Federated Farmers - October 2011

Dairy Alert

The bi-monthly newsletter from Federated Farmers Dairy Industry Group

EXECUTIVE COMMENTARY

Federated Farmers Dairy Vice Chairman, Robin Barkla

Federated Farmers Dairy Chairman Willy Leferink is away at the International Dairy Federation meeting in Italy. In his absence, Robin Barkla offers his commentary.

First of all, on behalf of Willy and the rest of the team at Federated Farmers Dairy, I need to thank Lachlan McKenzie for the terrific work he has done as our Dairy Chairperson over the past three years. He has been outspoken at times, but this has often been necessary in order to get the right results, and the right results are, as he has so often said, what success looks like!

TAF - I am really pleased to see Fonterra shareholders finally taking an interest in Trading Among Farmers (TAF) and the implications this proposal will have on your co-operative. I know you are passionate about the future of your co-op and that your concerns reflect your need to have Fonterra be successful in its next phase. A good debate is healthy and necessary. You need to make sure that all your questions are addressed by Fonterra and the answers satisfy you. The executive team of Federated Farmers Dairy is working on your behalf by contacting the directors to make sure they understand your concerns need to be considered and that the questions asked by you need to be answered and communicated back to you.

Strategy for nutrient management - New Zealand needs the dairy industry to come together and agree on a strategy on how to manage nutrients. We hope the Primary Growth Partnership's Nutrient Management Programme will do just this, so we can then go out to councils and the public and show them the industry is moving in the right direction. This may also help councils come up with policies that are based on the science the industry has agreed on.

Elections - There are a few elections coming up, including DairyNZ and Fonterra to name just a few. Your vote will count, so get out there, choose the candidates you will support, throw them a few questions to see what their view is on issues that concern you, and then vote.

Sharemilkers’ Section Chairman, Ciarán Tully

Health and Safety - The Department of Labour has been carrying out random farm visits. It is important that sharemilkers are aware of their responsibilities regarding work place safety. Do your staff wear helmets on their bikes? Have they received sufficient training in safe machinery operation and stock handling? If you haven't already done it, consider sending your staff on courses, such as Farmsafe, to increase their knowledge level and skill sets. Your business will reap the returns by having safer, more skilled staff. If you don't look after this area and have accidents, near misses or a visit from the department, it will cost you!

New Zealand Dairy Industry - AwardsThe 2012 New Zealand Dairy Industry Awards - of which Federated Farmers is a key sponsor - have just been launched. Why not give it a go this year and learn how to improve your business performance, develop leadership skills and grow your reputation. Federated Farmers recognises the value of sponsoring these awards, with many dairy industry leaders having come through NZDIA competitions. The awards will enhance your networks and also provide some fun along the way. Entries are open from 1 November until 20 December, with the Early Bird cut-off date of 1 December. Click here for more information and registration forms.

Check it off - Finally, the Sharemilkers' Section is working with Sharemilker Employers' Section to create a check sheet for would-be sharemilkers. The check sheet will help cover off questions both parties should ask before committing to a new agreement. If you have any ideas on what you want to see included, please contact me or your local Sharemilker Chair by clicking here.

Variable Order Sharemilking Agreement 2012 - At last, the new Variable Order Sharemilking Agreement is available. If you are signing up to sharemilk for the current season, you still have to use the 2001 Agreement. If, however, you are looking at the 2012/13 season, you will need this new agreement. See more on this below.

INDUSTRY NEWS

Federated Farmers Dairy Agm - The Federated Farmers Dairy Annual General Meeting was held in Rotorua on 29 and 30 June. Lachlan McKenzie stepped down as chairperson as planned, and Willy Leferink was elected unopposed as the new Federated Farmers Dairy Chairperson. The council's thanks go to Lachlan for all the hard work, dedication and passion he has poured into Federated Farmers Dairy and we wish him well as he finds some other venture to immerse himself in. I am sure the dairy industry has not heard the last of him.

