Farm like dad – Kelly

Farming costs should be flexible so they can be adjusted, says Kelly, now a director of prominent agri businesses, including Pengxin NZ Farm Management Ltd.

“I’ve been around for a long time. I remember when we were at the Dairy Board and we celebrated a $3/kgMS payout,” Kelly told Dairy News.

“The fact is the majority of our products are still exported as commodities and commodities go up and down in cycles. This is no different. In two or three years it will be back up again.”

But one of his worries – and what has changed in the dairy industry – is that until a few years ago most farmers relied on all grass farming. 

“More and more farmers now rely on concentrates to keep their cows cycling, and getting them in calf and good condition scores and all that sort of stuff.  So some of their costs which should be variable and which they should be able to withdraw in a low payout year – they haven’t been able to do that; they have a high cost structure.

“In my view the successful dairy farmer in future will firstly  remember that the cheapest feed is grass, secondly make their costs as variable as they can so in bad years they can reduce their costs, and thirdly won’t rely entirely on concentrates because in a bad year you lose your shirt.”

Kelly says in the 1-5 system (system one farms are all grass and system 5 are all concentrate) farms in New Zealand used to be systems 1, 2 and 3. They are now around 3 and 4. 

“So they have shifted up the curve as we have had higher payouts, more concentrates, more milk, more money and in a higher payout year more profit. But in a low payout year, you lose money.

“My advice to young dairy farmers is remember how dad, the uncles and those guys used to farm – all grass farming, keeping costs right down in bad years,” Kelly says.