Small dairy farmers search for silver lining
Finding the silver lining as farmers face their third year of low milk payouts was the main theme of small dairy herds conference at Manawatu, reports Jill Galloway.
... farmers need to be skilled in many areas – in grass, cows and people, be able to fix anything and be good with finances. Mark Townshend
Another tough year is looming for dairy farmers and finding a silver lining was on the lips of many of them attending the SMASH conference at Feilding. Most of the 45 people at the conference for farmers with smaller milk and supply herds milked from 200 to 350 cows and entering the third year of low milk payouts, it is hard for them to see anything positive in the dairy industry.
However, SMASH national chairman Noldy Rust says many smaller dairy farms are in the best condition to cope with the long downturn as they are milking smaller herds and many do not owe much to banks.
He says some people are new to the industry and have small herds and others are established and only want a small herd as they look to consolidate their position by paying off debt or investing offfarm.
‘‘Others are small because that’s as far as they want to go,’’ says Rust, who lives in Waikato and milks 200 mainly crossbred cows. ‘‘But many chose a small herd because they don’t want staff, that’s a big one for many farmers.’’
He says there are still challenges facing farmers on a smaller farm.
‘‘To increase profit and do it better and better. You can always strive to get better and more efficient.’’
Rust says many farmers chose to invest off-farm, such as buying a run-off, a maize crop or a commercial building.
Smaller dairy farmers can often weather hard times as they tend to carry less debt, he says.
‘‘You set up in the good years, to cope with the bad years. And we [Rust and his wife] are finding this first-hand. We thought we had enough put aside, but we’re struggling .’’
He didn’t expect the milk payout to go so low, for so long.
On a small farm there isn’t the ‘‘’wiggle room’’ and farmers have to be financially sound to manage to lower level of income, says Rust.
‘‘Generally people with smaller herds have less debt, generally but not always.’’
One of the speakers, Mark Townshend used to be a small herd owner and grew up on a farm in Ngatea. He was a Fonterra director and a dairy farmer of 40 years experience.
Though he started on a small dairy farm, he is a part owner of herds in Canterbury, Southland, Missouri in the United States and Chile.
He considers himself lucky to have farmed in distinct periods within the 40 years. Townshend has been a farm worker and sharemilker, farm owner, multi farm owner, a dairy industry governor and an international farmer.
‘‘The number of cows you have is a poor measure of success. Larger farmers have generally succeeded financially, but being smaller, profitable and growing your business outside the farm gate is equally successful. It may be that smaller and happier is a great outcome. But there is no point being small and not profitable.’’
He said wealth can still be created and small herd farmers needed to keep that in mind.
‘‘With three years of low milk payouts, it is a once in a generation experience. It is a time to hone your business – take out costs and become more efficient.’’
When the payout is good, it will be time for smaller farmers to invest, says Townshend.
‘‘When times are good, invest outside of the farm gate. You might be milking 200 cows. But when times are good invest in another farm, or sharemarket or a commercial building.’’
He advised people to stay small, but think big – an equity share in another farm might be the way for them to build their assets.
‘‘Equity partnerships in some cases have a bad rap. But the good ones are a great mechanism from an investment point of view, and also in terms of growing yourself.’’
Townshend says farmers need to be skilled in many areas – in grass, cows and people, be able to fix anything and be good with finances.
‘‘Most people are only natural at two of those. You need to build your skills in the other things, or delegate to other people who are good at the things you are not.’’
He sang Fonterra’s praises, saying if farmers were in other markets they might have to find buyers themselves.
‘‘But because we have Fonterra and they look after international marketing, we don’t have to worry about that. Yes I’d like them to do better, but farmers overseas see that Fonterra is owned by the farmers, and wish they were lucky enough to have a co-operative they owned as well.’’
Rust is keen for people to come to the Manawatu conference which was the first of others held in Waikato and the West Coast.
‘‘SMASH events have proven to be a winner in the past few years as they have brought like-minded farmers together for a day to learn, share, network and socialise. They are a bit different from other [dairy] industry gatherings with a wide range of topics and a friendly ‘family’ feel.’’
SMASH is run by dairy farmers for dairy farmers
SMASH has been set up to help dairy farmers, particularly those with smaller operations, to run successful businesses. This is mainly achieved by events run throughout New Zealand to give farmers the opportunity to gain knowledge and skills for their farms.
But Rust says people have smaller herds because they like the lifestyle.
‘‘People still like cows and grass, they still like to milk the cows, and they like being on the land and masters of their own destiny.’’