fbpx
Print this page
Tuesday, 08 March 2016 06:55

Grass will be back in fashion

Written by  Peter Burke
Colin Armer (left) and Greg Gent at Shanghai Pengxin’s dairy academy opening last week. Colin Armer (left) and Greg Gent at Shanghai Pengxin’s dairy academy opening last week.

Former Fonterra director Greg Gent says grass will become fashionable again as the effects of lower dairy prices continue.

The Northland farmer believes this one of the positive consequences of the current crisis.

"Our comparative advantage in the world is grass, and not all dairy farmers moved away from that," he told Dairy News at the opening of Shanghai Pengxin's Central North Island Dairy Academy in Taupo last week.

"There was quite a chunk of farmers who've stayed with that straightforward farming system. Moving back to greater use of grass and less reliance on supplements will make for a stronger industry," he says.

Gent says in the days when New Zealand was getting $US5000 a tonne for milk powder any farm system could work and make money.

But the fallout from the price downturn is now showing, and as a result farmers will probably take a different view of risk management; they will look at how they handle risk and maybe build more resilience into their businesses -- a positive consequence.

One concern raised by banks over the years has been the lack of financial literacy of some farmers, but Gent says risk management is a bigger issue.

"You can blame all sorts of things. You can equally say that banks have had a fairly short corporate memory. I would translate financial literacy more as risk management... and if I saw a weakness it would be that," he says.

Farmers will in time take greater ownership of their budgets, instead of these being largely owned by the banks Gent says. Farmers will get into developing various scenarios and planning for these.

Another former Fonterra director, Colin Armer, says clearer market signals from Fonterra would have been useful for farmers trying to manage through the present difficult times. While the low dairy prices can't be blamed on Fonterra, clearer signals would have helped.

Armer says restoring profitability to the industry requires a move back to basics -- volumes of production coming off farms and the cost of production.

"There will have to be a reset and some costs taken out of the business. We don't know how long this oversupply situation will last, but in the meantime people can't go on banking losses."

Armer says the present crisis arose from many factors including the Chinese market going off the boil, increased dairy production in Europe and US and trade bans imposed by Russia.

More like this

Fonterra's in good shape

Fonterra released its interim results last month, showing a continuation of the strong earnings performance delivered by the co-op through the 2023 financial year. Here’s what Fonterra chair Peter McBride and chief executive Miles Hurrell said about the results…

China trade

OPINION: Last week's revelation that data relating to New Zealand MPs was stolen amid Chinese state-sponsored cyber espionage targeting two arms of the country’s Parliament could test the long-standing trade relations between the two countries.

Featured

National

Green but not much grass!

Dairy farmers in the lower North Island are working on protecting next season, according to Federated Farmers dairy chair Richard…

Council lifeline for A&P Show

Christchurch City Council and the Canterbury Agricultural and Pastoral Association (CAPA) have signed an agreement which will open more of…

Struggling? Give us a call

ASB head of rural banking Aidan Gent is encouraging farmers to speak to their banks when they are struggling.

Machinery & Products

Tractor, harvester IT comes of age

Over the last halfdecade, digital technology has appeared to be the “must-have” for tractor and machinery companies, who believe that…