Federated Farmers - December 2011

Dairy Alert

The bi-monthly newsletter from Federated Farmers Dairy Industry Group

EXECUTIVE COMMENTARY

FEDERATED FARMERS DAIRY CHAIRMAN, WILLY LEFERINK

I have been in this job for six months and it still feels like a new suit and as daunting as ever. Before there was always Lachlan you could turn to; now everyone turns to me and the issues come, one after another.

I feel it is somewhat unfair that we are always in the spotlight. According to the NGO's, we are wrecking the environment; according to the Dominion Post, we do not pay any tax; according to the general public we are ripping them off with too high a price for their milk; and now we are blamed for not wanting to share Fonterra with the rest of New Zealand. Yeah right.

I would like to congratulate farmers for all the Clean Streams Accord targets we have met. While there are still improvements to be made, farmers have made huge strides environmentally and there is a will to do even more. In the meantime we keep New Zealand afloat with our export dollars.

So what are the big issues facing us?

1. The Tall Poppy syndrome, New Zealand's number one problem. We love to see people fall off their pedestals. How do we change this? That's a million dollar question, but we have to learn to celebrate success, not only amongst ourselves.
2. Public Perception. To me this is a lack of responsibility by the media. They can make claims with very little justification and publish it on page six. But we are also to blame ourselves, by giving the claims so much weight. The perfect example is "Dirty Dairying". Sometimes these claims are justified but to whip up the whole population to make them think that every dairy farm and farmer is terrible, is ridiculous.
3. Environment. Have we not learned a lot here? We farmers have made a huge philosophical shift in our thinking on environmental management and have carried this out onto the farm. Those who want to impose the rules on us have also shifted in their thinking, but because of lack of farmer consultation, often do not realise the implications of what they propose. There are still some regional councils in the southern part of both islands that have yet to come to terms with the consequence of poor collaboration with farmers.

The biggest difficulty is the wording around limits and downstream effects in regional plans and the science (or lack of it) around these. I have no opinion yet of what a good Nutrient Management Plan looks like. I do know that in Europe, if you do not have a plan you go back to a permitted activity which has different implications for different countries.

Fonterra needs to be watchful when it imposes rules on its suppliers as often Fonterra's rules become new benchmarks for regional councils. This in turn may lead to undesirable behavior which does not benefit anybody.

4. Animal Welfare. It is a shame that, after some good cooperation following the problems in Southland last year, Ministry of Agriculture and Forestry (MAF) has decided to reorganize itself, and this will affect how we work with the Ministry. We have yet to see how. I would like to thank Alan Wilson, MAF's animal welfare national manager, who worked so well with Federated Farmers over the past year and gave MAF a more human face again.

While DairyNZ has information on its website about animal welfare, click here to view this, a booklet that went to all dairy farmers on good practice might decrease the number of animal welfare issues. Then nobody can say they were not informed.

5. TAF. This is really a Fonterra issue but as so many of the suppliers are members of Federated Farmers I think it important that we are involved, just as we are involved to protect the interest of our members if there are issues concerning any of the milk processors. We are actively encouraging discussion amongst the shareholders of Fonterra, without taking a position. I believe that the Fonterra Shareholders' Council is now a better informed body and is taking the issue far more seriously than prior to the debate. We watch this space with interest.
6. Immigration. It is time to recognize that it is better to import people with skills than people with minimum skills to fill the shortages we have on the land. We need people that want to make New Zealand their future. We do not need people who send most of their earned money back to their home country, as many do nothing to make New Zealand their home, building a future here with other New Zealanders. Immigration should encourage real immigration to solve skill shortages rather than temporary work visas. You only have to see what temporary work visas have done in Western Europe. There they have created huge social disparity between community groups which take three to four generations to resolve.

It is nearly Christmas now and the year has raced past us with lightning speed. It has been a year of many ups and downs. We have had the best payout ever with the highest production ever and a very good start to the new season again, and we won the Rugby World Cup, although only just, but a win is a win.

But the 2011 year started with such misery, just as we thought we were on top of things. The Christchurch Earthquake. It is here that I want to reflect on reality that, yes, there is a lot of material and quite a bit of emotional damage done by the Earthquake and its consequences, but it is nothing compared to those who have lost loved ones in the event. Most other issues will be fixed or will heal over time. I thank you, those who helped us clean up in the aftermath; but of the victims we lost in the event, we have only got fond memories and I hope they last for a long time to come.

Wishing you a very Merry Christmas and a very Prosperous New Year.

Sharemilkers’ Section Chairman, Ciarán Tully

As we approach another Christmas and holiday season there are several things I would like you to think about:

Survival of Sharemilking - As you know James Allen of AgFirst is currently undertaking a progression pathway study on our behalf. The reason for the study, in simple terms, is to ensure those people starting farming today and wanting to progress to farm ownership, can build enough equity over a reasonable period of time to pay the price that a retiring farmer is happy with. There are many ways to do this, with no right and wrong answers. Thank you to those who have filled out the survey. We will have more news in the autumn. This study is being funded by DairyNZ.

