A comfortable present but a difficult future are contained within the latest commentary by industry organisation DairyNZ on its own farmers.
Also in the report are detailed figures on everything from income per cow to calf rearing costs. They show some expenses facing farmers have been rising fast, such as fuel, building maintenance and insurance. Interest rates have also been a sharply rising cost for farmers.
Other costs have been relatively static, such as irrigation and pest control.
The information comes in the latest edition of the DairyNZ Econ Tracker. The statistics stretch from the 2018-19 year to 2022-23. They also include forecasts of the 2023-24 and 2024-25 years.
DairyNZ’s Head of Economics, Mark Storey, says one positive aspect of the publication is that farm output prices are good at present. For example, farmers are forecast to break even in the current, 2023-24 season, with milk solids selling for $7.75 per kilogramme.
But the average forecast payout is well ahead of that figure, at $8.12 per kilogramme.
“The positive difference between these numbers is good news and will likely bring further relief to many farms,” Storey says.
“This is especially true when compared with forecasts mid to late last year which showed a negative situation for dairy farmers.”
But this positive news starts to fade when the Econ Tracker looks ahead to the 2024-25 season. That is because of a wafer-thin, three cents margin between forecast payouts and the forecast breakeven point.
It says the breakeven price will be around $7.76 per kilogramme of milk solids, while the actual forecast payout will be only fractionally higher, at $7.79.
“Looking ahead to next season, we see a marginal tightening of dairy farmers' financial position, with less revenue forecast,” Storey says.
“We are not expecting feed and fertiliser costs to drop much further, and while debt servicing may ease, it will likely remain at very high levels."
“We are encouraging farmers to continue managing their budgets and costs, as they will likely experience limited operating profits, and many will likely still find it tight across many parts of the country.”
But despite urging farmers to take care, Storey adds a rider, that prices can change quickly.
“Farmers will be working closely with their banks, advisors, and rural professionals, including the DairyNZ team, as they plan for the next season.”
The fine print of the Econ Tracker gives many examples of how all this will pan out.
Total income per cow slips from $3680 in the 2022-23 year to a forecast $3273 in the 2024-25 year.
After meeting multiple expenses such as freight, animal health, winter grazing and insurance, discretionary cash per cow slips from $726 in 2022-23 to $450 forecast for 2024-25.
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