Not enough cows for demand

 

A HUGE demand for dairy cows is outstripping supply and almost doubling prices in Wairarapa on the back of bumper Fonterra payout forecasts.

Virginia Serra, Dexcel consulting officer for Wairarapa and Hawke's Bay, said cow prices are driven by supply and demand and currently the supply of stock cannot keep up with the demand for it.

"There is a huge demand of cows for new farms being converted in the North and South islands at the moment. The price of cows is supported by the high of the industry, which is driven by the high payout."

Some people say the supply and demand will sort itself out and the market will bring the price back to a reasonable level, she said.

"I tend to agree with this view but I won't put my house on that and it is very difficult to predict."

Farmers wanting to go 50-50 sharemilking or expand their herd will suffer because of the high prices, she said.

"It is a very difficult time for sharemilkers to get into buying cows. It is very dependent on the type of farm and the expected performance on the farm and also how long the payout is going to last."

People already owning herds have an opportunity to keep as many heifers as possible, rear them and then sell them in-calf in two years time, she said.

"This is relying on cow prices still being high in two years time.

"Mating management will be very important this year and getting as many cows in-calf as possible. People may consider doing artificial breeding for longer to get more AB heifers and use more imported feed to get better reproductive performance, if they think that feed is limiting cows getting in-calf."

Baker and Associates consultant Chris Lewis said in the space of a month the price of cows has gone from a high of $1600 a head to $2500.

"I understand there are a few people putting cows on the market for $3000.

"Whole herd sales to be uplifted from June 1 are going for $2100 per cow."

Mr Lewis said farmers converting to dairy herds are responsible for putting the price up.

"Farmers that are pouring millions into setting up huge farms, particularly down south, are going to pay an extra few hundred per cow to get a good herd because in the long run that kind of money doesn't mean anything to them."

The industry can double its supply of cows in two years and at the moment farmers are rearing extra heifers to do this, he said.

"This is very much a cyclical thing and within two or three years there will be a surplus of cows in the industry."

Masterton farmer Matt Honeysett is excited about the high prices and payout and says the spin-off for the New Zealand economy is positive.

"The prices make it a lot harder for sharemilkers but it's not impossible. I much prefer having a high payout, which has caused the high cow price because in the long run its better for the economy."

There will be problems for people trying to convert or buy this season but for farmers on the whole it's exciting times, he said. "Our assets have gone up in value overnight."

The price will go back but there will be a delay of at least two years, he said.

"This year everyone will do as much AI (artificial insemination) replacement as possible that will bring a lot more cows in a few years time. The price will stay for a while because at the moment there is a shortage."

Westpac Bank senior agribusiness manager Blair Stevens said farmers have come through a difficult season and have long memories.

"If they're sensible they should look at chopping some of their debt off as it is unlikely the huge payout will hold for the next few years."