Agribusiness

Costs up as farmers reinvest back into the business

milk man agriculture stock image

DairyNZ’s newly-released Economic Survey 2017-18 shows farmers have taken advantage of increased milk income to catch up on deferred farm maintenance and revisit capital expenditure, previously delayed due to lower milk prices.

DairyNZ senior economist Matthew Newman said the annual farmer survey shows the largest increases in spend during 2017-18 (1 June 2017 to 31 May 2018) were on feed, repairs, maintenance and labour. But, it is likely expenditure has increased further in 2018-19.

“The 2017-18 season was difficult due to a dry spring/early summer for all regions. That affected pasture growth and peak milk production. It’s also the season that Mycoplasma bovis was discovered,” said Matthew.

“Overall, the break-even milk price increased 70 cents to $5.87 per kg milksolids in 2017-18, due to the higher farm working expenses, increased tax payments and increased drawings.

“This survey is a good reminder that as a sector, we need to maintain our competitiveness by striving to produce milk at profitable margins and being prepared for fluctuations in milk prices.”

DairyNZ farm business developer Angie Fisher said the Economic Survey can help inform planning for the 2019/20 dairy season.

“The Economic Survey provides financial data for both owners and herd-owning sharemilkers, along with forecasts for the 2019-20 seasons. This makes it a useful resource for farm budgeting,” said Angie.

Along with the Economic Survey, DairyNZ also collates other information that helps farmers plan for the season ahead.

DairyNZ analyses financial figures of top-performing dairy farmers nationwide through DairyBase. DairyNZ also provides budgets and results from 17 Budget Case Study farmers nationwide who have opened their books for others to learn from.

“Through data analysis and looking more closely at above-average performers, we’ve got a good picture of what influences profitability and returns,” said Angie.

“There can be cases when the business owner’s goals are not clear, not written down or not aligned between partners or family members. When clarity and alignment is achieved, results can be dramatically improved.

“For example, the Budget Case Study Farmers have a high attention to detail to what matters in their business. Budgeting and cashflow management are a monthly focus. A sustainable profit target is set at the beginning of the season and this target is locked in.

“The biggest single physical difference in highly profitable farms is pasture consumption per hectare. Those with higher profit have higher pasture eaten per hectare than average – for every extra tonne of pasture eaten per hectare, on average farms generate an extra $300 per hectare of operating profit.”

Source: DairyNZ

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