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Cropping Farmer's Switch a Sign of Times

Posted on: Wednesday, 21 September 2005, 15:00 CDT

* Dairy conversions have swept across Canterbury in recent years, turning paddocks of wheat and browntop over to fertile, irrigated ryegrass and cows. While water availability threatens to curtail the trend, the economic drivers remain strong, as Andrew Swallow found out when he talked to a farmer near Temuka and Fonterra's Peter McCorkindale. ----------------------

Last December's hailstorms had a devastating effect on many farms in South Canterbury, but for one cropping farmer near Temuka they were the last straw, even though his farm missed the maelstrom.

David Lister has farmed at Milford for 14 years, following in the footsteps of his father, grandfather and great grandfather as a cropping farmer; that is, until now.

This spring he has sown the last combinable crops on the 147ha holding for the foreseeable future because as of next August he and wife Bronwyn will start milking cows.

"It is to do with the economies of scale we could keep on cropping but we would never have the opportunity to expand because the value of land is set by dairy farm values.

"I am only 36 and if you are not looking to expand the farm business at that age you are never going to. But to buy land to go cropping in this district just wouldn't be economic at present," explains David.

Returns on cropping farms are currently caught in a pincer effect of falling grain prices and rising costs, notably machinery, labour, fuel and fertiliser, he adds.

To make ends meet crops need to be grown on a much larger scale than was once necessary. An increasingly volatile climate also seems to be making the risk unreasonable, which is where December's hailstorm comes in.

"The hail damage I saw came as quite a shock," says David, who worked as one of the insurance damage assessors for United Wheat Growers after the storm.

"It wasn't so much the damage to the wheat crops I was inspecting as the devastation in the crops of vining peas, ryegrass and other crops I had to cross to get to the wheat. I knew these crops were not insured and the farmers were having to take the losses on the chin. And it was all caused by a 20 minute weather event."

In contrast, while the hail may have caused some temporary discomfort for the cows, the moisture would have actually been beneficial on a dairy farm, he points out.

"We also seem to be getting more and more easterly weather in the summers, which means it is often quite damp here. That is good for grass growth, but no good for harvesting combinable crops."

Similarly, late spring frosts can devastate ryegrass seed crops, another uncontrollable risk.

While the hailstorm helped precipitate the decision, as did the drop in contract prices offered for cereal crops this year, it has been far from a hasty one, he adds.

"The farm was tested and cleared for DDT residues in 1992."

Based on a payout of $4.35/kg of milksolids the income from running the farm as a 480 to 500 cow dairy platform, will be almost triple that of the current rotation of wheat, vining peas, brassica and ryegrass seed crops, and even at this season's lower predicted payout of $3.85/kg of milksolids, the economics still stack up, he says.

However, the investment required is massive and an equity partner has been brought in to help finance the move.

Fonterra shares alone will cost them in the order of $1.4 million, then there is the cost of 500 cows at $1000 to $1200/head, a 50 bail rotary shed at a little over half a million, and an upgrade of the farm's irrigation system to a centre pivot plus rotorainer.

"The irrigation will be over $200,000 by the time we are finished but per hectare it stacks up very well. We anticipate having a longer irrigation season and the centre pivot is much more controllable because you can put so little on at a time."

Such investment should make it clear to those worried about the water use of the industry that farmers are making every effort to only use what's necessary, and as efficiently as possible, he points out.

"Besides, it is too costly to waste."

While the investment is, in his own words, "enough to make you raise your eyebrows," it is generally in long-term assets with minimal depreciation. Mr Lister confidently predicts cows will be being milked on the farm in 50 or 60 years time.

"For example, with regular maintenance we expect to get at least 30 years' life out of the shed."

Mr Lister is far from the first farmer in the district to make the decision to convert to dairying. Three of his neighbours who were all very good cropping farmers are now milking cows, he points out.

"When I first drove the header at night here you could see four or five other machines' lights working away around you. Now you are lucky if you can see one."

The environmental issues that some say will restrict the industry are more than manageable, he believes.

"You have to identify the problem, and if you can do that you are quarter of the way to finding a solution. It is when you are oblivious to the issues that things don't get fixed."

For example, the industry is already well on the way to dealing with the greenhouse gas and nitrate leaching problems cows' urine patches present. Also, the Wakanui soils of the district are more moisture retentive, and less leaching prone than those in some parts of Canterbury.

"We are future proofing the farm for our five-year-old daughter, Brianna, and our baby that's on the way. One of the two may want to farm and economically we want to have something worthwhile for them to farm."

Mr Lister admits a tinge of regret about giving up the cropping, having spent the best part of 20 years working to increase his knowledge and skills in that area, including a couple of years at college in the UK on an industry board scholarship. More recently he was elected as chairman of the grains section of South Canterbury Federated Farmers, a position he resigned from last month in light of his decision to go dairying.

However, the economics, reduced risk, and opportunity to grow the business make him convinced it is the right move.

"We know it won't be easy but I am happy to trade the early mornings for what is a lot of machinery depreciation, increasing diesel costs, and lack of cashflow.

"Having a harvest that walks itself to a silo that someone else pays for and collects every day, and then to have the money in the bank a month later, is a very attractive thought."

For Bronwyn, who grew up on a mixed crop and stock farm in the area, the change also has little or no downside.

"I prefer stock to crops anyday, so I am quite happy with the move too," she says.

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Source: Timaru Herald

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