Dairy farmers walking away from maize deals

Maize man: Bay of Plenty grower Bill Webb has been let down by a number of clients.

19-01-2009 | Richard Rennie

Dairy farmers are earning few friends among maize growers this summer as they walk away from silage deals, leaving some contractors with as much as a third of their crop now unsold.

"The dairy industry is really letting us down big time this year. It is hard to see how some contractors are going to be able to survive with portions of their crop now unsold despite contracts being signed," Bay of Plenty contractor Bill Webb told The New Zealand Farmers Weekly.

He personally now had 200ha of maize crop looking for a buyer after dairy farmers had reneged on deals. He knew of Waikato contractors in a similar position. NZ Farmers Weekly spoke to two other contractors also facing cancelled deals, one with 175ha of maize now unsold.

Webb said he appreciated that the dairy payout had moved significantly since spring when contracts were signed. However, he was surprised at the attitude of some farmers in cancelling orders outright.

"There is very little talk about negotiation on price. If we had to move a bit we would for the sake of both our businesses, but that does not seem to happen. Orders are just being cancelled outright." Out of 50 farmers he only had one who said he would not take as much of his contracted amount, but would take the rest if a buyer could not be found for it.

Historically low palm kernel prices coinciding with payout slide was also accounting for contracts being cancelled. With prices under $200/t, the lure had proven too great for some of Webb's customers.

He had longtime buyers who had cancelled orders for as much as 200t of maize silage, after he had spent $3000/ha getting the crop planted for them.

Economics aside, Webb has questioned the future integrity and health of relationships between dairy farmers and the maize industry.

"It is a damn good question. What do we do next year, do you go back to these guys and do business with them, or risk simply not having enough buyers if you avoid them?"

Federated Farmers Dairy chairman Lachlan McKenzie said the issue was one of integrity, not one of dairy versus maize growers. "There are contracts throughout the industry being reneged, from meat companies down. The days of a man's word is his honour seem to be well gone."

He urged farmers who had signed or even verbally agreed to contracts to honour them, lest the whole contracting industry's future be put into peril.

"These are operators who are skilled, and who have been in business for a long time, we cannot afford to have them leave the industry."

He suggested contractors compile and circulate a "black list" of farmers who reneged on deals, while farmers facing lower payouts negotiate on maize price. Another Bay of Plenty contractor Neville Marsh said contracts were no longer worth the paper they were printed on.

"And if you try taking anyone to court over it, the money owed is soon gobbled up by lawyers and time."

He believed there was now a younger generation of dairy farmers who lacked the integrity to keep their contracts. Dumped contracts bit harder after last year's drought and contractors' efforts to supply farmers with maize silage at the contracted price. By late drought these prices at 25c/kg drymatter (DM) were half the spot market prices. However growers had stuck to the agreed amount said Webb.

Waikato contractor Ian Gavin had so far avoided any cancellations, but he acknowledged it was still early days with some clients still on holiday.

"Things may change but so far we have avoided the worst of it."

"Last season when the boot was on the other foot we didn't screw up our contracts and we still managed to supply 84% of what the dairy industry needed, despite a 100 year drought."

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