Dairy grazing is currently cheaper than it has ever been, but prices are expected to increase with the sheep and beef industry competing for land use.

New Zealand Grazing Company managing director Ian Wickham says grazing is about $8 a week currently and with a dairy payout of about $8kgMS – which equates to about 50kgMS to graze a heifer for one year.

'Grazing has never been cheaper,” says Ian.
In 1970/71 when payout was about $1kgMS grazing was $3 a week; in 1990/91 payout was about $3kgMS while grazing was about $4.70 a week; and in 2000/01, payout was $5kgMS and grazing was up to $6 a week – which equates to a cost of about 60 kgMS a year to graze a heifer.

'Relatively speaking, for dairy farmers, off-farm grazing for dairy heifers has been getting cheaper and cheaper. That's a trend that's been happening now for 30 years.

'That's really why off-farm grazing for replacement stock for dairy has become so popular.”

Ian says, however, with the improvement in lamb and beef prices, demand for grazing is likely to increase – subsequently pushing up prices.

'What's happened recently of course is we've seen lamb prices increase by at least 50 per cent and beef prices increase similarly.

'There has certainly been a shift in pattern of land use, one would have to say with lamb prices as they are and looking quite stable – it certainly does start to give a good alternative land use to dairying.

'The price of milksolids is not a 'driver' of the price of grazing – otherwise the price of grazing would have increased along with the price of MS – but rather a supply/demand situation which encompasses all land use factors.”

The current returns for red meat has made sheep and beef farming a more viable land use option too.

‘Between lamb and beef and off-farm grazing – the price is likely to increase simply because of the supply and demand situation.

'We're involved in the growing of bull beef and currently we're looking for space for about 5000 animals over the next few months.

'So that's going to put more emphasis on the demand side.”
Ian says the issue is supply of grazing – the number of dairy conversions has caused a reduction in land available for grazing.

'We've seen quite a large number of farms well set up for grazing dairy heifers that have actually made the conversion into dairying – that's actually a double whammy because not only do those farms then want to graze their heifers out – so there is an increase in number of heifers required to be supported off farm – plus the land available has been reduced.”

Ian recalls the days when dairy grazing off-farm was an unviable option.

'Historically, I remember when it was not even a choice for a dairy farmer to have off-farm grazing, dairy farmers were relatively poor in comparison to sheep and beef farmers.

'When wool prices were high, sheep farmers were doing economically very well and dairy farmers were not – the thought of putting some dairy stock onto a sheep farm was ludicrous because you had to pay far more than what you would get back for it.”
Ian says that trend has reversed, but 'it may be changing again with the increased fortune in the lamb and beef side of things”.

'It's interesting to contemplate where it all might head.”

Ian says paying prices for off-farm grazing is a cost that the majority of New Zealand dairy farmers are paying now.

'A while ago, I heard some people referring to some dairy farmers who were ‘really old fashioned' because they still had their heifers at home.

'It's become the exception to have replacements on the dairy unit.
'The dairy unit is now seen as strictly having producing cows on it, not supporting any young stock.”

He says dairy farmers usually hold negotiation power, but with the increasing option of putting sheep or beef on the land, things may change.