DairyNZ sessions help farmers assess cash flow

Another round of farmer events is under way nationally to give dairy farmers a ''wake-up call'' to assess their cash-flow situation, given the low milk price forecasts.

DairyNZ, which is behind the Tactics for Tight Times campaign, has analysed what it is like for the average farmer in every dairying region and it is ''not looking pretty'', chief executive Tim Mackle says.

While 2015-16 would probably still end up being a break-even year for most farmers, he said cash flow would be a major issue that could result in some increased term debt in the sector and less spending in the regions.

''Farmers are used to having seasonal cash flow that drops into the red but then pops back into the black at some stage during the summer period.

''However, our current forecasts indicate that many farmers won't be in credit for the entire 12 months of next season unless costs are reduced, income is higher than predicted or some of their overdraft is put into their term debt.''

At Tactics for Tight Times events, DairyNZ would be helping farmers to understand how low their cash flows might go for the 2015-16 season and how long they might stay there.

In the South, an event would be held at the James Cumming Wing in Gore on July 1.

Cash-flow events would also be held during the winter.

Resilience was needed so farmers could cope effectively with the trough in milk prices after the record payment in 2013-14, Dr Mackle said.

While long-term prospects for the industry were still positive, farmers had to remain competitive in a global exporting business where New Zealand's market share could be eroded by other competitors, he said.

Lincoln University agribusiness and food marketing programme director Nic Lees said low dairy prices would benefit New Zealand's dairy industry in the long term, as they would limit European expansion.

Grass would always be the lowest-cost source of feed and New Zealand had the most efficient grass-based dairy system in the world, Mr Lees said.

Ireland, which was planning to increase milk production by 50%, utilised less than half what it grew, while the large housed dairy operations in Europe were also profitable only at high milk prices.

It was unlikely high prices would be seen again soon and it would be a slow recovery. Farmers needed to be profitable at $5kg ms or they would not survive, he said.

The average milk price over the past 10 years was about $5.50 and it was likely that would be similar over the next decade as well, he said.

Southern dairy farmers have until April 30 to pledge their support for the proposed Southern Dairy Hub.

Farmers and businesses need to contribute about $2 million to enable the venture to proceed.

To date, nearly 300 farmers have pledged more than $710,000.

The hub would comprise a centrally located working farm of 300ha-380ha, farming four herds of about 200 cows to enable comparative research.

Buildings would be provided for offices, meetings, learning and education.

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