NZ Dairy Winter 2021

4 | nz dairy DAIRY PEOPLE » Shane Ardern Think 2030 - not Karen Phelps N e w Zealand’s dairy industry, long the darling of farming innovation and invention, has reached a plateau, a point of stagna- tion, says Taranaki farmer Shane Ardern. “We cannot afford to stay in this stagnated position and I challenge our advisers at every level including MPI, DairyNZ, all the major machine fitters and all the private farm consultants to think 2030, not 1980,” says Shane. The Ardern family farm at Te Kiri, on the South- Western foot of Mt Taranaki, 11 Kilometres east of Opunake, milking 610 cows off a 196 hectare effective platform. There is another 350-cow property 11 kilome- tres away in the little district of Awatuna. Shane says it was his generation and his father’s generation whose drive for innovation resulted in the herringbone shed, the rotary shed, adapted farming systems to round bales and went from 80-cow herds to 800-cow herds. Since then the industry has stagnated, or perhaps become complacent with it own success. “For me that came to the fore when we were looking to upgrade the cow shed at Te Kiri. We talked to all of the industry experts who would have had a view or opinion on this. Overwhelm- ingly, all of them gave advice that was locked somewhere in the 1980s.” To illustrate his point Shane creates the hypothetical example of a city investor who has just received a $20m windfall, and decides now is the time to realise his life’s dream of becoming a dairy farmer. The investor buys a beautiful 300-hectare block of land in the middle of Canterbury; the highest growing area in New Zealand with the lowest cost of production. Knowing nothing about farming the inves- tor needs advice as to the capital infrastructure needed, including the type of shed and where to build it. “Where would you go?” asks Shane. “Who would you ask? And if you did discover people who you could ask, what would they tell you? You would end up with a dairy shed design that at best would milk 450 cows an hour. But you have 300 hectares in Canterbury and at a basic stocking rate you will have 1000 cows. So you have a problem. That just won’t work. The cost of production is too high.” Shane points to the stats saying the aver- age cow production in New Zealand is about 350 - 370kgMS/cow. The average production per hectare is 1000kgMS. So that will give the inves- tor a herd size on his 300 hectares of 800 – 900 cows producing 333,000 kilograms of milk solids at best. “Then you ask what is the average FTE labour unit earning and multiply that by the aver- age hours worked and you line them all up and they don’t fit. The economics of the farm won’t fly with the average figures. “Even if the farm is debt free it will be a low return investment. You have to maintain the inputs to get the production but do it at a cost that fits the budget and they don’t, they just don’t work. So that’s a conundrum and it’s an indictment on the industry.” As part of the problem Shane points to an eco- nomic vacuum, saying that whether or not a farm is debt free, it needs to be able to operate at 50% of its gross income. “With the $7.30 – $7.90 payout that has been forecast this year you need to be around the $3.80 running costs per kilogram of milk solids. That’s before debt interest, tax and the farm owner’s salary. “When you look at average stats that DairyNZ, banks and others have provided the running cost of a New Zealand dairy farm is somewhere around $5.00. So that is where the issue and stagnation is. We’ve had on-farm inflation running at 3.5% for the last 10 years when the national inflation is about 1.2%. So there are a lot of people out there in a lot of industries who are eating the cockies lunch. A lot of that is totally nonsensical, non- productive stuff.” The solution, Shane argues is to control on- farm costs so that you are operating at 50% of your gross income and can afford to pay competi- tive salaries and the only way you can do that is by having efficiencies and technology. “You cannot have three-hour milkings. It just will not fit. And the second thing is to make sure the people who are supposedly out there to sup- port the business are actually out there doing that and not just clipping the ticket.” “Even if the farm is debt free it will be a low return investment. You have to maintain the inputs to get the production but do it at a cost that fits the budget and they don’t, they just don’t work. So that’s a conundrum and it’s an indictment on the industry.” Photos: Cathy Ardern with grandaughter Athena. The milking crew: (back row) Robin Martel, Shane Ardern. Nia Cowcher, Cathy Ardern and Cameron Ardern. 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