1 Nov 2016

Dairy value drop in 'challenging' year revealed

6:17 am on 1 November 2016

The dairy industry's value to the economy has nearly halved since milk prices boomed in the 2013/14 season, new DairyNZ figures reveal.

Dairy cows in a milking shed in New Zealand.

Photo: 123RF

The figures show the value of the dairy industry to the economy has nearly halved since milk prices boomed in the 2013/14 season.

In the 2015/16 season farmers produced 1.862 billion kilograms of milksolids, worth just $8 billion to the national economy, with a final payout of $3.90 kg/ms.

That is well down on the 2013/14 season, when prices rocketed to $8.40 kg/ms and 1.825 billion kilograms of milk solids were produced, worth $15.3bn.

DairyNZ chief executive Tim Mackle said not surprisingly, dairy exports earned more in 2013/14.

"We had a total export earnings of $17bn, that compares to the year we've just finished of $12.2bn and in terms of total revenue itself, well it's the same story really.

"We've effectively reduced our farm income, that's production times milk price, by half."

The numbers are from DairyNZ's AGM, and while the 2015/16 season was the most challenging year yet for dairy farmers, Mr Mackle said farmers had responded well by cutting their expenditure by $200 a cow down to about $1300 dollars a cow.

He said most farmers' income was being soaked up by expenses.

"Back in 2014/15, 64 percent of farmers income was spent on farm working expenses, and in the year just gone they're spending 82 percent of their total income on farm working expenses."

Waikato herd numbers slump in response

Mr Mackle said Waikato, with more 30 percent of the country's dairy cows, was hit hard.

"For the 2015/16 season just finished, farmers were down 2.8 percent, which is a little more than the average of about 1.9 percent across the country.

"What you've seen there is a reduction in total income in that period to the economy of around $2bn, which is a lot of money."

He said during the 2015/16 season about 65 herds stopped producing milk in Waikato, and now there are just under 4000 herds in the region.

"It's a faster rate of decline that we've seen in the previous seven or eight years, and that is to be expected.

"Farmers felt if they were going to retire their land and do other things then it was a good year to do it."

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