Some big changes have been made to systems, one of the group has broken two bank loans to re-borrow at lower interest rates, tow-behind pasture meters are now considered a necessity, supplementary feeds are still being cut and deliveries deferred for existing feed contracts, crop machinery has been overhauled for more self-reliance, different forage crops are being trialled and off-farm income is needed to minimise cash drawings from the farm.
Among the group FWE for the year ranged from $2.80 to $4/kg MS and loan interest payments ranged from 20 cents (sharemilker) to $1.50/kg MS.
The cash surplus for each farm, after subtracting FWE and loan interest from milk income, ranged from a deficit of $1.10/kg MS to a surplus of $0.63/kg MS before tax. The group agreed the first step, for peace of mind, was to acquire a detailed knowledge of the farm’s financial accounts “to know how big that hole actually is” and not delay open-book communications with the bank.
Andy Kerton and his wife Tracy have two sons, aged 8 and 9, and are in their second year of 50:50 sharemilking on a system 3 farm (10-20% of feed imported) with 180 cows.
Andy has been farming since leaving school and moved to New Zealand from England four years ago, initially to manage a farm at Tokoroa.
“At the moment we are still cashflow-positive but by the end of this year we will be negative, as is the case for many people.
“Next season, keeping the same system, we could come out break-even, which would be a good outcome for us.”
After speaking to the bank, he said as a second-year sharemilker they could be considered a higher risk but they have got the loan interest down.
“We have trimmed our FWE as much as we can to $1.71/kg MS and after adding loan interest and principal payments I am not drawing wages or anything else from our farm income.”
The Kertons are living off Tracey’s wage and Andy’s part-time work for a contractor.”
“We use Dairy Base because you need accurate information. You can still make bad decisions but you need to know where you’re going and the detail. It’s a matter of getting the right system to suit your infrastructure, whether you have a feedpad or not, and to know the numbers.
“I think if you can be positive and keep going forward then you do have something to get out of bed for in the morning.”
For Andy and Tracy, with two children, they are not going to throw it all away overnight so are committed to work at it.
“I’ve talked to the bank and said ‘this is our position that I think we are in so can you go through it with us to doublecheck? No one wants to be lying awake wondering about their situation. After that conversation I felt we are on track, we are doing the best we can and there’s just not much else we can do really.
“I don’t lose sleep and I know others in worse situations who are managing it well. They have been to the bank. It’s the ones who stay home and are struggling who should be talking to someone.
“In England we were on the same farm for five years and barely spoke to our neighbour because the system there has farmers being paid differently. There was no talk of getting together but here it’s completely different.”
Farm owners have more debt now and the trend was a steady decline in herd-owning sharemilkers in New Zealand, highlighted in the 2012 AgFirst report Ensuring a viable progression path in the dairy industry.
AgFirst and DairyNZ are reviewing the report, with the updated report due out in May.
Read about it in the June Dairy Exporter.
