22 December 2000

Kiwis profit without support

New Zealand wheat growers

have had to live with world

prices and no state support

for over a decade.

Andrew Swallow visited a

farm on the Canterbury

plains to see how they cope

SOLID profits can be made from cereals without government support thanks to improved yields and long-term contracts, say one New Zealand farming couple.

John and Liz Chynoweth farm 350ha (865 acres) on the Canterbury Plain, near Ashburton on New Zealands south island.

Historically herbage seeds were their biggest earner. Now, wheat is holding its own as a result of a rolling three-year supply deal with leading NZ poultry producer Tegel Foods.

A 600t commitment was made for harvest in January 1998 and they are now supplying 1000t a year on a price fixed at NZ$220 (£63/t) to 2003.

"We think it is a really good deal. We would have to get $285/t for milling to compete with that and milling has only been making $260/t."

New varieities have been introduced and agronomy tightened (see below). Yields now average 10t/ha (4t/acre) and wheat is making a reliable contribution to farm profit. "Last year the whole enterprise made $600/ha before tax. Wheat is now one of our better options," says Mr Chynoweth.

For Tegel Foods, a subsidiary of Heinz, the aim has been to secure reliable source of home-grown feed grain, says South Island grains manager Peter Scott.

"A lot of what we bought was substandard milling wheat. Ditto for barley – it was anything that did not go for malting. So we looked at what we could afford to pay for domestic grain, which was $220/t, the landed price of wheat in Auckland at the time."

A "barn-filling" ethos is encouraged among growers with seed of previously unavailable high yielding UK feed varieties supplied. Other varieties are accepted, but are subject to a 2% price discount.

Agronomic knowledge was also recognised as a limiting factor to production efficiency, so the firm has set-up a system of field days and employs ex-ADAS adviser Pam Chambers on growers behalf.

Now, with costs and free-market grain prices rising due to the weak NZ$, growers such as the Chynoweths are hoping the price offered for harvest January 2004 will be increased, although Mr Scott says that is unlikely at this stage.

"We will have to wait and see what happens. We do not want to spoil the relationship by saying we definitely wont pay more. But the first goal has to be to increase the t/ha. The price should be the last thing to change."

FARMDETAILS

&#8226 389ha (84 owned, rest rented)

&#8226 Stony-silt to heavy soils.

&#8226 Cropping: 86ha winter wheat, 18ha spring wheat, 18ha riticale, 39ha winter barley, 94ha herbage seeds, 32ha white clover, 12ha phalaris, 10ha chicory.

&#8226 Irrigation available for all.

&#8226 Machinery: Second-hand 1994 145hp JD7800 tractor, 1999 100hp JD6310 tractor; 1997 ex-demo JD CTS combine; second-hand trailed Knight sprayer.

&#8226 Harvest student only employed labour.

Fixed costs

Good arable land with irrigation on the Canterbury Plain costs about £2500/ha (£1000/acre), while rents are typically £70/ha (£30/acre). "We pay slightly less than that, but we have put in the irrigation," says John Chynoweth. Harvest costs last year were £31/ha, including fuel, repairs, depreciation and labour for both combine and carting to store. Grain is sold delivered, freight to Christchurch costing about £6/t. "If we add in rent and administration costs the profit before tax from wheat was about $95/t, or £27/t."

Aiming for 12t/ha and more in NZ… Three-year rolling contracts have brought reliable returns for wheat at £63/t with no support for Kiwi grower John Chynoweth.