NZ dairy farmers face challenges in election year

While some parts of the country grappled with severe flooding, farmers on the whole, have enjoyed favorable autumn conditions. Photo / File

Dairy farmers can look back on 2016/17 with a sense of relief that milk prices have bounced back from a deep slump, but the sector faces challenges this election year as water quality and immigration issues come to the fore, says Federated Farmers dairy chair Andrew Hoggard.

This time last year, farmers were looking at what was then likely to be the third consecutive season of sub-par prices, when Fonterra's opening forecast came to just $4.25 a kg of milksolids.

Fonterra's farm gate milk price forecast has since been revised up to $6.00/kg for the season, which ends on May 31, comfortably ahead of Dairy NZ's break even point of $5.05/kg, as global supply and demand conditions come more into balance.

"This time last year, things were looking pretty grim," Hoggard said. "There was a slight improvement in the milk price [from $3.90 in the previous year], but it was not a hell of a lot," Hoggard said.

"From a financial perspective, things have improved quite markedly," he said.

When prices did finally improve, farmers faced a wetter-than-normal winter, which meant production was down by about 15 per cent in the spring.

Surprisingly favourable autumn conditions - aside from the severe flooding in parts of the country - have seen production spike back up.

Now, it's looking like this season's production will only be slightly down, if not level with last season.

"If you look at the industry as a whole things have improved and are looking good for next season," said Hoggard, noting Open Country Dairy's opening forecast for 2017/18 of $6.25 to $6.55/kg.

But as the September 23 election approaches, Hoggard said there was unease in the rural community.

"There is a feeling that we are constantly being targeted," Hoggard said. "We have challenges that we need to address."

Primary Industries Minister Nathan Guy said last week there was a limit to further dairy intensification in New Zealand and that growing exports in the future will depend more on increasing the value of products rather than the volume.

"It will be challenging for the dairy industry to grow," Guy said.

Guy's comments follow a raft of official reports detailing dairy's role in New Zealand's declining fresh water quality.

Hoggard said there needed to be a reward system for those farmers with a low environmental foot print.

As it stands, a farmer running 2.5 cows per hectare is treated the same as a farmer with a more intensive, 5-cow-per-hectare farm, he said.

Hoggard said he was already fielding phone calls from worried farmers who rely on foreign workers after the Government announced new rules aimed at curbing immigration, and with other parties proposing more stringent policies.

"What everyone is planning to do with immigration - to fix Auckland's problems - is actually going to create a whole range of problems in the regions," Hoggard said.

"What has been proposed by National is concerning a lot of them, and when you take into account some of the other proposals, it's really terrifying for some farmers."

Politics aside, Hoggard said farmers faced a favourable outlook for the current season.

"It's certainly looking good for next season, but we are taking each season as it comes, and making sure that you have a sustainable business model that can sustain the lows and the highs," Hoggard said.

"Most farmers are coming out of this with a more conservative mindset going forward."