The Te Rarawa and Ngai Takoto deed of treaty settlement signing ceremony in Kaitaia in late October brought the change in ownership for the Sweetwater dairy and beef farming complex at Awanui much nearer.
The Crown has agreed to transfer about $70 million of land and assets to Te Rarawa and Ngai Takoto, with the 2480ha Sweetwater farms comprising a major part. Since 2010 Landcorp Farming has sharemilked and sharefarmed Sweetwater for the Office of Treaty Settlements (OTS) after it was bought from Landcorp.
Government ownership goes back to the Lands and Survey Department days, when the low-lying, peat flats and sandy hills adjoining the southern end of Ninety Mile Beach were under sheep and beef cattle. Three dairy units totalling just less than 1000ha were converted from drystock farming by Landcorp between 2002 and 2006. Now the annual production of about one million kg of milksolids (MS) forms a major part of Fonterra’s Far North milk for its plant at Kauri, Whangarei.
Sweetwater dairy farms one, two and three would consistently fill a Fonterra tanker and trailer each day, although in practice each of the three units gets a separate tanker visit, topped up with milk from Awanui farms nearby.
Pending legislation passing through Parliament, it might be a year or two before ownership passes from the OTS to Te Runanga o Te Rarawa and Ngai Takoto. However, Sweetwater Station farm business manager Mark Johnson, along with farm office administrator and wife Sarena, an affiliate of Te Rarawa, eagerly anticipates the day. He said any further capital development of Sweetwater, including possible irrigation to summer-proof milk production, had been halted pending the change in ownership, after which he intends staying on.
“It will be good to get some certainty for all the staff members.
“A great deal of work has been put into this complex and I would love to see it continue to develop.”
The longest-serving staff member, drystock manager Noble Graham and his wife Alice, who have raised their family on the station, are also looking forward to Te Rarawa self-determination.
“I see it as a great challenge, with our special connection to this land, to be mentoring and passing on skills to the next generation,” he said.
He started with Lands and Survey 28 years ago, when Sweetwater was one big sheep and beef farm and had seven staff members.
“I have seen some big changes and they have all been good. I had to change too, while others were not so keen and have moved on.”
Many of the other staff members on the four-farm complex also have tribal affiliations, and are looking forward to continuing to work for Landcorp and iwi. There have been no preferences for iwi when advertising for staff members, with the best people for the job being sought.
Landcorp has 17 full-time staff members at Sweetwater, plus casual and relief milkers. The dairy farms are staffed at a minimum of one person to 240 cows and the casuals are used to provide a minimum three days off in 14 for the permanents. Johnson said three former dairy farm managers had moved from Sweetwater to positions within Landcorp with greater responsibility.
Some managers had started as dairy assistants and were promoted to herd managers and then farm managers within three to five years.
The sharemilking agreement with the OTS is unique, because Landcorp owns the Fonterra shares. This means it has about twice the capital tied up in Sweetwater as a normal sharemilker, yet receives only the share dividend on that additional capital. In low payout and/or milk production years sharemilking would not be profitable and the return on assets (ROA) would drop below the minimum 5% required by Landcorp. So Landcorp, Te Rarawa and Ngai Takoto will sit down before the change of ownership to negotiate a new sharemilking/sharefarming agreement.
Respect for each party’s position, skills and people was high and the desire for shared vision and goals was an excellent starting point, Johnson said. Perhaps some form of overall profit sharing could be arranged, or a sliding scale for splitting returns, depending on the milk payout and Fonterra dividend.
He went north in 2003 after completing an agricultural science degree at Lincoln and managing farms in Waikato, Canterbury and Southland. He was Dairy 1 manager initially, from conversion, and was promoted to farm business manager for the entire property seven years ago. He married Sarena and now considers himself at home in the Far North, especially enjoying its recreational attractions.
The total property is 2480ha, of which dairying occupies 977ha effective in three farms, plus a drystock block of 1063ha for dairy yearlings and heifers, beef cows and dairy support cropping.
The property also contains six QEII covenanted and fenced-off wetlands totalling 292ha.
A fourth and even fifth dairy farm would be possible by including some contiguous Maori-owned land, Te Rarawa believes.
The three dairy farms and the drystock farm are separate business units, with all stock movements and feed transfers entered in Landcorp’s accounts. There is some sharing of machinery and casual staff members.
“All farms have their own key performance indicators and there is a certain amount of friendly rivalry,” Johnson said.
