DairyNZ has confirmed that the average dairy farmer will lose money this season even after keeping a tight rein on costs.
The industry organisation, that represents the country’s dairy farmers, revised its national breakeven milk price down from a June forecast of $8.16 per kilogram of milk solid, to $7.51 per kg/MS for this season.
DairyNZ head of economics Mark Storey said the breakeven milk price of $7.51kg/MS is above DairyNZ’s forecast revenue of $7.34 kg/MS for the season, and above Fonterra’s midpoint forecast of $7 kg/MS, he said.
On Wednesday the price of whole milk powder nosedived to levels last seen in 2016 at the latest Global Dairy Trade auction after product volumes increased in an already saturated market.
This means some farmers will make a loss this season, so the focus will be on maintaining business viability, he said.
Many dairy farmers would find the milk price and inflation issues difficult to take, Storey said.
“We know dairy farmers have a difficult season ahead, in light of the reduced milk price and continuing high farm costs. The breakeven milk price is one tool we have to support farmers right now, as it helps identify and forecast average costs,” Storey said.
“The updated breakeven milk price reflects that farmers are working really hard to reduce their spending in the face of extremely high costs. We know farmers are looking at budgets line-by-line and analysing where spending can be reduced, including pausing non-essential capital expenditure and carefully evaluating feed, fertiliser and other spending,” Storey said.
“This will also have significant flow-on effects to New Zealand’s regional and national economy.”
The new forecast was published on the DairyNZ Econ Tracker and expressed as a national average, which did not reflect individual farm situations, he said.
An estimation of breakeven price by region was also shown on the Econ Tracker.
DairyNZ farm performance general manager Sarah Speight said every farm was different, and she encouraged farmers to look at their own situation and what changes can be made on their farm.
“Given the further drop in the Global Dairy Trade this week we are looking at 12 to 18 months of reduced income, so it is important to consider changes carefully,” Speight said.
