WELLINGTON - The nation's biggest dairy company, New Zealand Dairy Group, says it will keep a lid on conversions of drystock farms to dairying until at least June 1 next year.
Chairman Henry Van Der Heyden said the company remained committed to finding a fair and workable solution to the issue
of milk growth.
The company is facing pressure from farmers wanting to convert North Island properties around Te Awamutu, Reporoa and in King Country to dairying.
In the South Island, where it has taken over the South Island Dairy Cooperative, formerly Alpine and Southland, farmers are champing at the bit to push ahead with big conversions.
The Dairy Board has predicted that milk supply growth in Southland - where average farm sizes tend to be 40 per cent bigger than in the North Island - will reach 10 per cent to 15 per cent a year.
The board has said that land in current milk production in Southland represents only 5 per cent of the total area of the region that could support dairying. Milk supply growth would be partly driven by the attractiveness of dairying over sheep farming.
But Mr Van Der Heyden said the dairy industry had been grappling with the problem of the milk supply from new conversions diluting returns and investment to existing farmers.
Farmers adding supply from new conversions, or boosting milk flows from their existing properties, pay only a nominal $2 a kilogram of milk solids to fund the capital expansion and marketing needed to cope with the increased flows.
Even with the moratorium in place the Dairy Group still expects South Island milk flows to continue increasing at 7 per cent a year, and North Island flows to lift by 3 per cent. These sort of increases mean having to find $100 million every couple of years to build new processing capacity.
"We are working hard to find a way to adequately protect the returns and investments of existing farmer shareholders and establish a fair price for those wanting to enter the industry and supply new milk," Mr Van Der Heyden said.
The committee considering the issue would report back to the board before June 1. - NZPA
