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About 20% of West Coast dairy farms could be in serious financial trouble, Federated Farmers heard at its quarterly meeting in Greymouth last week.
Provincial president Peter Langford said farmer sentiment was low given Westland Milk Products’ poor performance and many dairy farmers having had to borrow just to continue.
The upheaval and "negative thoughts" around Westland Milk management, governance and performance meant it was fair to say dairy farming, "with low and no payout" over the past two months, was difficult, he said.
He was hearing grim news about farmer debt, which, after a tough year with the depressed global dairy market, was making it "even more difficult".
"The bank comes knocking because global dairy trading auction has risen a little and things must be on the up and up — so let’s put your farm on the market now and take advantage of it.
"I have had one farmer ring me with this scenario but how many more are there? It could amount to 20% of West Coast farms."
The pressure to sell was despite evidence West Coast farm listings were not moving.
One agent had refused to accept more farms, because they had "too many unsold listings".
Like many other farmers, Mr Langford, a dairy farmer from Karamea, said he had extended overdraft facilities because Westland Milk had paid no income for two months this winter.
"BNZ have sent letters saying they won’t be supporting [some] people after the end of this season," Mr Langford said.
"There is a lot of worry out there that there could be 20% of West Coast dairy farmers under pressure to move on," he said.
Westland Milk needed to be part of the solution, particularly as some shareholders would be considering their options.
"We really need the dairy company to be the most successful one in the country, not dragging last. We really need to be the one with people queuing up to join."
The prospect of Westland Milk’s Canterbury suppliers being "door-knocked" by competitors was real, he said.
"One risk we face is that Canterbury farmers do have choice when it comes to who they supply, and in some cases would make a million more by doing so."
Federated Farmers dairy section chairwoman Renee Rooney agreed, noting that cash flows were "pretty grim" after Westland Milk finished on a net average cash payout of $3.80 a kilo, topped up by 26c a litre from Westland’s balance sheet — which she said had to be paid back from somewhere.
In early spring, even though payouts and the weather were miserable, farmers had been generally prepared, had their eyes wide open with budgets and cash flows prepared and good communication with bankers, Mrs Rooney said.
But the 2016-17 opening advance of $3.80 seemed to be "the ‘magic figure’ that suppliers have become accustomed to".
"My report card for [Westland Milk Products’] performance in recent years is a rating of ‘poor’."
Farmers had been "keeping the faith" waiting for the company’s value added strategy to start showing results, but it was very disappointing — particularly when farmers had been obliged by the company to lift environmental and milk production standards to continue supply.
- Brendon McMahon