The DairyNZ Economic Survey for 2022-2023 has revealed that the past season was the costliest for milk producers in a decade.
NZ dairy farmers face highest costs in 10 years
The dairy sector in New Zealand is facing high costs

The DairyNZ Economic Survey for 2022-2023 has revealed that the past season was the costliest for milk producers in a decade. The survey underscores how inflation has been affecting New Zealand’s dairy farmers, leading to notable shifts in expense structures and impacting farm operations.

According to Mark Storey, DairyNZ’s head of economics, the combination of reduced milk prices and rising on-farm costs compared to the previous season led to a drop in operating profit to NZ$2.57/kg of milk solids (MS) (£1.26/kg MS), down from NZ$3.46/kg MS (£1.69/kg MS) in 2021-2022.

“For owner-operators, operating expenses increased by about 5% in the 2022/23 season, reaching NZ$6.67/kg MS (£3.27/kg MS), the highest level in the last ten seasons,” Storey explained. “A deeper dive into the operating expenses shows that feed continues to be the largest operating cost, making up around 30% of total farm expenses.”

Profit margins are squeezed in New ZealandProfit margins are squeezed in New Zealand

Labour costs (19%) and maintenance expenses (18.7%) followed feed costs as the second and third highest expenses. Feed has been the predominant operating cost on dairy farms since the 2007-2008 season.

“On a positive note, the 2022-2023 season saw an above-average milksolid payout, sitting at NZ$8.68/kg MS (£4.26/kg MS). While lower than the previous season, it was still a relatively high payout, which helped farmers manage these record-high operating expenses.”

Sharemilkers also faced higher operating expenses, which rose to NZ$3.76/kg MS (£1.85/kg MS). Despite a reduced average milksolids payout to NZ$4.14/kg MS (£2.03/kg MS), sharemilkers were able to maintain profitability and positive returns on average.

“Farmers have focused on making changes to manage these increased costs and fluctuations in the milk price payout to remain profitable,” Storey noted. “We also observed a significant rise in interest costs in 2022-2023, but it’s encouraging to see that debt-to-asset ratios marginally declined (down 3%), indicating that farmers did not take on more debt during the season.”

As the new season approaches, farms continue to face economic challenges and should remain vigilant about their spending and focus on effective cost management, Storey advised. “A range of advisers and rural professionals are available to support farmers in planning and adjusting their business for the next season, especially as the dairy environment continues to fluctuate.”

Key Numbers from the Economic Survey

Owner-operators

The average milksolids payout received was NZ$8.68/kg MS (£4.26/kg MS), NZ$0.51 lower than the previous season.

Operating expenses increased by about 5%, to NZ$6.67/kg MS (£3.27/kg MS), the highest in the last ten seasons.

Cash available for living and growth was NZ$301,982 (£148,275) per farm, the third highest in the last ten seasons.

Feed remained the largest expenditure category at around 30%.

Sharemilkers

The average milksolids payout received by 50:50 sharemilkers was NZ$4.14/kg MS (£2.03/kg MS), NZ$0.40 lower than the previous season.

Operating expenses per kilogram of milksolids increased by about 4%, to NZ$3.76/kg MS (£1.85/kg MS), the highest in the last ten seasons.

Lower milk payouts were partially offset by an increase in milksolids per cow (+10 kg MS) and a slight increase in herd size (+15 cows).

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