The good news was 60c of the forecast increase in milk price went straight into the advance with the September, paid October, production receiving $3/kg MS rather than $2.40/kg MS based on the previous advance rate schedule.
DairyNZ estimates 70% of farmers will still need more money to meet their farm working expenses, rent and interest costs this season. At $3.85/kg MS it was 90%.
Across the country the average deficit will be about $1.15/kg MS with Fonterra’s Co-operative Support loan covering less than half of this.
DairyNZ economist Matthew Newman said for a Waikato farm producing 122,400kg MS with 76% of its production happening by the end of December losses were significant even with the new $4.60/kg MS forecast milk price.
By the end of May 2016, based on the revised Fonterra advance rate schedule, the modelled farm would have a net cashflow position of negative $97,800 if it had started the season on June 1, with a bank balance of zero.
That includes the Fonterra loan of 50c/kg MS for production from the start of the season to December which over the whole season equates to 38c/kg MS for the modelled farm.
The 38c/kg MS is debt not income, but will make a material difference to cashflows throughout the season as it is to be paid in a similar fashion to an advance rate.
Without the loan the net cashflow position is -$147,600 for the modelled farm but at the initial milk price forecast of $3.85/kg MS that would have been almost -$230,000.
Across the country, DairyNZ estimates the average fully shared up farmer will receive a milk income of $4.15/kg MS within their financial year which includes 9c/kg MS of retrospective payments from 2014-15 and a 30c dividend.
