This report summarises the results of a financial survey of dairy farms across the Waikato and Bay of Plenty regions, carried out by AgFirst through June 2020. A description of the model farm is at the back of the report.
The key points of this report are:
The 2019/20 season was again mixed climatically. The recovery from the dry 2019 summer was good, with cows calving in reasonable condition into good pasture covers for winter/spring 2019. Reasonable, but below average rain kept pasture growing up to Christmas, but a severe drought over summer and autumn directly impacted production. Good rain through April/May coupled with mild temperatures have seen good recovery in pasture covers on most farms.
Overall milksolids production is down 4.1% compared with 2018/19, with the Waikato much more impacted than the Bay of Plenty.
Net income for the 2019/20 season is up 10% compared with 2018/19, largely due to the improvement in the payout over the 2019/20 season. Farm working expenses have also increased 10%, largely driven by the purchase of supplementary feed to combat the drought.
Surplus funds have been used to cover capital expenditure, and some principal debt repayment, such that the farm shows a small surplus for the year.
For 2020/21, the budget is showing a 7% decrease in Net Cash Income; while milksolids production is budgeted to increase (by 3%), this is more than offset by the reduction in the payout.
As a result, farmers are budgeting on reduced farm working expenditure (down 5%) and hoping not to have another dry summer. Key reduction in budgeted expenditure is bought-in supplements, and repairs and maintenance.
Overall, the farm is currently budgeting for a small profit, which is then added to by the dividend income.
Currently, farmer morale could be described as ‘okay’, although there is considerable uncertainty around environmental issues, and the impact of Covid-19 both on the domestic economy and on a wider world scale.