Dairy farmers over moon about payout

In 40 years of dairy farming, Barry Kibble cannot recall such a good year.

A record $4.60 a kilogram milksolids base payout announced by the Dairy Board is expected to be topped up to $5 by New Zealand Dairy Group's contribution, making the total payout $1.25/kg higher than last year.

Mr Kibble, who is 75, has lived on his family's 110ha property at Te Kowhai, 14km northwest of Hamilton, for most of his life.

His son John and daughter-in-law Delia 50-50 sharemilked 375 cows there last season, producing 119,000kg of milksolids - well above the Waikato average of 65,000kg.

For the Kibble family, the total payout will be $595,000.

Based on Ministry of Agriculture and Forestry farm monitoring figures, the net trading profit on this gross income would be 39 per cent of that, about $232,000.

Out of that come expenses, capital expenditure and mortgage repayments.

"This is our best year ever," Mr Kibble said. "My son and daughter-in-law have done a fantastic job. We've been blessed with great weather, and I think the low dollar has done a lot to help the result."

Son John, 40, added: "We've been running on empty for a long time, contrary to popular belief. It will be nice to be out of overdraft for the first time in three years."

Much of the money would go to paying off hardcore debt.

"I think a lot of farmers are so scared it's going to go down again it's a chance to pay a big whack off the mortgage.

"We've waited a long time for a good payout. I don't think it's sustainable."

The bumper season has been particularly good for dairy farmers in the Waikato, with mild weather, record milk production, a low dollar and low interest rates.

Farming leaders agree with John Kibble that dairy farmers will plunge the windfall back into the business.

"Farmers will inevitably invest in the productivity of the farm and that will be through debt repayment, upgrading ageing plant equipment or, in fact, expanding their businesses and their herds," said John Roadley, chairman of the Dairy Board.

Farmers would also have to take tax advice because the payout covered two tax years, he said.

Farmers estimate that the increased payout will mean a gross income lift of $90,000, putting roughly $2 billion back into the economy.

Charlie Pedersen, the head of Federated Farmers' Dairy Farmers, said there would definitely be downstream benefits for the rural economy.

"No matter what farmers spend their money on, it's a benefit to the wider community ...

"Even if farmers do the most conservative thing and retire debt, that still has a positive benefit because it improves the asset-debt ratio in the economy."

However, he was concerned about the "substantial sum" of over half a billion* dollars which the Dairy Board is keeping back for operational costs.

"That's $35,000 per farmer. Especially if you were a farmer exiting the industry this year, you wouldn't be feeling too good about that."

New Zealand's 14,500 dairy farmers are still waiting to vote on the proposed merger of Hamilton-based New Zealand Dairy Group, Taranaki's Kiwi Cooperative Dairies and the Dairy Board into a mega-cooperative, temporarily named GlobalCo.

A 75 per cent majority is needed for the merger to go ahead.

- NZPA

* CORRECTION: The original version of this story incorrectly said "half a million dollars".