Survival of staff - Make sure staff have time off and are refreshed over Christmas. Ensure they are familiar with where water pipes etc go and have plenty of supplies on hand to repair leaks. Have quad bike helmets and wear them. The Department of Labour, during its recent quad bike safety campaign, visited 376 farms across the country and issued 117 compliance notices; in Waikato alone they issued 27 infringements off 45 farm visits. It wants to stop senseless deaths, not increase revenue. Use your head, get a helmet and use it!

Survival of family - Take some time out to enjoy your friends and family. Your children will remember the Christmas holiday where you had some milkings off, better than the ones where you milked every day.

Some of you may be getting ready to sign new contracts. I have included some pointers for both farm owners and sharemilkers to consider before they sign, in the Advice section below.

On behalf of Sharemilkers' Section I wish you all the best for a Happy Christmas and New Year.

INDUSTRY NEWS

Sale of milk at the farm gate - Late this year the Ministry of Agriculture and Forestry (MAF) consulted the public on the sale of unpasteurised milk. It needs to align the current ability to sell up to five litres of milk at the farm gate with incoming legislation. Unpasteurised milk is also known as raw milk, or ‘farm' milk.

To inform our submission to MAF, Federated Farmers ran an on-line survey. If you were one of the hundreds who responded, thanks!

What we found is that there are two markets for this milk: one at the farm, serving friends, family and neighbours, and another in the towns and cities for the urban community.

We received responses from 35 farmers who sold this milk. In all, these farmers sold farm milk to approximately 2,500 people per week.

We also received over four hundred responses from people who either bought it or where in favour of making this milk readily available. Many were farmers who already made this milk freely available to their friends, family, neighbours and workers.

Four were against the sale of this milk, on food safety grounds - these were all farmers.

The respondent farmers who make selling this milk a significant part of their business indicated they already had in place farming practices and extra milk testing regimes in order to provide the best quality milk. They also see the value in transporting chilled milk to a centre near customers, where it can be kept chilled until it is picked up and quickly transported to the home fridge. They are keen to work with MAF to develop systems to make sure that those who sell this milk provide milk that is safe to drink unpasteurised.

Federated Farmers also sees the value of working with MAF to develop this secondary, away-from-the-farmgate market. While risks dealing with small numbers of customers who are closely connected to the farm are easier to manage, the urban market appears to be large.

We understand the risk of selling second rate milk to New Zealanders and are sure that the sample who responded is just that: a sample. If this practice were to be outlawed then it would, in all probability, go underground with even greater risk to the public. Getting the right systems in place will help this market manage the risks.

Federated Farmers looks forward to working with MAF in the new year to make this milk an option for those New Zealanders who want it.

Read our full submission by clicking here.

ADVICE

Negotiation Sharemilker Agreements - When negotiating a new sharemilking agreement it is important that both parties look through the contract, clause by clause, and be clear on what is expected. Parties can adjust the contract to their particular needs if mutual agreement is reached. Tailor it to fit the needs of your particular business relationship. Discuss now how to solve issues that will arise from time to time.

Negotiating to the sharemilker's strengths will allow you both to reap the rewards.

Herd Owning Agreement - Points to consider during the negotiation process could be:

The quality of the herd
Will any lease cows be included? If so, ensure that they are covered by the correct lease/security arrangement.
Make sure records are up to date and have provision for risk management if they aren't, for example, incorrect calving dates.
Look at inputs such as water, power, nitrogen and purchased feeds. They can be negotiated in the same percentage as the milk payment, but have some discussion around the amounts to be used.
Prepare for adverse events such as a drought. Discuss the split costs on extra feed, before the event. This is particularly important with the Variable Order Sharemilking Agreement (VOSM), as it is the farmer's asset being protected.
Make sure there is discussion on opening and closing pasture covers and how to address issues relating to this.
Discuss whether paying the dividend from Fonterra (the DRPA) to the sharemilker is best for your situation. If no DRPA is to be paid, then the owner may look at allowing the sharemilker to rear extra calves. Perhaps a sliding scale of the ratio of dividend payment and milk price can be used to manage volatility.
If the sharemilker owns lots of machinery, consider an increase in payout as the work will be done when required rather than waiting for outside contractors.
If the sharemilkers are good grass managers, then look at nitrogen amounts.
If a good sharemilker is short of funds, consider setting up a sharemilking company with both owner and sharemilker providing capital. Over time the sharemilker should be able to increase their share of the herd. The owner benefits by having a long term partner and the sharemilker has access to funds for their first herd purchase.

