Returns lift, costs down - DairyNZ
The outlook for dairy farmers this season has improved, especially when compared to forecasts only six months ago, according to DairyNZ.
A record $9/kgMS milk price is becoming a real prospect – but rising costs will slash profit margins.
Strong demand and tight global supply, including soft domestic milk production figures, are putting upward pressure on prices.
However, costs – both on and off farm – are rising, threatening profit margins.
BNZ senior economist Doug Steel says price rises on Global Dairy Trade auctions over the last few months mean a record milk price, beating the 2013-14 record of $8.40/kgMS, is highly likely. But he points out that this doesn’t mean “a record price in real terms”.
Rising costs mean it won’t be a record profit for most farmers. However, strong revenues from the high milk price will mean a reasonably profitable season.
“Even if GDT prices are maintained at current levels going forward, there’s a reasonable chance of a $9 milk price this season,” he told Rural News.
But Steel warns that we’re living in a world “with many moving parts”. International fertiliser prices and shipping costs continue to rise. On farm fuel and contractor costs are soaring, while interest rates also on the up.
“Farmers are doing their best to manage costs, but while revenues are strong, the high costs take the gloss off the bottom line to some extent,” says Steel.
BNZ is forecasting a milk price of $8.90/kgMS – the top end of Fonterra’s forecast milk price range of $7.90 to $8.90/kgMS. The co-operative is expected to upgrade its forecast when it releases its first quarter results on December 3.
Steel says there’s a strong chance Fonterra will revise its forecast price range. He notes that since the co-operative’s last upgrade, international dairy prices have risen 7%.
Analysis by Dunedin-based Techion New Zealand shows the cost of undetected drench resistance in sheep has exploded to an estimated $98 million a year.
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The opportunity to spend more time on farm while providing a dedicated service for shareholders attracted new environmental manager Ben Howden to work for Waimakariri Irrigation Limited (WIL).
Federated Farmers claims that the Otago Regional Council is charging ahead unnecessarily with piling more regulation on rural communities.
Dairy sheep and goat farmers are being told to reduce milk supply as processors face a slump in global demand for their products.
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