Pressing on through tight times on farm

“The challenge for everyone will be cashflow next season with a low forecast price and low retro payments,” South Canterbury consulting officer Caleb Strowger told a workshop at Pleasant Point last week.

Even before the April 30 cut to Fonterra’s then $4.70/kgMS forecast, a typical 730-cow, owner operated farm in the region with a zero bank balance at June 1 could expect a near quarter million-dollar overdraft by September and again in December before clawing back above zero in May, he calculated.

For a similar scale 50/50 sharemilker the dip’s not quite as deep, at -$160,000 by December, but the recovery is longer coming with the bank balance only just back to zero by June 1.

The April 30 forecast revision meant those figures would be even lower, with owner operators probably needing another $60,000 on the overdraft, he added.

“How many of you are confident you will leave here today able to plot where you’re going to get to?”

Several visitors, and host farmers 50/50 sharemilkers Cole and Virginia Groves, said they’d already run budgets for next season a couple of times and would be doing so again following the $4.50/kgMS forecast for 2014-15.

“The problem is we don’t know what we’re going to get next season [2015-16] and we won’t know until May 25,” said Groves.

Later the group thrashed through ideas to reduce costs, and be prepared for an extreme weather event such as a big snow.

Reducing cow numbers to cut or eliminate feed costs came up repeatedly, possibly with a switch to rearing young stock at home instead of contracting out. Keeping calves on until May instead of sending them away in December was considered a good option as heifers would get closer to target mating weights on the high quality pasture typical of dairy platforms than the lower quality feed offered by many graziers. Keeping those at home, instead of the yearlings, would also take less feed away from the milking herd.

Growing more winter feed, most likely fodder beet, on the milking platform also came up a couple of times so more cows could be wintered on, while it was also suggested grazing fees which were considered “quite high” at $27-28/head/week could be negotiated down.

However, with beef booming, graziers have other options so maintaining the relationship for the future was also stressed. “A lot of graziers are
very nervous about whether they’re going
to get paid this year,” noted one dairy farmer present.

There was no such sympathy voiced for contractors who needed “the acid” put on them over rates. “Ask the question before you get them in, whether they charge per hectare or per hour. These guys have had a pretty good run!”

And it’s not just contractor fees that should be challenged. “Renegotiate everything,” it was suggested, including bank and insurance quotes. The accountants should be briefed to minimise tax, especially provisional tax.

Meanwhile, “question everything you buy” on farm as to whether it’s essential. “Have you got something at home you could fix?”

Having “a good clear out” of surplus kit could also tidy the farm and raise cash. Selling some larger capital items, possibly surplus Fonterra shares, to reduce debt and interest was also suggested.

Transferring overdraft to lower-rate term debt could get interest rates down three percentage points on that money. 

Fertiliser could be cut to maintenance level, and the need for even that checked where drought may have reduced nutrient offtake.

As for personal drawings, there would be no holidays in Fiji this winter, which would at least be a positive if the weather turned to custard. “We’ll all be in biking distance!”

Saving ideas:

• Milk fewer cows for lower cost but more profit – do the math.
• Bring some or all youngstock in-house.
• Grow winter feed on milking platform.
• Renegotiate everything – bank, insurance, contractor rates, the lot.
• Challenge every purchase.
• Tidy up and sell surplus kit.
• Consider capital sales to cut debt and interest.

Keeping mental illness at bay

While Caleb Strowger focussed on the financial answers to the ‘how low will you go’ question, DairyNZ’s Dana Carver, possibly unwittingly, put a new spin on it, warning of the dangers of burnout and descent into mental illness.

Even before the current downturn, 14% of dairy farmers recorded high “burnout” scores and 32% had pain which interfered with their work. High blood pressure affected 57% of male farmers and 41% of all farmers have high cholesterol. On average there are 25 rural suicides a year, twice the number of vehicle deaths, she pointed out.

“We are concerned WorkSafe is going down the ‘safety’ line way too much and not doing nearly enough about health.”

With input from the field day audience, Carver listed the many stresses farmers face, including the “quite unique” trifecta of isolation, public perception and the fishbowl factor of being the nation’s biggest and most successful farming sector. “We are not seeing this many stresses in any other industries.”

Up to a point, stress is a good thing, as it’s what gets us out of bed in the morning and motivates us. But too much for too long is detrimental and burnout becomes a real risk. Symptoms include high blood pressure, heart disease, weakened immune system, aches, joint weaknesses, and inability to concentrate, make decisions and stick to a plan.

If those last symptoms persist for a fortnight or more such that “disorganisation” of the mind and emotions impairs normal functioning then you’re into the realms of mental illness.

Carver listed five internationally recognised strategies to keep stress in check:

• Rest and ‘take notice’.
• Be active and eat well.
• Connect and give back.
• Be safe and have a plan.
• Keep learning.

In a dairy farming context, being able to do those things depends on good people and time management, hence DairyNZ’s efforts in those areas, she added.