Friday, March 29, 2024

DairyNZ lowers break-even milk estimate

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Bigger-than-expected milk volumes mean the average New Zealand dairy farmer won’t need as high a payout from milk processors as previously forecast to break even, according to DairyNZ.
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The organisation, which collects industry data to work out the milk payment required for farmers to pay their bills each season, lowered its estimate for 2015/16 to $5.30 a kilogram of milk solids from a previous estimate of $5.40/kgMS.

Still, the break-even estimate remains significantly above what Fonterra Co-operative Group, the country’s dominant milk processor, expects to pay farmers at the farmgate for the season at $4.15/kgMS.

Forecasts for declines in New Zealand milk production this season have been pulled back as an El Nino weather pattern appears not to have dented national volumes as much as previously anticipated.

DairyNZ now expects New Zealand milk volumes to be about 3% lower this year, compared with a mid-season forecast for a 5% decline, which was based on El Nino causing a drier than normal summer.

“Milk production has held up a bit better than what we initially anticipated,” DairyNZ senior economist Matthew Newman said.

“While it’s drying out now, it’s kind of normal drying out and we have had quite good rain in a lot of places in December and January so production has held up better than we thought and that’s been reflected in the statistics coming through,” he said. “Our forecasts reflect a little bit drier for the remainder of the season, although who knows, it hasn’t really hit hard yet.”

The break-even price gives an average across the industry, and it can sit $1/kgMS higher or lower for individual farmers depending on their farm expenses and interest payments on debt.

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