Richard Reynolds has gone back to the whiteboard to run a discussion group.
Having been feeling a bit reminiscent this week, I was remembering back to the AGM of a now nonexistent dairy co-op that I was at after a then record $8 payout.
The part we were talking about was the statement from the chief executive that dairy had now reached a new supply level with a price that it cannot fall below. I thought at the time, if this was a listed company I would sell all my shares there and then. The next year we had a $3.98 payout.
This living in the past was also brought about by running two Discussion Groups for DairyNZ on the West Coast. They are suffering staff shortages too.
It was 15 years ago when I last ran groups, and my writing on the whiteboard had not got any better but my belief as to what farmers wanted had changed slightly. There had been a long spell between groups with Covid and a lack of a local CO (extension partner), and coming out of a drought farmers were keen to catch up and decompress with a cuppa. Sometimes just seeing that you are all in the same boat is the value of the day. Rains had come and with good soil temperatures most farmers were feeling confident with the big unknown being getting culls to the works.
The icebreaker question was who had been farming for more than 30 years and therefore experienced inflation. We had one farmer. It is quite a mindset change to get into that things are rapidly getting more expensive and one that up until now, I have luckily avoided.
I have a friend from Zimbabwe that I used to do discussion groups with. My introduction was that he was not taught his 10 times tables but his 1000 times table at school so that he could keep up with inflation.
I then asked how many had not been farming before the 2007 GFC. There were a few hands that went up. These farmers until now had not experienced interest rate rises. We are now over 7% mid range fixing.
Interest rates have risen 3% very quickly. Average debt per kg milksolids (MS) is about $20 so a 3% rise is a $0.60 increase in costs.
We had some money to fix the day after Lehman Brothers folded. I made the call to fix for two years at 9.9% as there was a high likelihood that banks were not going to lend money. This proved a costly mistake, the advantage of hindsight, and I can still say that I have never paid over 10%.
We also had two couples starting out as contract/lower order sharemilkers who were worrying about cost rises. I hope that with cost rises and labour issues all parties are realistic in their budgets.
After my stint going back to running discussion groups I don’t think I will be going back to the past but I will be holding on to a bit of history as to how farming can change so quickly and there is all likelihood that history will repeat at some time.
