News and Views

Economic Survey: farmer resilience among 2019-20 challenges

The DairyNZ 2019-20 Economic Survey released shows farmer resilience to the challenges of COVID-19, price volatility and unpredictable weather, with a positive year for milk production and farm businesses.

DairyNZ chief economist Dr Graeme Doole said operating profit, milksolids per cow and per hectare were all up on previous years.

“For the 2019-20 season we were fortunate to receive an above-average milk price of $7.05 per kilogram milksolids, which continued into the next season. This enabled some farmers to catch-up on farm maintenance and debt repayment, while continuing to invest in environmental improvement on-farm,” said Dr Doole.

“Farm costs also increased, with higher fertiliser and supplementary feed costs. Although we saw a decrease in interest costs, this was not enough to offset increases in other areas of expenditure.”

The annual survey shows that average operating profit was up 28 percent on the previous season, at $2,750 per hectare for 2019-20, while milksolids per cow and hectare were at their highest level to date.

“This on-farm success results in a strong contribution to the New Zealand economy, delivering around $20 billion in export value, while employing around 50,000 people on and off farm,” said Dr Doole.

“It is positive to see such a high operating profit for farms for 2019-20, compared to the 10-year average of $1,645 per hectare. Despite many farms nationwide being affected by a dry summer, production remained strong.”

Operating expenses increased to $5.31 per kilogram milksolids (compared to 2018-19), which is above the previous high of $5.17 reported in 2013-14.

“Feed continues to be the largest cost on New Zealand dairy farms, which is important for farmers looking to control farm costs. To build their resilience for periods when milk prices are lower, farmers should look at their overall cost structures on-farm and identify where they can trim costs,” says Dr Doole.

Sharemilkers experienced a good year, recording a 35 percent increase in operating profit on the previous season to $1,050 per hectare, while faced with similar cost changes, price volatility and weather conditions.

Farmers are encouraged to analyse their individual performance and compare their results with similar farms through DairyNZ’s DairyBase and budget case studies.

Budget case studies look at several top-performing farms nationwide for the current season, to help identify opportunities to reduce the cost of production. This is a useful benchmarking tool for farmers to get insights and ideas from.

The annual Economic Survey analyses a representative sample of farmers, surveying 326 owner-operators and 124 herd-owning sharemilking farms (50:50 sharemilkers) across New Zealand for the 2019-20 season.

To read the DairyNZ Economic Survey 2019-20, visit dairynz.co.nz/economicsurvey.

Budget case studies are available online at dairynz.co.nz/business.

Dairy sector economic contribution:

  • Dairy delivers around $20 billion in export value.
  • Dairy directly adds $10.2 billion to New Zealand’s economy.
  • Around 50,000 people are employed in the dairy sector.

Source: DairyNZ

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