05 Feb 2015
"t's the only time we were glad of the miserable $4.70 milk pay out, as sending them away at $8.60 would be enough to make a grown man cry."
Elizabeth Hayes, Dairy Farmer
With a seasonally unreliable average yearly rainfall of 500 mm, farmers here are used to working in dry conditions and farm for it. But this summer has forced even the most hardy in the area to look towards the sky.
We bought the 870ha farm off Andy's parents five years ago. After three seasonally kind years trading and finishing stock we decided to convert to dairying. ANZ supported us through the change, encouraging us through the many tough decisions.
In 2013 we said goodbye to the sheep and beef cattle and brought the first black and white 'milkers' into the Valley, putting on a 54 bale rotary shed, initially milking 550 cows. During the build we also underwent a land swap with our neighbours which saw us gain another 200 ha of irrigable flat land.
This meant losing our high country hills and bringing our total area down to 600ha but giving us the ability to winter on farm and go into the second season with a 900 cow herd.
What makes this season's dry even harder to bear is the fact we are still waiting on an irrigation scheme which should have been running six months ago. At this stage we can only irrigate 180ha of a possible 380ha with our existing supply.
It's a massive struggle to keep the grass growing in this heat with such a limited amount of water. Andy and I make it a mission to always look ahead or we would both be bald by now. And unlike many others we have the prospect of hope, with the water due to start pumping from the Waitaki River in March.
We had our first whiff of the looming drought back in October, when strong nor-west winds kicked in, causing sleepless nights with fears of pivots toppling over. As the temperature climbed throughout November and December the mix of strong winds and hot days left our irrigation systems struggling. Grasses were starting to go and reality kicked in: the land was parched and there was no rain on the horizon.
Where we live, in the mouth of the Valley, just 70mm of rain has fallen since November, more than 100mm short of the average for the period. We were looking towards January which is traditionally one of the wettest months to bring a reprieve but with less than 20mm the panic set in.
By mid-December we were feeding out 3kg of dry matter per head per day. In early January, the lack of feed forced us to send 200 cows away to be milked at a neighbouring farm. The move meant we took an instant hit on production but ensured feed for the remaining stock and kept the core of the herd milking well.
It's the only time we were glad of the miserable $NZ4.70 milk pay out, as sending them away at $NZ8.60 would be enough to make a grown man cry. We are now feeding out twice a day, about 4kg of bailage per cow as well as 2kg to 3kg of palm kernel.
The drought, (which the government has just kindly, officially recognised in North Otago, Canterbury and Marlborough), is roughly costing us about $NZ3000 a day. This is taking into account the loss of production coupled with the cost of supplementary feed.
In just our second season milking I'd be lying if I said it hasn't been tough. We are able to cope with the knowledge that, for us at least, there is an end in sight, with the new irrigation scheme about to kick in.
We realise many others in this part of the world aren't as lucky and with the 30 degree days continuing, even the most hardy farmers in the area can't ignore their scorched surroundings. The number of stock trucks leaving the Valley is continuing and with no obvious rain ahead to prepare crops for winter, the rest of the year is looking grim.
For us, the dry should be over soon but the ongoing effect will be long-lasting. The whole season can be scratched down to an experience, one we shouldn't have to relive anytime soon.
Large areas of New Zealand's South Island were recently declared to be in in the grip of a medium-scale drought.
The declaration means up to $NZ200,000 will be made available by the government for rural support trusts which provide people in rural areas with anonymous counselling and advice. The declaration will also mean farmers can access financial assistance from the internal revenue department. The declaration covers 1,400 commercial dairy farms and 4,400 commercial beef and lamb farms in parched areas of Marlborough, South Canterbury and North Otago.
The Government is also keeping a very close eye on Wairarapa and southern Hawkes Bay in New Zealand's North Island which are also suffering from very dry conditions.
ANZ has introduced a drought assistance package to farmers impacted by drought in NZ. The package includes suspending loan principal repayments; waiving fees associated with restructuring business loans considered necessary due to impacts of extreme weather; and waiving fees for term finance and investments which improve performance and the ability to respond to climatic variation in future years.
Five strategies to survive the Big Dry
1. Understanding your situation, both productively and financially, is key to understanding the best possible options . Instincts and experience work best in normal years but in abnormal situations you need both advice and hard numbers. Use feed budgets and financial budgets to work out the best way though this season and to restore productivity.
2. Work out your best options. Put together a plan and budget. Follow that. A good plan means you will act earlier and take more effective steps. Focussing on what you can control means less worry.
3. Look after yourself . The health and morale of you and your family are what will see you through the crisis.
2. After you look after yourself, look after your business's long-term future.
3. Talk to your financiers early and all the way through the process of developing a plan. Your banker and your farm and business advisers form a team to cheer you on and help you through.
The drought has contributed to a double whammy for New Zealand dairy farmers. With a low milk price forecast, the second half of the 2014/15 season was always going to see lower production as farmers dialled back on supplement feed to reduce costs.
On top of this, the drought has resulted in a rapid drop in milk production heading into the end of the season. For red meat producers prime stock have been turned off earlier than otherwise would be the case. Capital stock numbers have not been cut into too much as yet, but this could change if the dry conditions continue. Focus will be quickly turning to the mating season and the extra feed/condition required to be put on ewes to ensure adequate conception rates.
“Rolled together you can come up with some sizable drought consequences,” says Con Williams, ANZ Rural Economist in ANZ’s Market Focus. Williams expects the drought to knock at least 0.5 per cent off New Zealand’s GDP growth over the first half of 2015.
See the full Market focus report.
The views and opinions expressed in this communication are those of the author and may not necessarily state or reflect those of ANZ.
05 Feb 2015