NEW ZEALAND – Companies exhibiting at the National Agricultural Fieldays are expected to benefit this week, as all the signs are positive for dairy farmers opening their wallets, following an excellent autumn and high milk prices.
DairyNZ CEO Dr Tim Mackle says the provisional national production increase of 5.3 per cent to 1.5 billion kilograms of milksolids is remarkable, given the very dry conditions before Christmas.
“The end result is excellent for dairy farmers and positive for the country as a whole, which will benefit from the higher export earnings, farmer spending and a substantial lift in the amount of tax paid.
“We estimate the average dairy farm business has paid more than $50,000 in tax this season, and we know a good proportion of the extra revenue has been used to reduce debt,” he says.
Reserve Bank figures show $1 billion of bank lending has been repaid over the last six to nine months, with the majority likely to have been from dairy farmers. This coupled with an increase in production would have lowered the average term liabilities by $1.50/Kg MS from $21.65/Kg MS in June 2010 to around $20.15/Kg MS in June 2011.
“Should the current high international demand for New Zealand dairy products continue, it’s likely we’ll see more debt reduction this coming season, along with some increase in discretionary expenditure,” says Dr Mackle.
But he cautions against complacency. “The only thing certain in global markets today is volatility, so we’re continuing to encourage farmers to keep focusing on producing milk more efficiently and sustainably, reducing the cost of production to remain competitive and lowering debt levels,” he says.
Each year DairyNZ publishes the historical financial results for the past season via the Economic Survey of dairy farmers. The 2009-10 Survey not only contains a 10-year time series but a forecast of average owner-operator and average sharemilker operating profit for 2010-11 and 2011-12. A copy can be downloaded from the DairyNZ website or collected from the DairyNZ stand in the Mystery Creek Pavilion at the National Agricultural Fieldays, 15th -18th June.
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