Variable Order Sharemilking Agreement - While many of the above points also apply to VOSM, for herds of less than 300 cows the minimum net percentage to the sharemilker if the DRPA is paid is 21 percent after costs. For those not receiving the DRPA it is 22 percent.

Farm owners can reduce risk here by specifying the quality of equipment used, in order to reduce the Sharemilker's costs.

It is also possible to reward behaviour such as keeping weeds down, and the lawn and section/surrounds tidy.

And finally - Don't forget to have a trusted and experienced party look over the negotiated contract. Initial any amendments and most importantly, sign the agreement.

Inductions - Remember induction targets will be further reduced in 2012. While cows purchased with inadequate or faulty pregnancy information has been a reason for dispensation in 2011, this practice will not continue. Make sure the cows you purchase have accurate pregnancy data. Purchasing cows with inadequate information is not a reason for dispensation and neither will cows in poor condition.

From 01/06/11 to 31/05/12, within an individual herd, the level of inductions should not exceed 8 percent of the herd's total size,
From 01/06/12, within an individual herd, the level of inductions should not exceed 4 percent of the herd's total size.

NOTICES

Federated Farmers Dairy Council Meeting and dairy industry tour - The next Federated Farmers Dairy Council meeting will be held on 16 -17 February 2012 at the Kingsgate Hotel in Palmerston North. All Federated Farmers Dairy Council and Sharemilkers' Council delegates are requested to attend.

There will also be an optional farm tour prior to the meeting, on Wednesday, 15 February 2012. This tour will include

a visit to a farm which has installed the latest automatic dairy farm system;
discussions on how to get the most out of pasture and how to keep the upper hand when designing your effluent system;
learning about what research is occurring on green house gases; and
seeing what Fonterra is turning your milk into.
We will also discover why a local pub was made the best 2010 Country Pub in the whole of New Zealand.

This tour is open to anyone interested in attending.

To download a registration form for both the Council meeting and the farm tour, click here. Registrations close on 13 January.

Federated Farmers Dairy AGM - This will be held on 27 - 28 June 2012, in Christchurch.

Will the Food Bill affect you? - The Food Bill, currently on its way through Parliament, is set to replace the Food Act 1981. In order to help you understand what these changes will mean for you, the New Zealand Food Safety Authority (NZFSA) has put together a question and answer sheet on their website. You can access this sheet by clicking here. The Food Bill aims to provide an efficient, effective and risk-based food regulatory regime that manages food safety and suitability issues, improves business certainty and minimises compliance costs for businesses

Leadership courses - Dairy farmers are often the leaders in the community and the industry. Federated Farmers, through its Leadership Courses, can give you the skills that will help you handle situations confidently. There are two courses: one introducing you to agriculture lobbying and Wellington politics, where you learn how to be more persuasive and how to lobby to get the right results. We also take you around the corridors of power. The other provides a challenging and positive environment to practice your presentation skills and strategic thinking, enabling you to become a better meeting participant and chairperson, and to speak more confidently on the stage. This is a great workshop to gain confidence and build your own and others self esteem. Both courses are highly popular and lots of fun. See here for more information: http://www.fedfarm.org.nz/training

And finally from me: Ann Thompson - Have a safe and enjoyable Christmas and New Year. May the rain fall at a time when it is most convenient - between the hours on 1.30am and 2.30am every night would suit me, in a "satisfactory" amount - and the sun shine during the day. Travel safely and return home refreshed.

Thank you all for a great year.

The Federation is officially back at work on Monday 9 January 2012, with a ‘skeleton' staff working from the 4 January.

MEMBER BENEFITS

A Christmas gift for your staff - Give a lasting gift, sign up your staff as ‘farm employee' members ($100+GST) to Federated Farmers and get them into the strongest farmer network in the country. Not only will they get special discounts and offers through the business partner programme, they will also have access to policy and advocacy advice, member advisories, media releases, electronic newsletters, the Friday Flash and other publications and communications. Call 0800 FARMING (0800 327646) to sign them up.

SAVE on fuel with the Federation - Make the move for fuel savings at the pump and on farm deliveries. Call 0800 FARMING (0800 327 646) and our team can connect you with the appropriate fuel business partner. You can also call them direct on 0800 Mobilcard (0800 732 277) or Allied Petroleum, freephone 0800 383 566. Membership has its benefits.

Employment Agreements: the preferred choice - Federated Farmers offer a wide range of employment agreements, including, permanent, fixed term and casual agreements at keen preferential rates for members. Start your staff off on the right foot by ensuring you have up to date employment agreements for both parties.

The pack of two agreements costs $50 + GST for members and $150 + GST for non-members. Call 0800 FARMING to order or discuss your employment contract needs with our customer services team.

CONTACTS

Please remember 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.