He aims to keep the average cost of dairy production below $5/kg MS this season, having gone slightly over that in 2011/12. The three farms are all split calving, half-and-half autumn and spring. With about 2600 Jersey and Jersey-cross cows in total, Johnson believes 1m kg MS/season is achievable at the sustainable 2.75 cows/ha stocking rate without irrigation.
But as the past four years have shown, that worthwhile target can be missed because of weather impact, especially summer drought. Last season there was an impressive 15% milk production increase on the season before, which started with a drought, and a 994,509kg result. This translated into 1018kg MS/ha achievement and 385kg/cow, with 2583 cows at peak. The Northland averages for 2010/11 were 625kg MS/ha and 286kg MS/cow, the lowest production figures in the country.
Dairy 3 has about a 10% higher cost of production because it has about 70ha more area than the other two farms and poorer soil types, which are prone to drought in summer. It also runs all of the first and second calvers.
Dairy 1 is closest to the drystock farm, which runs 430 mixed-age Angus cows but no replacements, 200 empty dairy cows, about 550 dairy yearling heifers and the same number of heifer calves. The beef cows are used for pasture control on poorer parts of the complex, especially on “kikuyu or worse”, with Johnson saying some undeveloped sandy soils were capable of no more than three tonnes/ha of pasture growth annually.
The Landcorp Kapiro Angus genetics achievea creditable 95% calving, beginning in August, with weaning weights from 210-220kg in April, when all go off the farm. If they remained for grazing and finishing they would compete with the dairy support, which Landcorp considers the highest and best use of the drystock farm. The 250ha dairy heifer rearing unit on the drystock farm has been developed to dairy specifications and could milk cows in the future.
All the dairy units at Sweetwater experience considerable variability in pasture growth over one season and between seasons and large feed deficits often occur. Landcorp brings in palm kernel on a budget of 400kg/cow, plus more if needed, and grows maize on all farms as part of the regrassing programme to achieve about 20t/ha drymatter (DM) and a budget of about 500kg/cow. All maize sowing and harvesting is done by local contractors, as part of the $5m-plus Landcorp spends in the region on wages and farm inputs.
The spring herds from three dairy farms are grazed on the support farm for six to eight weeks from May to July and the autumn herds from February to April, at planned feeding levels of 12kg/cow/day dry matter.
Milk production peaked for Sweetwater in 2006/07 at 1044,000kg MS, when 3050 cows were milked, but stock numbers were reduced during the extremely wet winter of 2008, followed by the summer drought of 2009/10. That summer was the only time when milking stopped completely, for one month, and total production fell to 750,000kg MS.
Sweetwater has experienced the wettest winter and coldest spring in 40 years, the worst summer drought in 80 years and the biggest gain in milk production, all over the past four years.
Annual pasture growth varies between seven and 12t DM/ha, with an average of about 10.6 on the dairy platforms.
Soils are light and porous, so three weeks without rain means pasture growth is reduced and four to six weeks without rain reduces growth to negligible rates. Three cows/ha require more than 50kg DM/ha/day and the variability around Sweetwater can be zero to 80kg/day.
Because of split calving, half of the cows are milked through the winter, when growth rates are more reliable, at between 20 and 50kg/ha/day.This lightens the loads during the much less reliable summers but causes problems over winter wet periods, when peat soils can become waterlogged and fragile.
Even growing maize each year doesn’t ensure against summer droughts, because it is expensive and yields can be variable. Summer brassica crops suffer badly in droughts and are prone to major insect damage. Johnson said regular summer droughts impaired long-term pasture persistence and most of the three dairy platforms had been renewed through maize cropping at least once since dairy farm establishment between 2002 and 2006.
“That is costly and reduces the economic viability of the business.”
The way forward lies in irrigation development, Landcorp, Te Rarawa and Ngai Takoto believe.
It would allow for reliable and consistent pasture growth from October to April at low cost, removing the need for high-cost supplementary feeding and reducing pasture renovation costs.
“Production increases of 10-20% are expected at the same stocking rate with lower inputs,” Johnson said in evidence before the Environment Court hearing for the water consent in 2011.
“It must be remembered that Sweetwater is on light peat andsand soils, which have a low water-holding capacity.
“These cannot be compared with the clay-based soils under the predominant dairy farming districts in Northland. In my opinion irrigation will reduce the need to milk high numbers of cows through the vulnerable winter period and thus have a net beneficial effect on the environment.”
Landcorp has already put significant capital into infrastructure, such as concrete feedpads, silage bunkers and effluent systems, to minimise the effects of dairy conversion and intensification.
