1. Seizing the opportunity in the volatility challenge Tim Mackle Chief Executive DairyNZ

2. Opportunities and challenges What’s happening in our dairy world DairyNZ – equipping farmers for the challenges What does this mean on the farm?

3. Opportunities and challenges What’s happening in our dairy world DairyNZ – equipping farmers for the challenges What does this mean on the farm? “The only function of economic forecasting is to make astrology look respectable.” – John Kenneth Galbraith

4. History repeats?

5. Source: DairyNZ Economics Group, UN COMTRADE (World Bank WITS) Last cycle we had free-run…

6. Confidential to Fonterra World milk supply… NZ just 3% World milk production (2009) – 680 million tonnes Source: DairyNZ Economics Group, IFCN

7. Leads to volatility – it can be our friend

8. Volatility favours the resilient

9. Source: DairyNZ Economics Group, IFCN, OECD-FAO 2010-12 Argentina New Zealand Uruguay Ukraine Australia USA EU-27 …but we’ve got to stay competitive to win and thrive…

10. Opportunities and challenges What’s happening in our dairy world DairyNZ – equipping farmers for the challenges What does this mean on the farm? What DairyNZ is doing to help build resilience?

11. We are not losing sight of.. There’s a short- term challenge, but it’s a long term game. We need to make the right moves.

12. Profit from efficiency gains ($/ha) $50/ha/year

13. Taking on nutrient limit challenges

14. Good people build resilience

15. Resilience through research

16. More profit with less environmental impact Profit Footprint < > 30% The past (the last 10 years) The present (Research proven) The research challenge The farmer challenge

17. Opportunities and challenges What’s happening in our dairy world DairyNZ – equipping farmers for the challenges What does this mean on the farm? What DairyNZ is doing to help build resilience

20. Tactics for tight times

21. Become fit for the future The resilient farmer Resilient farm system Great place to work Commercially strong and sound Environmentally- responsible

22. The execution challenge

23. Look after yourself

24. So in summary…  We’ve got some challenges, but tactics are in place at an industry level.  You need your own plan too.  We all need to execute our plans really well if we are to build a resilient industry.

26. NZ Owner Operator - Monthly Cash Flow Assumptions for 2015 16 NorthlandWaikatoBOPTaranakiLNIMarl-CantWestland TasSouthland Cows298330377293392730410590 Cows/ha2.432.9 3.52.42.9 KgMS/ha802110510421097105414907271205 kgMS/cow334368359378363429363419 Eff ha124110130101135210205 Total Milk 99,500 121,600 135,500 110,750 142,300 313,000 149,000 247,000 Interest/kgMS *2013/14 DB $ 1.26 $ 1.15 $ 0.95 $ 1.42 $ 1.05 $ 1.19 $ 1.12 $ 1.31 Total Interest $ 125,370 $ 139,840 $ 128,725 $ 157,265 $ 149,415 $ 372,470 $ 166,880 $ 323,570 Rent- milking land $ 18,000 $ 11,000 $ 15,000 $ 10,000 $ 20,000 $ 16,000 $ 12,000 $ 20,000 FWE $ 4.07 $ 4.20 $ 4.34 $ 3.57 $ 3.74 $ 4.19 $ 4.16 $ 4.08 Cash Deficit-$25,795-$22,514$1,688$6,337$42,752$55,243-$31,726-$43,085 Comments Stock income high in DB- 70c/kgMS. Assume due to beef income. Cost of production also high. Maize silage - 500kgDM/cow. Grow half, purch half in Apr at 32c/kg. Maize silage - 500kgDM/cow. Grow half, purch half in Apr at 32c/kg. Other income of $36k. Not sure what this is - beef/ kiwifruit? Maize silage - 500kgDM/cow. Grow half, purch half in Apr at 32c/kg. Low cost of production but the Naki farmers are highly indebted. Maize silage - 500kgDM/cow. Grow half, purch half in Apr at 32c/kg. Cost of production high, but scale results in a lower deficit proportionally compared to the others. For milk payment - have used Fonterra payout, but no share premium. Assumptions Economic Survey 2012 13 season expenditure used. Where drought has affected production, figures have been adjusted back up to average. Interest and rent are based on DairyBase 13/14 figures Tax - has been calculated within the year at the Company Tax Rate of 28%. All farms excepte Westland paying some tax. These 12 month cash flows are generated using the DairyNZ 2015 16 templates. There purpose is to show what the expected bank balance will be over the next 12 months for the average farm in your region. The 12 month cash flow totals will not line up with the Annual Cash Budget, due to a 31 May balance date, GST & small variances in milk payment.