The first NZX Agri Dairy Farmer Survey of Intentions revealed they intend to cut back on supplementary feeding and send unproductive dairy cows for slaughter earlier.
Late winter pasture growth tended to be the same or worse than last year, 80% of farmers surveyed said.
But despite those negative trends and the appalling prospects for the milk price three-quarters of all surveyed farmers expected their milk production to be the same or higher than last season.
Such innate optimism at the beginning of the season was tempered by concerns over the unfolding weather conditions through spring and summer, especially the developing El Nino.
AgriHQ dairy analyst Susan Kilsby said dairy farmers were renowned for milking their way out of financial trouble.
Because the cost structure on many farms was fixed, farmers looked to maximise milk production at low cost.
“Incremental milk that is reliant on high-cost feeds will be eliminated but strategic use of supplementary feeds will continue.
“Weather will play a big part in how much milk is actually produced and the low milk price means it will be difficult for farmers to justify buying extra feed to fill gaps in pasture production,” Kilsby said.
The AgriHQ online survey attracted nearly 300 responses, about 60% from North Island dairying regions and 40% from the South Island.
Nearly half of those surveyed said their cow numbers would remain the same this season and those who intended to milk more cows were balanced by those who would milk fewer.
Only 25% of respondents said they would rear more calves to weaning age to take advantage of high beef prices.
Some 45% of farmers said late-winter, early-spring pasture growth and potential were worse than last season while 33% said they were the same and 19% said better.
The adverse effects of the forecasted El Nino weather pattern prompted 26% of farmers to expect reduced milk production, 5% expected increased milk and 41% said El Nino would have no real impact.
About 7% of surveyed farmers would milk once-a-day (OAD) from the start of the season and a further 20% would go to OAD after the milk peak.
Intentions concerning the culling of cows were quite clear – more culled than previous seasons and earlier in the season than before.
Half of farmers said they would cull the same number as usual; 31% would cull the same number but earlier and 19% would cull more.
Kilsby said 150,000 more dairy cows were culled last season compared with the season before and she was not surprised to see that trend continue given the cashflow incentives of low milk price and the high beef price.
The amount of supplementary feeding in spring would be reduced by 36% of farmers and 49% said they would reduce supplementary feeding in autumn.
Nearly half of all dairy farmers intended to grow more of their own supplementary feed this season.
Therefore, 63% said they would buy in less supplementary feed this season.
After considering their answers to all previous questions an optimistic one-third of farmers thought their milk production would be higher this season, 44% said the same and 22% said lower.
Massey University emeritus professor Colin Holmes said the low payout meant most supplementary feed would be producing incremental milk.
Supplements were unlikely to be profitable if their cost per kilogram of feed was greater than 5% of the forecast milk price.
Therefore at $5/kg MS supplementary feeds should not cost more than $250/tonne and that ruled out most purchased feeds except palm kernel expeller and some prices paid for grazing off.
Holmes said farmers should consider the feasible whole farm systems with “what if” scenarios, one of which had to be no use of supplements.
Otherwise, they would find it very difficult to distinguish between strategic and incremental use of supplements.
“At a low payout most purchased feeds will be producing incremental milk mainly because the farm is still on the wrong system, ie, too many cows per hectare, MS target per cow too high, calving too early and so on.”
Dairy NZ senior economist Matthew Newman said the AgriHQ survey finding that half of all farmers were going to reduce their use of supplementary feed was significant.
The findings agreed with what DairyNZ was observing, except for the farmers’ own production outlook.
Farmers did look on the optimistic side regarding milk production despite the trends to lower production such as less use of supplements, more cull cows and the looming El Nino.
"Fewer cows along with less supplement use will inevitably mean less milk is produced and processed and so we are at this point in the season forecasting a drop of about 2-3%.
"Repairs and maintenance, fertiliser and supplementary feed costs make up about half of a farmer's working business expenses.
“These are big cost items that are historically linked to the ups and downs of milk price.
“So when milk price goes down, we will generally see these cost areas reduce," Newman said.
