6 June 2024

3 minute read

By: DairyNZ

Oceania

The DairyNZ Economic Survey for the season 2022/23 continues to emphasise that dairy farmers, like others in New Zealand, have been battling with inflation, with the report showing an ongoing change in the make-up of expenses and the impacts this has had on dairy farm businesses.

DairyNZ head of economics, Mark Storey, said the combination of reduced milk price and increased on-farm costs compared to the previous season saw the 2022/23 operating profit drop to $2.57 per kilogram of milksolids (per kg/MS), down from $3.46 per kg/MS in 2021/22.

“For owner-operators we saw operating expenses increased by about 5 percent in the 2022/23 season, up to $6.67 per kg/MS, which is the highest it has been in the last 10 seasons,” explains Storey. “A deeper dive into the operating expenses shows that feed continues to be the largest operating cost, making up around 30 percent of total farm expenses.”

This was followed by labour (19 percent) and maintenance costs (18.7 percent), as the second and third highest expenses. Feed costs have been the largest operating cost on dairy farms since the 2007/08 season.

“Positively, for the 2022/23 season we saw an above-average milksolid payout received again, with it sitting at $8.68 per kg/MS. While lower than the previous season it was a still a relatively high payout, which helped farmers as they managed these record-high operating expenses.”

Sharemilkers also experienced an increase in operating expenses, to $3.76 per kg/MS. Compared to the 2021/22 season, there was also a reduced average milksolids payout to $4.14 per kg/MS. Despite this tightened economic performance, on average, sharemilkers were able to maintain profitability and positive returns.

“Farmers have focused on making changes to manage these increased costs, and fluctuations in the milk price payout, to remain profitable,” says Storey. “We also noted the ongoing shift in the make-up of costs farmers are facing, with a large increase in interest costs in 2022/23. In this context, it is encouraging to see that debt to asset ratios marginally declined (down 3%), which is a positive indication that farmers did not take on more debt in that season."

Storey acknowledges that we have now entered the new 2024/25 season and emphasises that farms are still operating in a tight economic environment and should remain focused on being considerate of their spending and look to manage their costs and budgets accordingly.

“A range of advisors and rural professionals are available to support farmers plan and adjust their business for the next season, especially as the dairy environment continues to fluctuate.”

The full DairyNZ Economic Survey is online at dairynz.co.nz.

DairyNZ’s Econ Tracker is also available for farmers and rural professionals to see 2023/24 and 2024/25 season forecasts and to help with financial planning, forecasting, and budgeting.