Focus on governance, profit and environment

Changing dairy – more focus on governance, profit and environment
New Zealand’s dairy sector is strongly focused on building resilience to commodity price fluctuations, sharpening business practices and taking care of the environment, ANZ’s annual survey of the sector reveals.
ANZ’s annual Privately Owned Business Barometer surveyed 368 respondents from across the dairy industry on how their businesses were performing, the opportunities and challenges, and how optimistic they were about the future.
“This year’s Barometer showed that while confidence in the future of the industry remains high, dairy farmers are grappling with a range of issues,” said Graham Turley, ANZ Managing Director Commercial & Agri.their businesses were performing, the opportunities and challenges, and how optimistic they were about the future.
“Some are short-term, such as managing costs and cash flow in response to the downturn in commodity prices, and the flow-on impact on revenue.
“Others are much longer term, such as where future growth will come from given the constraints on land use, and the complex choices to be made about succession and
ownership structures into the future.”
Key findings
 43% of dairy respondents saw a reduction in profit last year compared to 27% for other agri sectors
 Half responding farmers compared their actual spending to budget on a monthly basis
 30% of dairy businesses have boards – or similar bodies – a much higher percentage than the commercial sector as a whole
 Over half of respondents are planning to invest more in pasture renewal or forage; 45% into animal genetics, and 42% feed budgeting
 Over half of dairy respondents are aware of and have a plan to manage the environmental impacts of their business
 46% of respondents said environmental management was a key factor in their business decision making
 Succession is an issue for 60% in dairy – more than any other agri sector except red meat
While respondents saw decreased profit growth in the short and medium term, they were more upbeat about the longer-term prospects. “Over a three-year horizon optimism is around the same as for other industries, reflecting a long-term confidence in the future of the industry,” Mr Turley said.
The survey showed farmers to be better financial managers than is widely believed – responding to lower prices by controlling costs and recognising the need to invest in increased production.
“Farmers are taking a balanced approach which includes cost reduction, redirection of costs to areas that contribute more to profit, and to consider the investments that enhance efficiency,” Mr Turley said.
Over half of respondents were planning to invest more in pasture and forage, improved animal genetics and improved feed budgeting.
The survey showed that while farmers are responding to lower prices by controlling costs, they recognised the need to invest in increased production. Over half of respondents are planning to invest in pasture and forage, improved animal genetics and improved feed budgeting.
Environmental issues continued to be a major focus for the sector. Respondents reported that much of their investment in environmental improvements was driven by compliance, but there was also an understanding that consumers were increasingly making choices based on environmental considerations.
The ANZ Privately-Owned Business Barometer is New Zealand’s most comprehensive annual survey of business sentiment, taking in commercial, farming and Maori businesses. The Dairy Key Insights 2015 report is available here: www.anz.co.nz/barometer

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