New data revealing an average dairy farm made a $58,500 cash loss last year has prompted some calls for dairy factory wages to be frozen.
The financial situation was worse for Southland dairy farms. A Ministry of Agriculture of Forestry (Maf) dairy farm monitoring report released yesterday showed an average farmer made a $153,400 deficit in 2008-09, a massive $462,900 turnaround on the 2007-08 year, due to rising costs and a falling milk price.
The New Zealand Dairy Workers Union said it had not been approached to consider a wage freeze, but the Otago Daily Times has learnt some dairy industry leaders are saying privately that given falling incomes and low prices for dairy exports, they should consider the gesture.
Last year, the union negotiated a collective agreement for three years with Fonterra, Westland Milk Products and Tatua Co-operative Dairy, which together process more than 95% of the country's milk.
The agreement provides for a 6.5% increase on all pay rates and allowances, plus a 1.5% lump sum for the first year, then pay rises based on the inflation rate plus 1% for the next two years.
Critics say this agreement was twice that of the average salary increase of other workers last year. It followed strike threats by the union.
Sources say that while farmers were struggling to survive and facing reduced incomes, dairy workers had negotiated a deal union leaders publicly describe as "exceptional".
Short-term wage freezes were becoming commonplace in other industries in trouble, they said.
The union's national secretary, James Ritchie, said the union had not been approached to consider a wage freeze and it was locked into a three-year deal.
Westland chief executive Rod Quinn said the proposal had not been put to him to consider. A Fonterra spokesman said it had not requested a review of the agreement, which it had negotiated in good faith and stood by.
Fonterra has frozen the wages of about 1000, or 20%, of its salaried staff until October 2010.
Federated Farmers dairy section chairman Lachlan McKenzie said he would like the union to consider the gesture, but doubted it would.
The Maf report revealed a grim situation on the nation's farms last season and again next season.
Farmers were budgeting for a 3% rise in production next year and an 11% drop in farm working expenses, but Maf still forecast a $15,500 cash loss for an average farm in the 2009-10 season.
Many Southland farms were still growing in size and while production rose 4% last season, the lower milk price slashed net cash income by 28%, or $408,500.
Farm working expenses were $3.60 a kg of milk solids, the second-highest monitored.
Canterbury dairy farmers face a $45,5000 loss before tax, due to an 8% increase in farm working expenses and a 29% drop in net cash income.
