Dairy farms squeezed from all sides

Chris Engel, Wairarapa Federated Farmers dairy chairman, says grass is still a competitive strength of the New Zealand dairy farm. PHOTO/FILE

Early signs of Wairarapa dairy farms in financial trouble are not necessarily linked to the low milk payouts, says the region's Federated Farmers dairy chairman.

The Wairarapa Times-Age has heard of dairy farms near Featherston and both north and south of Eketahuna that are either in receivership or under threat of sale by their banks.

However Chris Engel, Federated Farmers dairy chairman for Wairarapa, said this was not necessarily down to current low prices.

Fonterra last week forecast a payout of $4.25 for the 2016-17 season, up 30c from this season.

"When you have the first things happen, they could be things that were going to happen anyway. It's when there's a few more and the floodgates start to open," Mr Engel said.

But he did say farmers were losing money under present conditions.

"Each month, we're just earning less than we spend."

Mr Engel said the dairy farmers' "saviour" was lower interest rates of between 4-5 per cent. Otherwise it would be a perfect storm.

"We could be at 7, 8, 9 per cent, which we have been (most other years).

"We've got the small advantage of that cheaper money."

A dry autumn was also a major hardship factor this year, Mr Engel said.

"No one's declared a drought, but from January on there hasn't been the rain, and now it's starting to get cold. Southerlies will return to Wairarapa."

He said even sheep farmers in an eastern band from Riversdale down to Pirinoa "have got nothing" in terms of feed.

"From the information I've picked up, they've eaten into the winter supplements."

Mr Engel said he had "never seen" waterways so low in autumn as they were currently, and this had nothing to do with irrigation because farmers stopped irrigating long ago.

"I know when there's no rain in the hills and no one's irrigating, the levels go down ... that's all nature."

The Carterton farmer questioned whether previous high payouts had brought too many new farmers in. "It's a bit like it got too high at $8 and anyone was sustainable. Now we're too low and no one is."

Mr Engel said European farmers had been "held back for 35 years with quotas".

"The quota comes off and he [the European dairy farmer] is just going to go for it. You're dealing with human nature. They only have to go up 2 per cent and that's us flooded."

But the New Zealand dairy farmer had the advantage of being grass-based, Mr Engel said. "That's where, hopefully, our green grass is going to be our saviour.

"And we've got that milder, more moderate winter."

Mr Engel said pasture-based farming had traditionally been a New Zealand strength.

"We started to get a bit Europeanised with foods and [breeds but] we can go back to the Kiwi cow where unless the breed's been changed, they're happy with the grass. I'm telling my cows that."