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NZ Agriculture looks to be in a strong position. The world wide shortage of food is going to make New Zealand one of the lucky countries.
- Lucky because we are well away from the bulging hungry populations;
- Lucky because we are a food producing nation that does not eat all its products and has plenty to sell;
- Lucky because we are in a temperate climate with relatively regular rainfalls.
Distance from our consumers was a disadvantage and now I think it will become our main advantage. Why? Because hungry countries and hungry people start doing strange things. We have seen some results on that oblong screen in our homes recently.
As the New Zealand Government and the Reserve Bank slowly lower interest rates our dollar will probably follow. Don’t get too carried away however, because for the reasons just listed New Zealand is seen as a prosperous country. And people want to invest here. Sheep and beef and some horticulture products languish under soft demand, high cost of production, processing, and transport to market
If we look at how much grain it takes to produce a kilogram of beef we realise it is relatively inefficient. Compare this to feeding grain and cereal as a direct food for humans and we realise that it is not the best use of resources.
Higher Interest rates have also sucked the lifeblood out of rural New Zealand. In most balance sheets the debt cost is the largest cost to their business. Managing the cost of debt is really important and should be the focus of all farmers.
New Zealand benefits from some of the best, innovative farmers in the world. Hopefully, ever increasing regulations and compliance costs will not stymie our inventors from trying and completing new ideas and technologies.
An example of this is the “Batt Latch”. This is a simple electronic device that opens the tape gate for the cows to leave the paddock at a pre-determined time. This allows the cows to drift up to the cowshed or up to the feed platform. One farmer told me he can have cups on his cows in the morning within ten minutes of leaving the house. Why? Because this simple little device lets the cows come up to the shed. All at a cost of approx. $400.
The challenge will be to manage our input costs and our land resources, which include:
Fertiliser
- What is the best and most profitable fertiliser?
- What is the interrelationship with carbon exchange and the ability of the soil to hold and release nutrients?
- How is the soil nutrient balance related to the brix level in our pasture and so on?
- What is our cation exchange capacity and do we need more lime and so on?
- Some farmers have run the old formula of 1kg of fertiliser per 1kg of milk solids produced.
Interest Rates and Debt Costs
Enough said
Feed Costs
The 2008 drought has taught us all a lot of valuable lessons.
- How can we source good quality feed at a realistic price?
- Do we store it on our own farm or rely on outsourcing?
- Can we grow more feed on farm and so on?
- What if for example all these lifestyle blocks grew maize and grass silage, for the dairy farms that surround them?
These costs as a percent of gross farm income used to be relatively low but are creeping up.
- Can we be more efficient and use our time and motors more effectively?
- Will “Batt Latches” save us 2 trips down the farm for example?
- Can staff use push bikes to follow the cows up the race during the summers and so on?
- Can we be more organised for fewer trips to town to collect supplies?
I heard of one friend who called themselves “tarseal farmers”. They spend most of their day in a car!
Labour
- How do we manage our labour resource?
- Can we reduce labour by having more mechanisation?
- How do we maintain our staff on a long term basis rather than having them leave every year?
Compliance Costs
What are the issues and how can we manage them better?
I have heard of somebody who is willing to fly over the whole of New Zealand with cameras mounted on the bottom of his plane to advise Fonterra of the dairy farmers before the prosecuting authorities do so.
Stock Health
- Can we reduce costs here?
- Can we look after our stock better?
- Can we use drenches less?
- Can we have more natural resistance and so on?
- Can we have these more realistic and cut down on wastage and consumption?
- Can we be more effective in how we spend our money?
- The challenge is to maintain our low cost of production as our competitive advantage on the world scale. How can we do that and keep costs down?
In Summary
New Zealand agriculture looks great. I have had a lifetime in agriculture, and I have never seen things look so good.
The world is hungry and short of food. There are some serious challenges before us but we resilient Kiwi’s will manage our farms and resources better than most. We need to be open to change and the speed of which will frighten us. We need to be proud of our country and have a more “Buy New Zealand” attitude.
By considering all these things we will remain at the forefront of world agriculture as quality food producers.
These are the opinions of Don Fraser of Fraser Farm Finance. Any decisions made should not be based on this article alone and appropriate professional assistance should be sought.
Don Fraser is the Principal of Fraser Farm Finance and a consultant to the Farming Industry. Contact him on 0800 777 675 or 021 777 675.
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