Dairy farmers fit broadly into two camps: those who believe dairy farming should be ‘all grass’, and those who favour a role for supplements. I don’t fit neatly into either camp, because as in so many things, I think there is more than one way to succeed. It all depends on the situation.
As a visiting farm systems professor put it to me this last week, amongst academics this is called ‘flat-line optimality’. Or as Mark Twain made famous, drawing on others who had gone before, ‘there is more than one way to skin a cat’. And just to set that story straight in terms of political correctness, the cat was actually a catfish.
Although there is usually more than one way of doing things, there are also different levels of efficiency with which it can be done. So last week I spent a morning with Peter Hancox, the manager of the Lincoln University Dairy Farm (LUDF), learning how he was making all-grass farming work at Lincoln. Continue reading
Although it leaves many New Zealanders uncomfortable, there is a stark reality that the future of New Zealand’s agricultural industries, and hence the overall economy, is highly dependent on China. The reason is very simple: there is no-one else in the world who needs and wants our agricultural products at the levels we produce those products.
If actions were driven by logic, then we would spend a lot of effort in trying to understand China. We would want to understand Chinese consumers, we would want to understand Chinese government policy towards agriculture, and we would want to understand what is happening on the ground in rural China.
We do know something about all of these things, but we don’t know enough. In particular, we know very little about what is happening within Chinese agriculture itself. Continue reading
Fonterra’s recently announced profit figure for 2015/16 of $834 million is a big step forward from the $506 million of 2014/15. The biggest underlying source of improvement appears to have been the margin for commodity cheese over and above the auction price for whole milk powder (WMP). This is because WMP dominates the milk price calculations whereas cheese margins go straight to profit. A second major improvement has been Australian operations where unprofitable operations have been sold and the EBIT (earnings before interest and tax) are now running positive. Continue reading
When I was an undergraduate back in the 1960s – in some ways it seems just yesterday – the dominant agricultural paradigms were about farm production and management. As students, we learned nothing about marketing. And when marketing did come in vogue in the following decades, the dominant perspective was that marketing was what happened at the end rather than the beginning of the agri-food chain.
To a considerable extent, that perspective of a value chain that starts with production still survives within our animal-based agricultural industries. In contrast, the plant-based industries have been more successful in making the transition to a consumer-led position. And that may well be why, in an evolving world, our horticultural industries are currently succeeding where our traditional pastoral industries are currently struggling. Continue reading
Our Australian dairy cousins are currently going through difficult times, particularly for those who supply Murray Goulburn, and to a lesser extent Fonterra. There are lessons to be learned, although there may be alternative perspectives as to the specifics thereof.
Right now, production in Australia has plummeted. It will take a month or two to see how it all settles out, but early season production is down 10 percent. Fonterra’s production is down 22 percent, and Murray Goulburn is in all likelihood down even more. Indeed, there have to be doubts as to whether Murray Goulburn can survive long-term in its current form. Continue reading
Since late July, there have been remarkable price rises at the Global Dairy Trade (GDT) auctions for whole milk powder (WMP) and to a lesser extent skim milk powder (SMP). Including the September 6 auction, WMP has risen 34 percent since late July, and SMP has risen 15 percent.
There has been no earth-shattering change in market fundamentals that would cause this mini-boom. So either the buyers were misinformed back in July when they were reluctant to buy, or they are misinformed now. Or perhaps this is just the way of global commodity markets in a crazy volatile world. Continue reading
[This article was commissioned by the NZ Herald. It was written on 8 August 2016 and published on 31 August 2016. Since being written, some 24 days ago, we have seen substantial increases in dairy commodity prices, and in the short term (i.e. the forthcoming GDT dairy auction on 6 September GMT, and possibly subsequent auctions) these increases are likely to continue. However, the fundamentals remain unaltered; i.e commodities are highly volatile and will remain so, but there are also many traps for the unwary along the value-add path.]
There is increasing recognition within New Zealand that the dairy industry is in some trouble. Heading into a third year of low prices, questions have to be asked whether the industry is on a false path. And if so, where is the path back to firm ground?
Some will argue that the answers are simple: that we should reduce the dairy footprint on our land, and that we should focus on value-add. In reality, it is not that simple. Continue reading