DairyNZ’s annual Economic Survey report has shown dairy farmers remained profitable in the 2021/22 season due to a high milk price, although this was partially offset by increases in operating expenses due to on-farm inflation.
DairyNZ head of economics, Mark Storey, said it was positive to see operating profit at the time was up on previous years, with an increase to $4,150 per hectare for owner-operators. However, at the same time, a record-high was occurring for operating expenses – and, more than one year on, it remains a key challenge for farmers.
“It is good to see farmers managed increased expenses and, with careful management of costs and inputs, still being able to achieve higher-than-average operating profit,” says Mr Storey.
“For the 2021/22 season we were fortunate to see an above-average milk price of $9.19 per kilogram milksolid (kg MS) which helped enable this success. However, farmers also experienced record-high operating expenses per kg MS.”
This was the second consecutive record-high for operating expenses, with an increase to average $6.35 per kg MS for 2021/22. On a per hectare basis, the most notable increases included fuel fertiliser, feed.
“Looking ahead, we are seeing many of these high costs, including high interest rates, being carried into this season, with operating expenses forecast to increase to around $6.78 per kg MS,” says Mr Storey.
“Feed continues to be the largest cost on dairy farms and has been since the 2007/08 season, which is an important consideration for farmers looking to control farm costs. Those farmers can consider strategic planning to reduce the cost of purchased feed by looking at opportunities for planting more crops or forward buying imported feed.”
Sharemilkers also recorded an increase in operating profit per hectare, although the higher milk prices were partially offset by a decrease in milksolids per cow, a slight reduction in herd size.
“The difference between the farms with high and low operating profit is that top farmers are more efficient, with lower operating expenses per kg milksolids. That’s why it is important farmers are making a budget and considering how they will manage costs for the season ahead, with more operating expense increases expected.”
DairyNZ’s new Econ Tracker will help farmers as they look to plan for the season ahead and better understand the current economic environment.
“Farmers can use the data in the Econ Tracker to observe trends and consider the application to their farms and then apply this to their budgeting and farm business planning,” says Mr Storey.
Farmers looking for support are encouraged to reach out to their rural professionals and their DairyNZ regional team or visit dairynz.co.nz/budgeting for more information.
The new DairyNZ Econ Tracker is also available dairynz.co.nz/econtracker
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