The Perfect Storm – Weather Update

I published a post the other day explaining, among other things, how the trade sanctions placed on Australia by Russia will effect us. If you missed it, here it is.

This is an update.

Thankfully, our heifers are not destined for Russia this time. This means we don’t need to figure out what we have to do with them.

Sadly, another export company has a lot of heifers already in quarantine ready for shipment to Russia and as far as I can tell, forward contracts to honor.

Our buyer said not to expect a phone call from him for a while. He has different markets and can soak these heifers up.

Personally, I’m not that upset with this. I loose sleep and am prone to bursting into tears randomly for weeks every time we send heifers away.

But the impact on the whole dairy industry is still to be felt.

We also need to take into account what will happen to the beef industry, as this effects the value of our cull cows. Its of particular concern for us as the local abattoir is Russian certified (or whatever it needs to be to export to Russia). It is also another export destination closed. Already Brazil is ramping up production and making deals to fill the void. They can also supply grain and dairy products too. Thank you Colin Bettles for this link.

And my worry that the ARA’s will discover Australia exports’ dairy cattle is happening. I’ve thought for a while now dairy would be the next big thing for them to try to dismantle once the pig and chicken industries were destroyed. Could be happening earlier than I expected.

And I feel I should explain the WMP issue too.

The farm gate pricing is directly linked to World Milk Price. Its all business. A good blog on how our milk prices are decided can be found here. Marian is a great dairy advocate worth a follow too!

The lack of rain – still an issue!

Really, there isn’t much we can fix here! All we can do is weather the storm the best we can!

 

The Perfect Storm

I found out late – for me  – tonight that Vladimir Putin has placed trade sanctions on us. The article in question can be found here.

This has me very worried. Not in the least because we recently sent some of our dairy heifers to Victoria for export to Russia. I’ll get to that later.

As I am discovering, it’s really hard to pinpoint how much of the dairy we export goes to Russia. I have searched all the usual places and can’t find anything definitive.

I do know we have been sending heifers to Victoria to be sent to Russia and China for the last 12 months to help pay the bills. It means for a while we’ll be short of pure bred Holstein replacement heifers. But we do have some very good crossbreds to take their place.

But what of this market now? I guess the next few days may just change a lot of the earning capacity of all dairy farms.

If there are less export opportunities, a few things will happen.

Firstly, the record highs we’ve all been paid recently for our heifers will obviously finish.

Secondly, cow prices could drop. Good news for those wanting and able to expand, not so good if you’ve budgeted for the high cow price.

Thirdly, it will affect the people who have set themselves up for heifer rearing and raising.

Fourthly, the heifers don’t get on the boat until the export company has the full load sourced and any blood tests are done and the heifers need to be housed and fed. People have set themselves up for this as well.

And lastly, animal rights activists will now become acutely aware we export live dairy cattle.

I did have plans to try to follow some of our heifers on their journey, but time constraints have stopped me.

So why am I worried? We sent some heifers to Victoria for export about two weeks ago. Possibly, they are still in Australia. As far as I can tell, bringing them home is not as option due to the Johnes (pronounced yoknees) disease issue. You can read more about that here if you have time.

This comes on top of news this week that the World Milk Price (WMP)  has dropped rapidly. That can be seen here.

For the first time in years, we have been getting a decent farm gate price for our milk. Its meant we can finally see the light at the end of the tunnel.

If WMP drops, our processor drops the farm gate price. Simple as that.

And to top it all off, we are still in the drought we had last year. And there is no end in sight. I have heard it will be March next year before we get any decent rain. And that doesn’t guarantee the drought broken, just rain. The Bureau of Meteorology site is here. These are the rainfall deficiency maps.

There’s a lot going against us as an industry right now. I still believe there is a bright future in dairy. We just need to ride this storm out.

I think we are in for some interesting times.

Better go find that life jacket…..

So Friday November 8 was our 7th wedding anniversary.

How did we celebrate? Sleep in? Nice breaky or lunch in town? Romantic stroll along the beach?

No to all of them.

We sat in the Centrelink office hoping to get some extra money to prop up our extravagant lifestyle…

Costs outweigh our income for a lot of reasons. And I think its the same for most primary producers at the moment. I saw an article in the last few days – which I can no longer find – about a sheep farmer from Southern NSW. She says in that article (I paraphrase here) that we are feeding the nation for free.

That’s exactly what we are doing right now.

According to the Australian Government’s Industry, Innovation, Science, Research and Tertiary Education’s report ‘Key Facts Australian Industry 2011-12′, agriculture, forestry and fishing added $34.2 billion to our economy ($2.76 billion of that was dairy). That was 2.4% of the GDP. Mining’s contribution was $139.9 billion, 6.7% of the GDP.

So that explains why mining gets all the press, both good and bad!

But the point I’m trying to get across is this

2.4% of GDP helps feed 100% of the Australian population.

So why is it that those people who produce the cleanest greenest food in the world (my opinion) are forgotten?

According to the National Farmers Federation 2012 Farm Facts, each of the 134,000 farm businesses in Australia feed 600 people and produce 93% of the food consumed here.  Agriculture creates a total of 1.6 million jobs.

At farm level 307,000 people are employed, while only 269,300 are directly employed in mines. Is anybody else as surprised as I am about this?

I could wax lyrical about agricultural statistics all day! But as dairy is the industry I am currently heavily involved in, I found the following very interesting.

Last years ABARES report shows this;

In 1967, the national dairy herd was 3,061,000, the average production per cow was 2,298L. In 2012 the herd size has shrunk to 1,630,o00 and average production has risen to 5,816L. Genetics, feed, and a better understanding of the cow has helped Australian dairy farmers improve productivity by 258% in 45 years.

The International Farm Comparison Network, as reported by the Weekly Times, says the average cost to produce 100kg of milk (1kg of milk, 4% Butterfat, 3.3% Protein) is $US46. The same article states Australia and New Zealand produce milk for $US30-40/100kg. A quick study of that map shows the cost of production is higher in countries who are subsidized.

Why are Australian dairy farmers not being rewarded for this?

New Zealand is so far ahead of us in production and export. What could their industry leaders and Government see that ours couldn’t? The strong Australian dollar has something to do with it, but New Zealand have been working on this for a while.

The New Zealand herd size is 4,634,226, but their cows produce 4,128L each/year.

Australia produced 9.48 million litres 2011-12 about 50% is of which is exported, New Zealand a staggering 19.1 billion litres, 95% of which is exported. If their cows were as efficient as ours they would produce 26.9 billion litres.

So who is making the money?

I don’t think its the farmers.

And how do we sort this problem out?

If agriculture in general is in trouble, and it is, its my opinion that the issues need to be sorted industry by industry. What fits for dairy probably won’t work for sheep for example.

The one thing all primary producers need to do is tell the general public their story.

If the public – consumers – understand where their food comes from and how its produced, they might then become interested in why its so expensive to produce in Australia, then we can work on having a win/win situation for both buyers and sellers.

Pipe dream – maybe! But without ambition, we have nothing.

Your views on this are something I’d love to see! Both from producers and consumers alike.

And I’d also like to hear how the industry you’re involved in is doing.

After all, a problem shared is a problem halved, right.