Top Performing Farms Thrive Despite 27% Increase in Operating Costs
The cost of running a New Zealand farm is now 27% higher than it was before Covid, putting sustained pressure on profitability acrfoss the sector, according to new ANZ research.
ANZ agri economist Susan Kilsby says global milk supplies have been growing at a very modest pace over the past 12 months, so additional milk has not been the catalyst for the weaker prices.
"Looking forward, global milk supplies are likely to tighten further as the low milk prices result in less feed inputs, particularly in countries where cows are housed and therefore feed is their major operating cost.
"There are already anecdotal reports of smaller farms going out of business, particularly in regions where the cost of producing milk is very high, such as China.
"Therefore, over the next 12 months we could actually see a fall in global milk supplies," Kilsby says.
New Zealand's milk output is generally trending lower.
There will continue to be significant seasonal variations, given pasture production is largely determined by the weather, Kilsby notes.
"El Nino is forecast to occur this year, which could deliver a long, hot summer. That would curb dairy production, particularly in non-irrigated regions," she says.
