US farmers were on target to increase exports from 14% to 18% of total production this season, the equivalent of 60% of total NZ exports and enough to influence global milk supply.
“This will send us into another cycle within the next 12 months,” he said.
“That’s my crystal ball.”
The US industry was still feeling the effects of the global financial crisis and recent droughts, but the general mood was positive. Farmers’ mindset was to grow after weathering these recent storms.
McCall and DairyNZ economist Sam Howard visited the western US late last year to complete a benchmark study. They met agricultural economists, university and extension representatives and also visited farms in Idaho, California, New Mexico and Texas.
“We wanted to know the size and the imminence of the threat,” McCall said.
They confirmed the US was NZ’s biggest future competitor in dairy export markets, with companies such as Dairy Farmers of America and Glanbia now focused on exporting milk powder and cheese to Japan and China.
A lot of US farms were dairy beef operations, easily able to increase or decrease milk supply to meet export demands. And they had advantages such as cheap labour and supplements, he said.
Corn was 28c kg/DM and maize silage 25c kg/DM and dropping.
“We are foolish to take them on in their own system,” he said.
“They have access to much cheaper feed even when it’s expensive. They have cheaper labour and they can build infrastructure for less than half NZ’s price.”
To build unnecessary, expensive infrastructure and rely on supplements was the wrong move for this country’s farmers, McCall said.
“It isn’t doomsday for NZ. We continue to have a bright future, but we have to hone in on our competitive advantage.
“It really struck home to me that NZ has the climate to grow grass and we have to be very efficient at using our pasture. If the use of supplement distracts us into wasting pasture we have a problem.”
Another advantage to aid milk supply expansion was environmental regulations were not likely to get as restrictive as NZ’s, McCall said. US environmentalists were mostly worried about effluent solids and phosphorus, but because of low rainfall the problem didn’t show up as rapidly as in this country.
US farmers also had the ability to expand into new regions unlike in NZ.
“Environmental regulations appear to be biting more in California. Farmers are talking about selling up to move to a more business-friendly state.”
The scale of farms, the level of technology and good management skills were also impressive, he said. Some managers on 30,000-cow farms were exceptional, he said.
“They were savvy traders with both milk and feed and understood future markets completely.
“Their efficiency gains were substantial as they knew how much each feed loader was wasting down to 0.1%. “And they knew how much it is costing them.”
• David McCall and Sam Howard will be leading a workshop entitled United States and European competitiveness: how do we compare? at the DairyNZ Farmers’ Forum on May 7 at Mystery Creek.
