Heifer Grazing agreement is low risk.
A variable price agreement for grazing heifers is very popular now that milksolid payout forecasts are declining.
At the beginning of January 2009, New Zealand Grazing Company Ltd introduced a further option to the agreement most used by its dairy farmer clients, which is the ‘Fixed Rate Guaranteed – Super’ agreement.
The ‘Payout Linked’ option provides for the maximum price charged for the whole year from 1st May 2009 to 30th April 2010 to be directly linked to the Fonterra payout for the production year ending 2009 (confirmation expected in September 2009).
At the introduction of this Grazing agreement option (1st Jan 09) the Fonterra forecast is $6.00 kg MS, with indications that this will be lower by the time the current 2008-09 production season is complete.
The ‘Payout Linked’ agreement provides for the grazing fee to be lowered on a progressive basis to a low of $4.80 kg MS.
The ‘Fixed Rate Guaranteed – Super’ agreement already provides incentives for the heifers to be grown to high body weight targets, but with a limit on the dollar amount per week that can be charged. It also has a minimum weight guarantee that is unique in the industry. Coupled with the Payout Linked option, this heifer growing agreement is the most sophisticated yet offered in New Zealand.
Ian Wickham, Managing Director of New Zealand Grazing Company Ltd says “With grazing-off, the biggest risk to a dairy farmer is having under weight heifers [Read "NZ Dairy Exporter" article one] entering the herd. However, according to the industry statistics, that is the case with most heifers in NZ. Our systems are renown for addressing that problem.”
“Last season the industry witnessed too much money chasing too little feed. With declining payouts forecast, and plenty of grass currently available, it is understandable that some dairy farmers will select the cheapest grazing available, and overlook that they could lose much more from lost milksolid income than what they may ‘save’ on the cost of feed.”
“This agreement addresses that problem by directly linking the cost of growing heifers to the current income from the herd to ensure excellent value for money.”
“The real pity is that when selecting grazing based on price [Read "NZ Dairy Exporter" article two] (including keeping them at home, buying a run-off etc) dairy farmers inevitably believe they have made the right decision. It used to be very much that way with buying bulls and breeding dairy cows until the development of sophisticated measurement systems such as ‘Breeding Worth’ to reveal true value.”
Ian summarizes “Increasing the genetic value of a herd is not cheap, but it is worth it. Likewise, to properly develop and grow a calf into an efficient dairy cow is not cheap, but it is worth it!” “This Heifer Growing agreement provides all the ingredients needed to cope with the volatile feed cost / income matrix.”