Farmers discuss slump options

"This reduction equates to farmers getting $460 million less dairy revenue than expected this year, around another $37,000 per farm." Photo / David Kerr

Federated Farmers and Dairy NZ have been holding meetings up and down the country aimed at helping farmers, particularly sharemilkers, through the downturn.

Two "what are my options" meetings were held in the South Island last week and four are planned for the North Island this week.

Federated Farmers dairy chairman Andrew Hoggard said the meeting in Manawatu was attended by about 50 farmers. "We are trying to get sharemilkers and farm owners to discuss their options," he said.

The theme was on the need for good communication between the farm owner and share milker "but there is no silver bullet to solve the problem".

There are two types of standard sharemilking arrangements. In the first category, the sharemilker provides the skills, labour, knowledge and perhaps some machinery in return for 20 to 22 per cent of the milk cheque.

He said sharemilkers in this category were under the most stress because they typically don't have any equity to borrow against.

In the second category, the sharemilker owns the stock and pays expenses relating to the herd. The farm owner pays the farm expenses, and the milk cheque is shared 50/50.

Hoggard, who started off as a share milker in 1998, said: "It's about communication between the sharemilker and the farm owner, and having [a] farm plan and making sure both parties agree on that plan."

Dairy NZ chief executive Tim Mackle said the industry's leaders have met over the past month to discuss the downturn. With the forecast Fonterra farmgate milk price last week dropping by 25c from $4.15/kg milksolids to $3.90/kg, farmers will receive even less milk income than expected this winter and spring.

"This reduction equates to farmers getting $460 million less dairy revenue than expected this year, around another $37,000 per farm," Mackle said.

Farmers' ability to survive the downturn will depend on the size of their debt and the level of their costs.

Ten per cent of the highest indebted farms have 30 per cent of the total dairy debt - that's $11 billion to $12 billion or $10 million each, but Mackle said that did not mean all those farms were at risk.

Twenty per cent of the highest indebted farms have 45 to 50 per cent of the total debt - $15 billion to $38 billion.

"But again these bald figures don't necessarily spell doom and gloom for all," he said. "It is the combination of high debt and high farm costs that will require urgent action."