DairyNZ’s latest farm financial forecast shows a national breakeven price of $8.32 per kgMS.
With the average national forecast payout now sitting at $10.08 per kgMS, that’s potentially $1.76 of cream on top for farmers, 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,” says DairyNZ Head of Economics Mark Storey.
“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 per kgMS, 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 break-even milk price, now sitting at $8.32 per 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,” Mark says.
DairyNZ Senior Business Specialist, Paul Bird, says 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.
“It’s the perfect time to take a moment to celebrate a positive end to 2024, while reflecting on how to approach the New Year, including how to utilise the higher payout to best support long-term success,” says Paul.
“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.
“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.”
The new forecasts are published on the DairyNZ Econ Tracker and expressed as national or regional averages, which does not necessarily reflect individual farm situations. A quarterly update, on this occasion focused on the evolution of the dairy cow diet, is also available.
The Econ Tracker can be accessed at dairynz.co.nz/econtracker
Media contact
Celine Walters-Gray
Media specialist
p: 027 247 9876
e: celine.walters@dairynz.co.nz