Investing in New Farm TechnologyFriday, Aug 3, 2001
Two news items from either side of the Tasman present an interesting commentary on farmers’ reaction
to the additional farm income that has been generated in the past twelve months.
The Rabobank Rural Survey show some tempering of farmers belief that this next season will be as good
as the last certainly from a production point of view but also there is a tempering of belief that
prices will be maintained.
But of particular interest is the result that indicates that more than 90 per cent of farmers will still
spend the same or more on their businesses in the coming season compared with last season even
though 66 percent are not picking an improvement over the next 12 months and 15 per cent expect
to see their incomes drop.
On the other side of the Tasman it is reported that the impact of injecting an after-tax $1.25 billion
of deregulation assistance into the Australian dairy industry had been to create more debt.
Rather than using the money to retire debt, dairy farmers have to use the cash injection to bring forward
capital works programs in pasture improvement, herd upgrading and expansion and new technology
to aid their businesses.
It is said that the Aussie dairy industry was on the edge of a period of rapid capital expansion with
a large part related to the uptake and introduction of new technology.
It seems that in spite of the trauma of dairy deregulation 12 months ago Australian dairy farmers are
now gung ho in their attitude to investing in milk production but in large part it is going into
What is this technology and is it giving the Aussies an edge in the dairy farm cost of production stakes
compared with New Zealand? From time to time in the recent past it has been indicated that NZ
was falling behind in the dairy production efficiency stakes. A position we have prided ourselves
on for a long time.
Has the restructuring into GlobalCo taken our mind away from the real generators of producer value –
production efficiency and market demand?
Sure there is an attraction in believing that industry shares and valuations are an indicator of real
wealth that can be cashed at some future time. But finally real wealth rests on the continuing efficiency
of the production process and the ability to market against other low cost competitors.
The structure has been put in place on the processing/market side but where is the technology edge that
will keep us ahead of our competition on the production side?
It would be a bugger if those Aussies were stealing an edge on the farm while we were gloating about
being the biggest and best in the market.