KEY POINTS:
The face of dairy farming is changing with more cows, fewer farms and confidence booming as commodity prices soar, says animal and farm improvement company LIC.
LIC (formerly Livestock Improvement) published its annual Dairy Statistics for 2006-07 yesterday showing milk production was up 2.9 per cent at 15.1
billion litres and milk-solids up 3.9 per cent at 1.3 billion kilograms.
LIC chief executive Mark Dewdney said a longer-term view of the statistics showed how the industry had altered.
"The changing face of farming is stark," Dewdney said. "When you look back 10 years ago there were 14,700 farms, today 11,600. But in the same period cows are up 850,000."
Total cow numbers were up 2.2 per cent at 3.9 million, with average production per hectare of 934kg milk-solids, up from 907kg last year.
"Farmers are getting bigger to grow their businesses, offset their operating costs and capture synergies of scale that exist," Dewdney said.
The trend towards fewer herds, more cows, more production down South and increased productivity would continue.
"I think the increased payouts that farmers are going to enjoy this year and by the look of it for the next few years will speed up those trends."
The average payout had grown from $2.34 a kg of milk solids in 1987-88 to $4.46 in 2006-07, with Fonterra forecasting a record $6.40 this season.
"They'll give farmers more confidence to invest in technology, automation, further consolidation of farming," Dewdney said.
The average price of land per hectare was $25,308 last year, up from $5212 in 1987, although from 1996 to 2000 prices dropped.
Some farms were leaving dairying, particularly in the upper North Island, as land close to towns and cities became valuable, Dewdney said.
The rising value of farms - the average sale price last year was $2.2 million, up from $270,180 in 1987 - reflected national property trends.
"It also reflects, particularly in the last four years, an increasing optimism in dairy as to future prospects." He said he had never seen it stronger in his 20 years in the industry.
More farms would be sold by farmers finishing their careers, with a number bought by neighbours.
"I think the pace of that will pick up ... if the disparity in income between dairy and sheep and beef stays as it is we'll see more land switch."
Farms would inevitably consolidate and get bigger but there would still be a place for smaller operations and traditional family farms, he said.
"New Zealand has been built over generations by farming families and I don't see that changing."
The changes happening in the industry should not be of concern and reflected economics, Dewdney said.
"Growth in total production is good for Fonterra and other processing companies and therefore it's good for farmers. I think it's really positive."
Dairy Farmers of New Zealand chairman Frank Brenmuhl said the trend towards more cows and fewer farms was not a surprise and he expected that would continue.
"In the old day you dug all your fenceposts by hand, and it was a long process," Brenmuhl said. "Now we just bang them in with a hydraulic ram."
Many jobs could be done faster, meaning one person could manage more work.
"The limits on farm size now tend to be more about cows' ability to walk distance rather than man's ability to deal with cow numbers."
Dairying was growing quite rapidly in the South Island, he said.
"Prior to the dairy boom Ashburton was a fairly sleepy town with just sheep and arable and now it's one of the fastest-growing towns in the country - on the back of dairy."
The LIC report was funded by New Zealand Dairy Farmers through Dairy InSight.