Saturday, March 30, 2024

Dairy financials falter despite higher payout

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Dairy farms run by owner-operators lost equity by an average of nearly $240,000 in the 2017-18 season, Dairybase figures published in the latest DairyNZ Economic Survey show.
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Despite the fourth highest operating profit recorded and a rise in return on dairy assets, reduced values of dairy company shares and livestock sent total return on equity to minus 4.4%.

The growth in equity went into reverse, minus 5.7%, compared with plus 15.4% the previous season.

Sharemilkers with 50:50 contracts fared a little better recording growth in equity of $6500 or 1.6%.

But those numbers for sharemilkers were down considerably from $240,000 and 87% respectively in the 2016-17 season of recovery.

DairyNZ also said sharemilkers made cash deficits in four of the past six seasons.

The most-recent Dairybase figures show debt for sharemilkers rose 3% to 56.7% of assets while for owner-operators the equivalent figure is 50.7%.

In 2017-18 the farmgate milk payout for owner-operators was $6.62/kg, up 83c from the previous season while the break-even price rose 70c to $5.87.

Gross farm revenue was $7.23/kg and the operating profit was $2238/ha, a lift of $301 on the previous season.

From the Dairybase data, farm working expenses increased from $3.73 to $4.20, dairy operating expenses rose from $4.60 to $5.13, and average tax payments and drawings increased.

During the season milk production per cow and per hectare fell because of a difficult and dry spring/early summer.

Operating return on dairy assets was 4.3%, up from 3.9% previously.

For owner-operators the average peak cows milked was 430, on 151.4ha effective, and production was 376kg/cow and 1067kg/ha.

For 50:50 sharemilkers the average herd size was 391 cows on 137.2ha effective and production was 376kg/cow and 1072kg/ha.

Payout received by those sharemilkers was $3.21, gross farm revenue $3.79 and operating profit was 67c/kg.

The operating return on dairy assets fell slightly to 11.5% and total return on equity was minus 2.9%.

This was the fifth year in the past decade of negative returns on equity for sharemilkers. 

Delving into on-farm costs, the report said inflation was 0.2% overall, with increases in the prices of fuel, rates, electricity, animal breeding and insurances offset by decreases in grazing, fertiliser and interest rates.

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