Dairy decline set to reverberate

Reporoa farmer Nicole Manndonks. Photo / Ben Fraser

Next season's forecasted low milk price will not just hurt dairy farmers but will be felt across the community, says a Reporoa farmer.

A payout of $5.30 per kilogram of milk solids was forecast this week for the 2014/15 season - a big drop from this season's payout of $8.50 per kg/MS.

Reporoa farmer Nicole Manndonks said, while local dairy farmers will feel the pinch, so will associated farm industry employees such as sales reps, and farm equipment companies such as tractor sales, and even the corner store.

"Realistically, it is going to hit everyone, people will just not spend any money," said Ms Manndonks, who milks 270 cows with her partner on a family property near Reporoa.

"There definitely won't be any profit being made by the time costs are incurred and the banks are repaid," she said.

DairyNZ calculates two-thirds of dairy farms have working expenses of between $3.25 and $4.75 kg/MS, while average cash costs on-farm are estimated around $5.40 kg/MS after loan repayments.

Ms Manndonks said farm staff redundancies would occur and jobs would get scarce.

"Personally, our operating costs are kept very low but I would think many are in the same position and this will reflect back on the community.

"Farmers will spend what they need on supplies and vets but it will be the little things like buying less feed supplement."

Ms Manndonks said the worst scenario now would be another drought this summer.

"At the moment we are okay, but we just don't want a dry summer, we need plenty of grass growth."

Rerewhaakaitu contract farm manager Marcus Pinder said farm staff were feeling the downturn already.

"Margins are very tight, staff were being laid off, and jobs are very scarce. There are a lot of people applying for fewer vacancies," he said.

"We are looking to lease a farm with 250 cows but the bank has told us we will need a $200,000 loan. The repayments will kill me."

If he sold his cows he would not make a profit, he said.

Mr Pinder, who has worked in the industry for 20 years, said he had applied for 21 jobs in the past year and had one interview.

"I'm almost ready to get out, sometimes you are up against 70 other applicants."

Federated Farmers dairy chairman Andrew Hoggard said the current season, which had looked promising, had now turned into "break-even" for the whole industry following the 2014/15 payout of $5.30 kg/MS forecast this week.

"Losing 70 cents kg/MS on the milkprice is really going to hurt," he said.

"Farmers will be kicking capital works into touch and will be pruning herds to rid themselves of any passengers."

Mr Hoggard said there was some "good news" if the 2013/14 confirmed payout and the lowest revised forecast for 2014/15 were combined.

The result was average payout across two seasons at $7kg/MS.

The $5.30 kg/MS milk price was a lot higher than expected, he said.

Feed, fertiliser, repairs and maintenance would be cut back, and farmers will only do what needs to be done, he said.

He estimated 25 per cent of farmers will make a loss.