By Gerald Piddock

Copyright farmersweekly

Reading Time: 2 minutes

Dairy farmers remain on track for a good season with the payout forecast holding and spring weather starting to push up pasture growth rates.

Globally, while there are some signs of softening prices from increased supply – as indicated from Rabobank’s latest dairy quarterly update – the fundamentals are still strong heading into spring, DairyNZ head of economics Mark Storey said.

DairyNZ’s forecast of average payout received for this season is slightly adjusted from the previous June update to $10.30/kg MS.

“Overall, I think the fundamentals and the outlook for farmers for a good payout this season remain strong.”

What has changed is that some of the underlying costs have crept up, leading to a revised average break-even milk price of $8.66/kg MS.

This compares to break-even milk price of $8.45 for the 2024/25 season.

Electricity costs have lifted 12% in the past 12 months, freight costs are up 10%, livestock purchase prices are up 19% and fertiliser costs are also high, he said.

“Offsetting that are that interest rates coming down.”

It appears these relatively high input prices may be here to stay after they spiked during and following the covid pandemic. It appears there is a new floor in some of these costs, he said.

“We are not seeing any of these inputs significantly reduce. Feed might, depending on the season, but some of these other costs – fertiliser, electricity and freight, with those inflationary pressures – have all stayed high.”

Signs are also positive that it could be a good production season ahead and pasture growth conditions are also looking favourable across the North Island and top of the South Island, according to the latest Earth Sciences NZ (NIWA) outlook, he said.

“On the production side, the weather side and the price side, there’s every reason to look confident although it’s still very early in the season.”

Morale is also positive. The latest Rabobank Rural Confidence survey showed that farmer confidence is now at its second highest reading at any stage across the last decade.

Completed in early September, it found 51% of New Zealand farmers were now expecting the performance of the broader agri-economy to improve in the year ahead (up from 48% in the previous quarter), though the number expecting conditions to worsen has also risen to 5% (from 4% previously).

The remaining 43% of farmers expected conditions to stay the same (44% previously).

Federated Farmers dairy chair Karl Dean said that sentiment echoes the positivity he is seeing in the sector. Even if dairy prices soften, that sentiment would stay.

“It’s not going to be a morale killer.”

Pastures are generally growing well across the North Island and are poised to start growing in the South, once the temperature lifts, he said.

Farmer feedback he has received is that calving has gone well for most. There was good demand for 4-day-old calves and the bobby calf processors have had no major issues.

Cost-wise, it is now the unfortunate reality that costs appear to be set around $8.50/kg MS. But both dairy and meat prices are where they need to be for farmers to be profitable, he said.