Dairy industry warned to look beyond the boom

The New Zealand dairy industry is expecting a ''boom'' this year, and while the country's dairy income and production could be record-setting, DairyNZ chief executive Dr Tim Mackle cautions farmers about being tempted to loosen their belts.

He said good milk prices and high production meant it could be a great year, but the industry's optimism needed to be tempered with the fact there was a still a lot of hard work to do.

The industry expects production to be about 7% higher than last year, Fonterra's forecasted 2013/14 payout to farmers is $8.30 per kg of milk solids, which is the highest it has been, and dairy prices are reported to be more than 50% higher than they were a year ago.

Dr Mackle said he was optimistic that milk returns would ''boom'' for New Zealand, particularly with ''several billion dollars looking [like] coming into the country''.

The demand for fresh, local dairy product was particularly strong, compared to powder in bags.

''We have some really good production figures [this season], touch wood, and most regions are well ahead,'' Dr Mackle said.

''Let's keep our feet on the ground and make sure we maintain our cost structure and be resilient in case of soft prices and weather events.

''When we get a good year, then sometimes the belt gets loosened, but then the costs go up and vendors want more, so we have got to be careful and we don't know what is around the corner.

''We keep hearing [price] volatility is here to stay, so we have got to be on our toes.

''Farmers often say it takes two to three years to recover from a good year.''

Dr Mackle said there was some hard work still to be done around land and water regional planning as part of the National Policy Statement for Freshwater Management requirements for regional councils in all the main dairying areas.

They wanted to ensure policies addressed issues with other land users, included those who were urban-based and who also contributed to the nutrient waste.

He said DairyNZ and Federated Farmers would be devoting a lot of resources to ensure a good outcome. The industry would also continue to focus on nutrient and effluent planning and management.

Encouraging more young people, particularly those with degrees and diplomas, into the industry, including on-farm, and in the science and consultancy sectors, was another challenge.

He said the demand for good labour would increase as the economy started to pick up in the next two to three years and to farm better, more profitably and more sustainably required greater skill levels.

''The demand for labour from Australia is tapering off and that is one positive for us.''

The general perception about the way we farm and the way we looked after our animals was the subject of ''great interest from the public and consumers''.

New Zealand needed to keep an eye on new on-farm technologies as well as its overseas market competitors, including Ireland, which was looking at entering the Asian market for dairy supply, as well as on the United States, which now had more corn available to feed its dairy cows and was one of New Zealand's main competitors.

''Other people want to play in our sandbox.''

Greenhouse gas emission mitigation (GHG) was another issue that DairyNZ had invested resources in.

Another eye had to be kept on what other governments were doing towards regulation and GHG targets.

However, as other countries had not included agriculture in their GHG mitigation strategies, he could not see any advantage to New Zealand including it.

- by Yvonne O'Hara