Dairy farmers advised put money in bank for a rainy day

Dairy farmers are being advised to stick to budget, despite Fonterra's forecast of an $8.30 milk price.

South Island Dairy Development Centre executive director Ron Pellow told farmers at the Lincoln University Dairy Farm's (LUDF) spring focus day last Thursday to keep within their budget to give breathing space for when the milk price drops again.

Mr Pellow reminded farmers that in the 2006-07 and 2007-08 seasons, Fonterra's milk price jumped from $4.33/kg of milk solids to $7.87.

However, the Lincoln farm's expenses increased significantly and then the milk price fell to $5.25 in the 2008-09 season.

''This time, we want to make the most of it by keeping to the budget we have set and put the money in the bank.''

He said this season's farm budget was set early in the season, before Fonterra revised its forecast to $8.30, so the budget was based on a payout of $5.80, with expenses budgeted at $4.08.

''History of past seasons with large increases in forecast payout suggest even more rigour is required to maintain costs this year as `ag-inflation' will occur across many on-farm expenses.

''Avoiding these cost increases will enable LUDF to both retain the increased payout and ensure costs are held in future years with lower probable payouts.''

''Ag-inflation'' could include price increases for things like nitrogen or supplements as farmers sought to maximise production to cash in on the higher payout. Mr Pellow said the farm's management team remained committed to its goal of farming within a nitrogen limit, despite the challenges of no longer being able to use Eco-N, which contained dicyandiamide (or DCD), and were committed to using less nitrogen to induce pasture growth.

''Farming within a nitrogen limit is voluntary for us at the moment, but talking with local councils, it could become quite a challenge for farmers in the future. So we will continue to demonstrate best practice for farmers to follow.

''To date this season, we have used less nitrogen and it has worked well for us, but that is probably due to the weather conditions.''

DairyNZ developer Steve Lee said regular applications of 25kg of nitrogen per hectare would be made instead of the previous rates, which varied from 25-40kg/N/ha, meaning significantly less nitrogen would be applied this season compared with last season.

- David Hill.


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