy farmer Gisele Schweizer.

"My feeling is that next year is going to be a lot tougher than this year."

Mrs Schweizer said she expected a dampened mood from retailers at next week' Fieldays trade show in Hamilton, as attending dairy farmers cut back on annual upgrades to equipment.

"If it was like last year's payout, we would be looking at a new ute," she said.