"The reduced milk price has meant farmers have really fine-tuned their management and analysed their costs of production. This should bring the average farm working expenses back to an anticipated $3.55kg this season, the lowest level since 2009/10."
Farm working expenses were sitting at $4.07kg in 2014/15, so the reduction has been equivalent to around $100,000 a farm, on average.
Mr Mackle says reducing the break-even price is tremendous recognition for New Zealand dairy farmers and the resilience they have shown.
"Being able to reduce the break-even milk price tells us that dairy farmers have cut costs further than we thought. This cost control is resulting in more efficient dairy businesses, which is key to resilience."
Despite the $5.05 kg break-even milk income required for the average farmer, under the current forecast farmers will receive around $4.50kg all up in terms of milk income, including retro payments from last season and dividends (including the lift in dividend announced).
"Obviously there is still a shortfall there - and while there are farmers operating above that $5.05 level, there are many with break-even incomes below that too. But a $4.50 income and reduced farm working expenses means farmers won't need to borrow quite as much," says Mr Mackle.
"But let's be clear, this is still very tough for our farmers as it's been a sustained period of low milk price. Every farm runs a slightly different system, with different costs and needs.
Many will have been through the process of fine-tuning their budgets, but maintaining that momentum and always looking for efficiency opportunities is key."
DairyNZ's Tactics campaign continues to support farmers through field days which will be underway in September and October. These Tactics for spring events will help farmers extract maximum value from their pasture.
"Pasture First is a message we are promoting with farmers. Our research shows pasture drives in excess of 85 per cent profit for most farms at a $7kg milk price, but 98 per cent at a $4kg.
"So it makes sense to get our focus clearly set on managing this important feed source well - we've got to make the most of it, particularly this spring," says Mr Mackle.
"While increasing revenue is important, it's even more important to keep hold of as much of it as possible. This means running a tight budget.
"Following on from the huge interest in this area last year, farms with a low cost of production have opened their books once again and revealed their 2016/17 budgets - enabling other farmers to improve their own business, by comparing themselves.