All three dairy units have upgraded effluent systems capable of a low application rate of 3mm/hour, meaning negligible chance of run-off, ponding or contamination of ground water or waterways.
Nutrient budgets and management plans are in place and all inputs are recorded.The irrigation plan does not call for increased inputs or stocking rates but more reliability over summer pasture.
Consent was gained for the joint application by Landcorp and Te Rarawa for two groundwater takes from the Aupouri aquifer, totalling 3.8m cumecs/year, which would be enough to irrigate up to 450ha of pasture.
Landcorp believes it would be able to milk fewer cows over winter and therefore reduce pasture damage, improve reproductive performance and reduce nitrogen (N) leaching. Pasture grown annually should increase from 12.6t to 17.2t, with about 4t/ha of that additional growth utilised, at about a 40% increase.
However, the decision on irrigation development is to be left to new owners Te Rarawa and Ngai Takoto.
“It remains to be seen where the capital will come from, but I believe it will take Sweetwater from doing well to standing out,” Johnson said.
Sweetwater already has a high standard of dairy infrastructure – two 54-bail and one 70-bail rotary dairies, all with Waikato milking plants. Each has a 30m by 12m implement and calf shed, with feedpads, palm kernel bunkers and compliant effluent systems.
Fences and races were laid down to a high standard and Johnson said he would change only the initial effluent system design if he were to begin again. The balance of peat and sandy soils is different on each dairy farm, ranging from 75% peat on dairy 2 to 46% on dairy 3. Over the 10 years of dairying, with up to 20% of pasture renewal annually on each farm, it has been established that tall fescue has better summer production on the peat.
“It loves the heat and responds better to nitrogen inputs and we are setting up for future irrigation development,” Johnson said.
Ryegrass remains on the sand country to make better use of winter growth rates.
Sweetwater is the only Landcorp dairy farm in the country that has Jersey genetics, because Johnson believes in their suitability for the Far North, their efficiency and reproductive performance.
“In winter we want the lighter animals on our peat soils and last season’s milk production of 93% kg MS/kg liveweight (LWT) was further proof for Jerseys to be here, if it was needed,” he said.
Mating performance is a big emphasis this year for Johnson and his four unit managers. They want 75% in-calf at six weeks of AI.
This is harder to achieve with the autumn-calving herd and they will give cows a second chance, with carryover in milk to the spring-calving herd if necessary. However, those carry-over cows are sent to run with the bull, not AI’d, to ensure replacements are coming from the genetically superior animals.
Yearling heifers also go into the AI programme, with all age groups getting Jersey tail-up bulls for a month after AI. Hereford bulls are used on non-cyclers and carry-over cows for ease of identification, and because there’s a useful market locally for white-faced calves.
Landcorp’s senior business manager (dairy) Mark Julian said Sweetwater was the most difficult to manage in the portfolio of 52 dairy units nationwide. He paid tribute to the first complex manager, Ross Shepherd, then Johnson, and all the farm managers and staff members who had worked there.
“It’s the climatic variation and the split calving, and there is that unique aspect of the Jerseys, whereas everywhere else has crossbreds or Friesians,” he said.
Landcorp chief executive Chris Kelly said sharemilking dairy farms instead of owning them brought benefits to Landcorp and its Crown shareholders. Capital was released for use elsewhere and revenue generated for the payment of healthy dividends to the Crown.
“Larger annual dividends to the Crown come from operating dairy farms, not necessarily owning them,” he said.
He expected that would be the case with Sweetwater for Te Rarawa in the future, as it would be for Shanghai Pengxin on the former Crafar farms (see story, page 34).
Property: Sweetwater Station, Awanui, Northland.
Area: 2480ha, three dairy farms and a dairy support and beef unit.
Owners: Office of Treaty Settlements, pending settlement to Te Rarawa and Ngai Takoto.
Sharemilker: Landcorp Farming, total 2011/12 milk production 994,509kg milksolids (MS), 1018kg MS/ha, 383kg MS/cow, Jersey AI over crossbred herds.
Farm business manager: Mark Johnson
Dairy 1: 311ha effective area, 830 cows milked at peak, 2011/12 production 341,480kg MS, farm manager Karl Foster.
Dairy 2: 298ha effective, 840 cows, 2011/12 production 342,297kg MS, farm manager Rodger Jensen.
Dairy 3: 373ha effective, 900 cows, 201/12 production 310,732kg MS, farm manager Shane Cooper.
Drystock farm: 1063ha, stock manager Noble Graham.
Mark Johson and Shane Cooper, Dairy 3 manager, inspecting cows.