DairyNZ’s latest Econ Tracker update shows most farms will still finish the season in a positive position, although the gap has narrowed compared with early season expectations.
Despite the Fonterra forecast farmgate milk price easing to a midpoint of $9.50/kgMS, the overall outlook remainspositive with a forecast break-even milk price of $8.50/kgMS.
That’s down from $8.66 earlier in the year — a 16-cent decrease.
The break-even 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 repayments on loans.
The forecast average payout is based on the estimated milk receipts for the specified season, along with dairy company dividends.
DairyNZ Chief Executive Campbell Parker said the cost of doing business for farmers had dropped slightly, thanks largely to falling interest rates.
“While there’s still some upward pressure on input prices, fertiliser, etc., interest costs have come down significantly,” he told The Country’s Jamie Mackay.
“When you look at a break-even milk price of $8.50 and a mid-point at $9.50, reconfirmed by Fonterra last week, things are still in a reasonably good space for our sector.”
Mackay asked whether a $1 margin per kilogram was enough for meaningful profit.
Parker said it was achievable if farmers kept an eye on their finances.
“The most important thing for farmers to do is keep a tight control on costs, particularly when you see an increased milk price, it’s often easy for that cost piece to get away,” he said.
National milk production to date is up 3.4% on last season, with the South Island leading the charge, posting a 5.7% lift in October, mainly driven by extra feed.
The November stats will be out shortly.
“I think it reflects where the milk price has been,” Parker said.
“We’ve also seen a 20% lift in the likes of palm kernel over the last 12 months.
“So, people are taking that marginal milk and driving more production and profit in these current times.”
Image / DairyNZ
On the biosecurity front, Parker said the industry had almost won the fight against Mycoplasma bovis.
Parker, who sits on the M. bovis Governance Group, said that while this was a great achievement, it was not the time to rest.
“We will be the first country to self-declare eradication of Bovis, but we’ve got to keep the foot on the throat around that.
Parker said this declaration could be made earlier than the 2028 target, based on the tracking and the reporting, but “we keep a very close eye on that”.
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The other biosecurity highlight this year for Parker was the Foot-and-Mouth Disease Operational Agreement, announced at Fieldays.
“I’m the chair of the inaugural FMD council, and we actually had a council meeting yesterday,” he said.
“So we’re making good progress around some of the readiness activities, but we’ve got to keep working hard on that.”
As for research, Parker said it remained a priority, with work underway on methane emissions, resilient pastures in the Upper North Island, and non-replacement calves.
“Lots happening in the research space, and turning those into tangible tools that farmers can adopt on farm,” he said.
