Costs cut as dairy price slide continues

Industries related to dairy farming have already felt the flow-on impact, even before the seventh successive fall in global dairy prices yesterday, Bradstreet Contractors owner Peter Bradstreet says. Photo / File

Bay of Plenty farmers are cutting costs to survive as global dairy prices continue to fall.

A 1.3 per cent drop on Tuesday night was the seventh successive fall in global dairy prices.

Labour's Finance spokesperson Grant Robertson said prices had fallen 30 per cent since March and were down 55 per cent from last year's peak.

"These are not just numbers on a spread sheet. The fall in dairy prices has a significant effect on incomes.

"There is an expanding $13billion economic black hole that will suck in regions reliant on dairy and supporting industries," he said.

In September last year Fonterra's forecast dairy payout dropped from $6kgMS to $5.30 which, according to Dairy NZ, represented a $390million drop in revenue for the region when compared with the record 2013/14 payout of $8.40.

Federated Farmers Bay of Plenty Dairy chairman Steve Bailey said yesterday's fall was "just another sober realisation" for the farming industry.

"No farmer will be smiling at the moment ... We like to hope it could go back up as fast as it's gone down but the reality is it'll probably take a lot longer."

It was an important time for farmers to look out for their neighbours and help one another out.

"I do know of a couple of farmers who are just exhausted. There's a lot of support out there from the banks and the local services because if farmers fall over, their business falls over," he said.

"The dairy industry supports a lot of other businesses and the flow-on effect is going to be huge."

Farmers would be cutting costs wherever possible.

Some would be selling stock for beef so they could rely on their own grass to feed their herd instead of having to order in feed, he said.

"Farmers will be looking at the quality of their stock and only the best will be kept.

"They will be trying to be as efficient as possible in turning grass into milk."

Predicting which way dairy prices would go, even in the next two weeks, was "crystal-ball gazing", Mr Bailey said.

"There's a lot of uncertainty ... All we can do is roll with it."

Dairy farmer and former Federated Farmers Bay of Plenty vice-president John Scrimgeour said farmers were hoping for an increase in demand from overseas markets.

"We're in a waiting game really."

Farmers were staying positive but many were anxious about the coming months until the milking season started again about August, he said.

Until then they would cut costs by reducing herd numbers as well as putting off any maintenance work on the farm that could be delayed.

A Dairy NZ report released last week showed in 2013/14 that national farm working expenses were $4.33kgMS and that was forecast to be about $3.90kgMS in 2015/16 which reflected the anticipated size of expenditure reduction.

Bradstreet Contractors owner Peter Bradstreet said industries related to dairy farming had already felt the flow-on impact.

"Things have slowed right down.

"People just aren't spending like they used to.

"Everyone's finding the same thing, plus the people in related industries," he said.

"We were hoping we would've bottomed out by now but that hasn't happened.

"It's not good news but there's not a lot we can do about it."