31 Jul 2015

Farmers warned to prepare for more milk cuts

2:38 pm on 31 July 2015

National dairy industry body DairyNZ is warning farmers to prepare for further cuts to companies' already low milk price forecasts.

Dairy cow north of Matamata.

Photo: RNZ / Alexander Robertson

It comes as ASB announced this morning it expects Fonterra to slash its forecast by $1 to $4.25 per kilo of milk solids when it reviews its payout next week.

However, the bank is predicting an end of season payout of $4.50.

Westland is the latest company to slash its milk payout for the current season, by $1 to a range of $4.60 to $5.

It also knocked another 10 cents off its yet-to-be-confirmed price for last season, to a range of $4.80 to $4.90.

Last week, the country's second largest processor, Open Country, also revised its forecast payout for this season to below $4.

DairyNZ chief executive Tim Mackle said the price slump was lower and longer than anything seen in the past decade, and farmers would need to do more than just shave costs.

"if we take the Open Country Dairy announcement last week and we talk about a $4 per kilogram of milk solids milk price, for the average farmer producing 150,000 kilos of milk solids, that's around a quarter of a million dollars in deficit for the production season ahead.

"One of the first things we're advocating strongly to do is to look to where they can cut the most unprofitable production, and that really is where they're putting in expensive feeds into the system to produce milk at times when they don't need to be.

"Some farmers will be feeling a feed pinch now... Average pasture covers in some areas are down, but once pasture growth rates kick in and your cover is built up, then really supplements that are costing a lot of money need to be pulled out of the system.

"The key really is to not get too concerned about dropping milk product, as long as you're dropping costs at a much faster rate - so that is the trick."

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