DairyNZ’s latest Econ Tracker update shows the sector is in a relatively stable position, with strong milk price payout forecasts continuing to offset ongoing high farm costs.
The breakeven milk price (BEMP) has been revised to $8.66/kgMS, up slightly from last season’s $8.45, but little change from DairyNZ’s June forecast. The predicted average payout also remains steady at $10.30/kgMS.
DairyNZ Head of Economics, Mark Storey, says the update reinforces the fact that current market fundamentals remain stable.
“Costs continue to remain elevated, but with high expected milk price payouts, the revenue outlook is still relatively strong, which is helping counterbalance cost pressures,” says Mark.
“There continues to be uncertainties in the wider economy and the international geopolitical environment, but overall, the dairy sector is in a good position.”
Farm working expenses have edged up slightly to $5.91/kgMS, reflecting ongoing cost pressures.
StatsNZ’s Farm Expense Price Index shows electricity prices are up 12 percent and freight costs are up 10 percent compared to last year, while fertiliser and feed costs are still elevated, with no relief expected in the near term.
However, Mark says easing interest rates are helping farmers manage these increases.
“Falling interest rates are offsetting some of the extra costs and helping to keep breakeven milk prices stable. Looking ahead, further OCR reductions are forecast, which should ease debt servicing pressures, although this also points to a broader economic slowdown.”
DairyNZ Chair, Tracy Brown, emphasises that farmers are focused on what they can control, including careful planning and improving production.
“The season’s production has started relatively well, with national milksolid production up by 18% in June, and up by 2% in July, compared to the same period last year," says Tracy.
“While it’s early days, that’s a positive sign - but as always, we’ll need to see how the season plays out over the coming months.”
The Econ Tracker presents national and regional averages and may not reflect individual farm circumstances.
Explore the latest figures and analysis at dairynz.co.nz/econtracker
Note for the editor: The breakeven milk price is the milk sale price per kilogram of milksolids to cover a farm’s costs in a season, excluding capital expenditure and principal repaid on loans. The forecast average payout is based on the estimated milk receipts for the specified season, along with dairy company dividends.
Media contact
Celine Walters-Gray
Corporate Communications Advisor
p: 027 247 9876
e: celine.walters@dairynz.co.nz
