The Country 02/12/25: David Birkett talks to Hamish McKay

Federated Farmers’ arable group chairman on a surge in dairy conversions in Canterbury, as low wheat prices and a high milk payout tempt growers to swap crops for milk.

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Episode Transcript

Speaker 1 (00:00):
Well, we talked about this a little when I was

(00:02):
on a few months ago, which was the well, the
one sector of the egg and farming community doing it
pretty tough, the arable industry and of course much of
it based down around the center of the South Island.
And it's just been well, it's come to hand from
the Canterbury Regional Council about twenty five thousand more dairy

(00:23):
cows could be added to the regions heard this year
as there is a switch from many arable farmers into
the dairy world. To look at this more closely, we're
joined by Arable Group Chairperson Federated Farmers David Burkett.

Speaker 2 (00:39):
Geto David, Yeah, how's it going?

Speaker 1 (00:42):
Yeah good, thank you, thank you for joining us. Look
what is driving the decision for some arable farmers to
convert the fully aw? Is it partially only to dairy?

Speaker 2 (00:52):
Yeah's a bit of combination of both there. I guess
there's been some rules which Environment Cannery had in place
which essentially a moratorium on conversions and those rules came
came out of effect essentially early on this year. And
with the arable situation currently, the profitability is really it's

(01:15):
a bit of a struggle to get that profitability up,
and that is driven by international prices largely, so a
lot of these decisions are purely economical. And the opportunity
is there now for some of those who have farms
who are able to convert over to dery taking the
option up at the moment, but there's a number of

(01:37):
hoops which they still need to go through in order
for those conversions to happen.

Speaker 1 (01:42):
Yeah, he can say thirty two new can sensor proved
this year, fifteen more in progress. I guess it's a
bit of a tight line, a bit of a tight
rape to walk in terms of the cost of converting
to deiry to warrant the change.

Speaker 2 (01:55):
Yes, it is the cost of everything these days, as
we all know, has gone up hugely, and in order
for these conversions to go ahead, there is a number
of consentings, well can concents required and as you're also
we are, we're getting consents through he can has been
problematic in the past as well. So yeah, there's a

(02:15):
lot of water to go under the roots for some
of these conversions, but a number are already well down
the track, and you know, there's there's consenting conditions around,
especially around discharge obvious fluent and saying so, yeah, there's
but the conversions that are going on the arable ones
are either an arable farm who are fully going over

(02:37):
to dairy or some of the large arable farms. What
they've done is they'll put half the farm into dairy
and the other half will stay arable, and that way
they can use the synergies between arable and dairy quite well,
particularly around supplement feeds and wintering of cows and so forth.
So you know, those connections work really well between the

(02:58):
two industries. And and that's probably what we're going to
see is about half of those conversions being arable farms
and the other half are probably dairy dry land blocks
which will be converted over to milking.

Speaker 1 (03:14):
What can you just give us a sort of a
deeper insight and what are the main causes again for
the downturn for arable indian z.

Speaker 2 (03:24):
There's a number of things, but I guess the one
thing is the global wheat price. So a lot of
the crops we grow, the wheat price is a benchmark
and quite often pricing is based around that global benchmark.
And what we're seeing at the moment, we've got the
war in Ukraine and Russia, and both of those guys

(03:44):
are big exporters of grain and both needing money, and
so they are selling grain and so the EU quite
cheaply in order to get some more money to buy
some more bombs to throw at each other. The other
thing that's happening is the tariff war in America. The
number of American buyers have gone off buying American grain

(04:04):
because of the terraffs, and that's put pressure on the
global price as well. So we've got three big producers Ukraine,
Russia and in America all struggling to sell at a
reasonable price, and that's holding the global price back. And
it also looks like we've got some reasonable harvest coming

(04:24):
in from Australia and Argentina as well, so there's a
bit of a glup there and particularly around the grains.
But we are starting to see some recovery in the
herbage crops, which is our rye grasses and white clovers
which we grow for seed for the rest of the world.
That market is starting to come right again, so you

(04:45):
there's a little bit of light at the end of
the tunnel, but in general it's really just static pricing
but increasing costs, and yeah, those margins are getting pretty
close to that break break even or be even below
break even point.

Speaker 1 (04:59):
Is there a bit of a angers downward spiral in
terms of I guess the arable farming infrastructure if we
keep dropping our production.

Speaker 2 (05:07):
Exactly, every industry has a critical mass that it sort
of needs in order to maintain and develop and maintain
that infrastructure that is needed. And as we lose arable farmers,
there is a concern that, you know, we get to
that point where we can't afford to invest in the industry. Essentially,

(05:28):
we'll not be yet, but you know, and we hope
that new opportunities will come along. But yeah, there's one
thing as we lose farmers, and it's not only just
the infrastructure, it's also the market for things like egg king.
You know, the our industry is quite small in New Zealand,
and it's already quite difficult to get some of the
chemicals that we needed registered in New Zealand because of

(05:50):
the small size of the industry as well. So the
otter sort of questions that we start to ask when
we do lose more and more players out of the
air of industry.

Speaker 1 (06:01):
Thavid Vic thank you very much for joining us.

Speaker 2 (06:02):
Much appreciated, great thanks, Hamish