Congratulations to the new executive members: Willy Leferink (Chairperson), Robin Barkla and Andrew Hoggard (Vice Chairpersons), Michelle Riley, Kevin Robinson and Ciarán Tully. You can contact the dairy executive by clicking here.

Prior to the meeting the council visited DairyNZ's Scott Farm and AgResearch's Tokanui farm. We heard about the research DairyNZ is doing to see how farmers can get better outcomes with fewer inputs and more milk with a smaller environmental footprint, while at the Tokanui farm we learned about research on pasture persistence.

Remits carried at the AGM were:

THAT Federated Farmers work with industry partners, including regional and unitary authorities, to ensure the adoption of risk and effects-based rules around the management of farm dairy effluent, and the reporting of any compliance breach. The reporting should be based on:

No adverse environment effects
Potential adverse environmental effects
Actual adverse environmental effects

and the level of enforcement must reflect the level of "likely" effect.

THAT the National Council of Federated Farmers ask banks to justify their method of calculating margins on bank loans as it is important that banks provide greater transparency in relation to setting loan margins so that farm businesses can make better financial planning decisions.

Both of these remits were passed up to National Council, where they were also both passed.

Council discussed the importance of Federated Farmers' membership. Everything we do depends on our membership base - without members, Federated Farmers would not be able to advocate on behalf of all farmers. With farmers making up a tiny proportion of New Zealand's population, we need to shout well above our weight. The Federation engages with key policy decision-makers at the highest levels about the main policy issues facing all farmers. It is essential we continue to work with these people in order to get the best outcomes for farmers.

Tim Mackle from DairyNZ also spoke on the need for the whole dairy industry to work together to ensure environmental, regional and catchment-specific goals are met.

Jim Gordon from Inland Revenue spoke on livestock tax issues as the department looks at ways of closing loopholes regarding the current livestock evaluation schemes. He invited farmers to contribute to the discussion document that has since come out. See more on this in "other news" below.

NAIT's Chief Executive Russell Burnard joined the meeting, clarifying which tags farmers needed to use until the NAIT scheme comes into affect in mid to late 2012.

Currently, farmers must:

Tag cattle destined for slaughter with a yellow bar-coded primary or direct-to-slaughter tag
Tag bobby calves (less than 30 days old going direct to slaughter) with a meat processor's direct-to-slaughter tag
NAIT approved RFID tags may be used as an optional primary tag for cattle born after 1 March 2011 (or optional secondary for cattle born before that date).

When NAIT becomes mandatory:

All cattle moving off farm must be tagged with a NAIT approved RFID primary tag and an approved secondary tag - but for cattle going to slaughter only primary tags, not secondary tags, will be required
All cattle born on or after this date must be tagged with a NAIT-approved RFID primary tag, and an approved secondary tag, within 180 days of birth, or before movement off farm
All cattle born before this date, and not being moved off farm, need to be tagged with a NAIT-approved RFID tag within three years

Federated Farmers is taking this delay in implementation as an opportunity to try and make further improvements to what is turning in to being a very costly scheme.

The Constitution for the Sharemilkers' Section was ratified at the AGM also. View it here: Federated Farmers of New Zealand (Inc) Sharemilkers' Subsection Constitution . See also the Federated Farmers Dairy Constitution by clicking here.

New Board Of Federated Farmers - For those of you who have not yet caught up with the new board of Federated Farmers, we now have: Bruce Wills as our President; Vice President as William Rolleston; Willy Leferink, Jeanette Maxwell, Ian MacKenzie, Anders Crofoot, and David Rose. You can contact them by clicking here.

Milk - Most of you reading this will be aware the dairy industry has faced two major issues over the last few months: the Raw Milk Regulations and the Parliamentary Commerce Select Committee's enquiry into the price of milk.

Raw Milk Regulations - Federated Farmers submitted to the Ministry of Agriculture (MAF) on the Raw Milk Regulations. This was followed up with a meeting with MAF where we requested that it is fixed once and for all. This, however, is a difficult problem and fair solutions will be hard to find.

