While most farmers have recovered reasonably well from the drought and the two regions receiving good rain in autumn, it has yet to penetrate down to the subsoil, AgFirst economist Phil Journeaux said.
Last year’s rainfall was down 20-25% and down 50-60% to the end of May this year, meaning while topsoils were wet, subsoils were not.
“In a lot of areas, the subsoil is still quite dry which doesn’t particularly auger well if we get hit with another dry summer this coming season,” he said while commenting on AgFirst’s annual financial survey for Waikato and Bay of Plenty dairy farms.
“In one sense, we need a lot of rain over the next few months to make up the deficit, in another sense, we don’t as we’re calving and the season is underway. If we do have a dry summer, it could be a lot worse than the one we have just been through,” Journeaux said.
The survey is based on the information collated from 25 dairy farms across the two regions. A farm model is then created from that survey data. This model is a seasonal supplying farm of 129 hectares, milking 364 cows and producing 130,556kg milksolids.
Journeaux rated farm confidence as “okay”. Most of the 25 farmers surveyed by AgFirst were reasonably happy with the financial performance of their farm and where it was heading.
“But that’s offset with the degree of uncertainty around politics and environmental compliance and around the impact of covid-19 on the world scene,” he said.
The 2019-20 season saw a mild spring with good pasture growth which then gave way to drought, with some areas not getting rain until late-May-early-June.
Production was back 4.1% compared to the 2018-19 season, with Waikato more heavily affected than Bay of Plenty. Maize yields were well back on crops on lighter soils at 12T/ha, while those on heavier peat soils made 20-25T/ha.
Net cash income, however, was up 10% largely due to an improved payout.
Farm working expenses lifted by approximately 12%, jumping from $3.97-$4.54/kg/MS in absolute terms. Feed cost had the biggest lift, jumping 10% because of the drought.
Despite the increase in farm working expenditure, farm profit before tax was up 39% to $244,000 driven largely by the increase in the dairy payout.
Heading into the new season, most areas had recovered well from the drought, Journeaux said.
As most farmers dried their herd off early, their cows were in good condition with calving currently underway in the region.
“Farmers obviously used a lot of supplement in the drought, our estimates are that most farmers are at least half a tonne of dry matter per cow down on supplement, but talking to our monitored farms, most are confident they have enough supplement on hand to get through to spring,” he said.
Journeaux expected a reduced payout this season with the model budget working on a $6.40/kg MS forecast compared to $7.20/kg MS last season. This, along with an expected 3% increase in production means that income is expected to fall 7% this season.
The farm model budgeted on a 5% decrease in expenditure and overall, farm profit before tax was down 14% on the previous season to $210,700. The model had a small cash surplus of $8000, excluding any dividend payment.
“Over the past three years and looking forward to 2021, the farm (model) will be operating quite profitably,” Journeaux said.
The model set a break-even milk price of $5.88/kg/MS meaning a payout $6kg/MS or over was needed to cover farm costs.
Journeaux said the model’s balance sheet took at $1.8 million loss in asset value between 2017-2018 and 2018-2019 due to falling land values. Those values have since stabilised.
