State farmer controls cost as profits slump

For the year ended June, profit dropped by just over $25 million to $4.9m but Carden says in the circumstances the result is a solid one for the state owned farmer. He says like all farmers in the dairy industry they suffered the same fate in terms of profit. 

But he says the result could have been worse had Landcorp not secured a significant volume of milk to Fonterra’s guaranteed milk price. 

Milk revenue was down from $129m last year to $88.1m, but livestock revenue was up from $98.7m to $111.3m, partly offsetting the drop in dairy income. 

Carden says while the drop is not unexpected, there are some positives.

“We have a 9% decrease in the cost of our dairy production and that coincided with the 4% increase in overall production so it’s a sizable increase in our efficiency. We will increasingly lower stocking rates to a system two type rather than the more intensive systems,” he says.

Carden says as part of a move to get greater efficiency in their dairy operation they are adopting a management regime based on the system Toyota uses. 

“We are looking at how we spend our time in every aspect of our dairy operation and looking for areas where we are inefficient and to standardise the way we do things to drive out that inefficiency. It sounds very mechanistic but these are disciplines from other businesses that work really well in every sense, and the great thing is the staff love it because it means they are a lot more productive in what they do. They don’t waste a lot of time looking for tools or conducting a process like putting on cups in an inefficient manner because they have been shown the most efficient way of doing it,” he says.

Carden says this means staff get through milking faster, get home sooner and are more energised. He says it’s having  a big impact  on the quality of the experience of working at Landcorp regardless of the dollar savings.

The further development of dairy farms in the central North Island is under review. 

Carden says that since he came into the role of chief executive he’s been very wary of the risks dairying poses to Landcorp’s balance sheet.

Landcorp had planned to develop 35 dairy farms in the region in partnership with a private company Wairakei Pastoral but has so far done only 13.