7 May 2014

Farmers more efficient than ever

2:19 pm on 7 May 2014

DairyNZ says its latest economic survey shows New Zealand dairy farmers are more efficient and profitable and produce at least twice as much milk per hectare, compared with 50 years ago.

The survey, released at the dairy farmers forum near Hamilton on Wednesday, shows the inflation-adjusted cost of production has stayed at a constant level of about $4.70 a kilo of milk solids for the past 25 years.

Dairy NZ's chief executive Tim Mackle said keeping the cost of production in check, along with increasing milk production per hectare, has given farmers a higher level of operating profit.

He said that's mostly been running at more than a thousand dollars a hectare since 2000.

But Dr Mackle said dairying has also become a tougher and riskier business.

He said new rules and regulations to farm within nutrient limits will bring more challenges and put extra pressure on the New Zealand dairy industry's ability to stay competitive.

Governor's concerns over farm debt

The Governor of the Reserve Bank, Graeme Wheeler, also highlighted some of the challenges facing the dairy industry when he spoke at the farmers' forum on Wednesday morning.

One of those is the high level of dairy farm debt, which has almost trebled over the past decade, and currently stands at $32 billion.

Mr Wheeler said the debt is concentrated among a small proportion of highly leveraged farms, with 10 percent of dairy farmers holding about half of the debt.

He says the elevated debt level would leave some of those farmers highly exposed if the milk payout fell significantly or if land prices fell.

But he says dairy farmers are generally being cautious. They're using their higher incomes to buy more farms and do farm improvements without taking on new debt. Many are also repaying debt.