Farmer income set to fall by $150,000

Dairy NZ chief executive Tim Mackle.

Next season's average farmer income will drop by $150,000 based on Fonterra's $5.25 per kg forecast, says DairyNZ.

Farmer-funded DairyNZ said it had calculated the break-even milk price for the average farmer at $5.70 kg.

"Yet under this forecast scenario they'll only be receiving $4.75, all up, in terms of farm income including retro payments from last season and dividends," it said.

Annual farm working expenses would need to be reduced to minimise increasing debt levels further.

"The flow-on impacts to the local economy will be significant as that money gets spent on things like feed, fertiliser, repairs and maintenance items," said Dairy NZ chief executive Tim Mackle.

There would also be less capital spending in the sector, he said.

Dairy NZ said it would be working closely with farmers to advise them on managing their finances.

"Many of our farmers have coped with low milk prices in the past, and so this isn't new for a lot of people, or even that unexpected given where global milk prices have been heading," Mackle said. "Farmers have been preparing for the worst case scenario - and this is pretty much it - so now it's a matter of everyone pulling together to cope with it."

Mackle said those farmers who had just bought farms or who were first year sharemilkers would need support as they would have more debt to manage. "Lower order sharemilkers are also under immense pressure as they have little wriggle room."

DairyNZ will be shifting its "Tactics for Tight Times" campaign to a seasonal calendar of advice on "farming fundamentals" that will look to give farmers targeted advice on key decisions.

Mackle said: "We'll be working with our case study farmers and other farmers to help shape that support and share tips and tactics around the regions on getting through a low milk price cycle." Jamie Gray