In summary, we submitted that:

the volume of Regulated Raw Milk available to each independent processor should be at a set volume (50 million litres per each independent processor) for three years, and then decreased over time, with zero being available on the fifth year, to encourage independent processors to source alternative supplies of milk after getting through the "catch 22" period
independent processors in business for five years or longer should not be eligible to use any Regulated Raw Milk
Those taking milk at the factory gate must be treated the same as those accessing it at the farm gate market. This will ensure that processors will not switch from the farm gate market to the exclusive use of the factory gate market just to continue to be eligible for this milk. This could help achieve the objective of getting a competitive farm gate market to work for the betterment of all dairy farmers and to reduce demand for Regulated Raw Milk
Independent processors should not be discriminated against in terms of what markets they sell into
the amount of milk specified in both the Dairy Industry Restructuring Act (DIRA) and the Raw Milk Regulations be the same, and be set at 600 million litres.
that the twenty percent rule within the DIRA be dropped or replaced with a secondary volumetric limit to protect the boutique cheese makers and other small independent processors who rely on this type of supply

In order to encourage these outcomes, MAF needs to consider:

Unwilling traders of raw milk
Regular change in name and/or ownership of independent processors in order to maintain their eligibility
Toll processing, given the current definition of independent processors
Goodman Fielder's position in the dairy industry, as it exports milk, is not a new entrant, has no own supply, and has a long term contract for a fixed volume of milk, all under the Raw Milk Regulations
Clearly stating in the Regulations (and the Act if necessary) that restrictions on the use of Regulated Raw Milk are allowed and to state what these restrictions are

Read the full submission here Federated Farmers DIRA Submission

The price of milk enquiry - We also submitted to the Parliamentary Commerce Select Committee on their enquiry into the price of milk and were invited to speak before the committee.

Federated Farmers does not believe New Zealanders are paying more for milk over and above the cost of living increases that have taken place. We do not believe that either the farm-gate or factory-gate prices are too high, especially considering the levels and movements of international dairy commodity prices. However, we are keen to ensure the regulatory framework for setting these prices works effectively and fairly.

On the face of it milk appears to have been more expensive in New Zealand than overseas, but there are important factors to consider: the addition of GST to milk in New Zealand; and in other countries, the supermarket price wars and payment of subsidies to farmers. The use of subsidies means consumers actually pay more for their milk indirectly through their taxes.

Read the full submission here Federated Farmers Milk Price Submission.

Variable Order Sharemilking Agreement - The 2012 Federated Farmers' Variable Order Sharemilking Agreement is now available for use.

The Variable Order Sharemilking Agreement 2001 has proven to be a valuable document, protecting both the rights of sharemilkers who do not own cows and those who own their farms. There have, however, been various issues that needed clarification and a review of the order was undertaken.

The review was spear-headed by representatives of the Sharemilkers' Section and the Sharemilker Employers' Section of Federated Farmers Dairy, who also considered members' feedback on the existing 2001 Agreement.

The resulting agreement is a product of good faith and bargaining which will stand up in court. Most importantly, it is in language farmers will understand, it is user friendly and contains helpful charts and monthly reporting forms.

The 2012 Agreement covers:

Obligations around farm practices. These ultimately cost farmers money if things are not done correctly
Keeping children safe. The farm house is now required to have stock proof fences. Also, a safe place is required if children need to be at the milking shed during milking times
Milk supply to all dairy processors. While the Agreement does take into account Fonterra's method of payment, it is also suitable for all VO sharemilkers who supply milk to other dairy processors
Fonterra's method of payment. The Agreement takes into account the new method of payment which Fonterra uses. For those with herds of not more than 300 cows, and who agree not to share the revenue from the dividend under the DRPA, the minimum percentage of income derived from milk supplied to Fonterra will be 22 percent
Disputes. The arbitration and conciliation clauses have also been updated. While it is disappointing every time the relationship between the sharemilker and the farm owner breaks down, these things happen

As with any agreement, we ask that you sit down with your farm owner/sharemilker and talk over the business proposition. All the clauses in the agreement need to be read and discussed, as the outcomes will affect you if things go wrong. Fill in the tables and blank spaces where you need to and sign on the dotted line. An unsigned agreement is not worth the paper it is printed on, as parties cannot argue over anything. At least if you sign an agreement you can argue if things are not fair and this will be taken into account.

