DairyNZ’s latest farm financial forecast shows a national breakeven price of $8.32 per kgMS.
It should be a positive end of the year for the country’s dairy farmers with DairyNZ’s latest farm financial forecast shows a national breakeven price of $8.32/ kg MS.
With the average national forecast payout now sitting at $10.08/ kg MS, that’s potentially $1.76, which is well above the profit margin of recent seasons.
“I suspect that Christmas came a bit early in some dairy farming households following multiple positive announcements in recent months,” DairyNZ head of economics Mark Storey said.
“The Global Dairy Trade auctions have seen a steady demand for all dairy products, which has positively influenced dairy prices, while reductions in the Official Cash Rate (OCR) have decreased interest expenses, providing financial relief and improved profitability for our farmers.”
Since initial forecasts in June, the average national forecast payout received has increased by 21% to $10.08/kg MS while farm working expenses have remained relatively stable, with a small 4% increase since June.
This is reflected in a 3% increase to the forecast breakeven milk price, now sitting at $8.32/kg MS.
“Farm working expenses are forecast to increase marginally to better reflect what is happening on farm, including slight increases in key operational areas such as electricity, wages and insurance.
“A portion of this increase is attributed to deferred costs from the tight times in previous seasons, as farmers look to catch up on deferred repairs and maintenance.
“Despite the slight rise in expenses, the combination of higher income and reduced interest costs will be resulting in a substantial increase in cash surplus. This indicates a stronger financial footing for farmers, providing them with greater liquidity and the ability to reduce debt or undertake essential capital projects depending on their individual situation.”
DairyNZ senior business specialist Paul Bird said that after a few years of high costs and inflation having big impacts on the bottom line it is a relief to see a change in narrative.
“Now is the time to use this payout to prepare for whatever comes next – because farming is a marathon, not a sprint. There are a range of tools and resources to support you, including the Econ Tracker, where you can consider the balance of increased payout, inflation and subsiding interest rates,” Baird said.
“Business strategies might include sticking to your original farm budget despite more income, paying down debt, or investing in the future of your farm through technology, infrastructure or more staff training.”
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