Call Federated Farmers on 0800 327 646 for your copy today.

OTHER NEWS

Livestock Tax - IRD has been reviewing livestock tax and last month it released a discussion paper on herd scheme elections. The Government is concerned about the ease that farmers can switch between the herd scheme and the national standard cost scheme, which can result in significant tax advantage when livestock values are volatile. This "inappropriate use" of the herd scheme elections is estimated to have cost the Government $100 million as a result of the 2007/08 peak in dairy cow values. IRD wants to make herd scheme elections irrevocable and to tighten the election farmers using a herd scheme can currently use when selling livestock and ceasing farming.

Federated Farmers has consulted with elected representatives and has developed a submission. Feedback to date indicates most farmers accept there is a problem but there is concern about the loss of flexibility from making the herd scheme election irrevocable. There is therefore a preference to retain the ability to exit the herd scheme but to increase the notice period to at least two calendar years. There is also acceptance about the need to tighten the elections when selling livestock and ceasing farming, but the focus should be on clamping down on the blatant avoidance activity rather than genuine sales.

Submissions officially closed on 30 September, but we have an extension. Our submission is nearly complete so those who wish to provide their views should contact nclark@fedfarm.org.nz.

Land and Water Forum - Earlier in the year, the Land and Water Forum (LaWF) presented its report to Government - a comprehensive package with 50 plus recommendations for improving water management in New Zealand. Following through, the Government has now asked LaWF to come together again to work through the detail of some of the key recommendations. Federated Farmers Board member Ian MacKenzie is representing the Federation through this next phase, working alongside representatives from dairy and other primary sector groups, as well as representatives from other stakeholder groups, from energy companies to environmental NGOs and including regional councils. Over the coming months, LaWF members have been tasked with developing an agreement around recommendations for setting limits for both nutrients and water, quantity and quality, and for managing these limits.

ADVICE

Inductions - Don't forget that induction targets will be further reduced next year so farmers need to get the condition back onto cows quickly if they want a narrow calving window next season; farmers may need to put their hands in their pockets sooner rather than later to buy in extra feed.

From 1 June 2011 to 31 May 2012, within an individual herd, the level of inductions should not exceed eight percent of the herd's total size
From 1 June 2012, within an individual herd, the level of inductions should not exceed four percent of the herd's total size

Animal Welfare - Officials at MAF are congratulating Federated Farmers on the work its members are doing on getting to farms with difficulties. Giving farmers a helping hand before issues become too big means that fewer cases of poorly treated animals are being found. A big thank you those farmers who are helping deal with this issue!

NOTICES

The next Federated Farmers Dairy Council meeting will be held on 16-17 February 2012.

MEMBER BENEFITS

Employment Agreements - Federated Farmers has a completely up to date range of Contracts and Agreements to assist with all aspects of rural employment. We have employment contracts for fixed term, casual and permanent employment agreements, as well as Application for Employment forms, Application for Leave forms, Contract for Services and Occupational Health and Safety manuals.

Members pay from just $50 + GST, non members may also purchase from $150 + GST.

To discuss and order your employment contract and agreement needs call 0800 FARMING (0800 327 646) to talk with our Customer Service Team.

Special offers for Members of Federated Farmers - All current members enjoy great purchasing discounts when shopping with Federated Farmers sponsors. For example Resene Paints offer members a 25 percent discount off premium paint in the 500ml to 4 litre range, Swanndri gives a massive 20 percent discount off orders placed online and Avis provide an additional five percent discount off the best deal of the day. Remember to present your Federated Farmers card to our sponsors and enjoy the extra savings and benefits of being a member.

CONTACTS

Please remember that if you have any issues or queries you would like to discuss, please feel free to contact Federated Farmers on 0800 FARMING (327 646) or contact your local Federated Farmers Dairy representative or one of the Executive team as listed below.