Compared to the previous season (2021-22), milksolids payout received by owner-operator farmers in the DairyNZ Economic Survey sample in 2022-23 decreased by $0.51 to $8.68 per kilogram of milksolids (kg MS), milksolids sold per cow increased by 5 kg MS to 418 kg MS, and stocking rate decreased by 0.1 cows to 2.8 cows/ha. As a result, milksolids sold per hectare decreased slightly in the 2022-23 season, from 1,199 kg MS/ha in 2020-21 to 1,174 kg MS/ha. Operating expenses per kilogram of milksolids increased by $0.32 to $6.67. The combination of a lower milksolids payout and higher operating expenses in 2022-23 resulted in an Operating profit per hectare of $3,017, $1,133 lower than the previous season. Operating return on dairy assets decreased from 7.6 percent (2021-22) to 5.4 percent (2022-23), and total return on assets decreased by 3.6 percentage points to 3.9 percent. The mix of lower returns from dairy operations and higher interest costs resulted in a lower Total return on equity in 2022-23 (3.5 percent) compared to the previous season (11.5 percent).
Owner-operator Summary
In the 2022-23 season owner-operators faced a decrease in milksolids payout, which together with a reduction in stocking rate and an increase in farm expenses led to a notable decline in operating profit compared to the previous season.
The milksolids payout received by Owner-operators in 2022-23 was $0.51 (6%) lower than the price received in 2021-22. Although milksolids sold per cow increased by 1 percent, milksolids sold per hectare decreased by 2 percent in the 2022-23 season due to a 3.4 percent reduction in stocking rate. The reduction in stocking rate in 2022-23 was in part associated with a reduction in the average herd size, from 419 to 407 cows. The reduction in herd size also contributed to the reduction in livestock income per kilogram of milksolids in 2022-23, from $0.55 (2021-22) to $0.51. Gross farm revenue per kilogram of milksolids in 2022-23 ($9.24/kg MS) was $0.57 lower than in the previous season, a consequence of lower income from the sale of milksolids and livestock. Farm working expenses and Operating expenses in 2022-23 ($5.75/kg MS and $6.67/kg MS, respectively) were the highest of the last 10 seasons, driven mainly by increases in feed, grazing off, labour and fertilisers expenses (Table 12.4). The Operating profit of $3,017 per hectare in 2022-23 was down 27 percent on the previous season, a consequence of lower Gross farm revenue (-8 percent) and higher Operating expenses (+3 percent).
The cash surplus in 2022-23 ($44,541) was above the 10-year average of ($10,654). Cash surplus is the cash remaining from the farming operation during the year after rent, interest, tax, capital transactions, debt repayments, drawings, and discretionary expenses have been deducted. Factors that contributed to the high Cash surplus in 2022-23 were the increases in net off-farm income ($36,366) and the significant reductions in net capital transactions ($137,369) and net debt ($38,791), compared to the previous year (Table 12.5).
In 2022-23, the total return on assets (3.9 percent) and the total return on equity (3.5 percent) were significantly lower than in the previous year but higher than their corresponding 10-year average (3.3 and 2.5 percent, respectively). In 2022-23, total liabilities decreased by $46,773 to $4,027,540. Closing term liabilities were $22.22 per kilogram of milksolids, significantly lower than the peak of $25.31 per kilogram of milksolids in 2017-18. On average, total equity growth was $95,121, $34,231 lower than the growth in equity from profit ($129,388) due to negative growth in equity from capital (revaluation of assets).
Owner-operator Summary Table
Variable
2021-22
2022-23
PHYSICAL CHARACTERISTICS
Effective hectares
144
145
Peak cows milked
419
407
Stocking rate (cows/ha)
2.9
2.8
Kg milksolids sold
172,832
169,990
Milksolids sold per hectare
1,199
1,174
Milksolids sold per cow
413
418
PRICES:
PAYOUT RECEIVED ($/kg MS sold)
9.19
8.68
CASHFLOW:
Cash operating surplus
771,689
593,495
Discretionary cash
489,778
302,861
Cash available for living and growth
427,950
301,982
Cash surplus/deficit
2,543
44,541
PROFITABILITY PER HA:
Dairy gross farm revenue per ha
11,761
10,851
Dairy operating expenses per ha
7,611
7,834
Dairy operating profit per ha
4,150
3,017
Business profit before tax per all effective hectares
2,868
1,834
PROFITABILITY PER KG MILKSOLIDS:
Dairy gross farm revenue per kg milksolids
9.81
9.24
Farm working expenses per kg milksolids
5.32
5.75
Dairy operating expenses per kg milksolids
6.35
6.67
Dairy operating profit per kg milksolids
3.46
2.57
RETURNS:
Operating return on dairy assets %
7.6
5.4
Total return on assets %
7.5
3.9
Total return on equity %
11.5
3.5
WEALTH CREATION:
Growth in equity
362,987
95,121
Growth in equity from profit
297,876
129,388
Growth in equity from capital
65,148
-34,231
Growth in equity %
8.3
1.9
RISK:
Closing debt to asset %
47.4
44.4
Closing term liabilities per kg MS
23.56
22.22
50:50 Sharemilkers Summary
In this iteration of the DairyNZ Economic Survey, the physical characteristics of 50:50 Sharemilker (herd-owning sharemilkers) farms all increased, in terms of hectares, peak cows milked and milksolids production.
The combination of a lower gross farm revenue and higher farm working expenses contributed to tightened economic performance of 50:50 sharemilker farms relative to the previous season. However, despite the deteriorated performance, on average, 50:50 sharemilkers maintained positive profitability and returns. Additionally, the proportion of 50:50 sharemilkers experiencing extreme indebtedness (>70% debt to assets ratio) in 2022-23 (1.8 percent) decreased significantly relative to 2021-22 (4.6 percent).
Dairy operating profit per hectare for 50:50 sharemilkers decreased by 37 percent to $1,104 per hectare in 2022-23. Lower milk payouts received (-$0.40 per kilogram of milksolids) were partially offset by an increase in milksolids per cow (+10 kg MS) and a slight increase in herd size (+15 cows). Gross farm revenue of $4.65 per kilogram of milksolids was down $0.40 in 2022-23. Farm working expenses of $3.05 per kilogram of milksolids were $0.20 higher than last season. Operating expenses per kilogram of milksolids increased by $0.15 in 2022-23 to $3.76.
Cash surplus in 2022-23 ($5,853) was significantly lower than in 2020-21 and 2021-22 ($51,154 and $38,556, respectively). However, the cash surplus in 2022-23 was still higher than the 10-year average of $2,625. Factors that contributed to a lower cash surplus in 2022-23 were the reduction in cash operating surplus, from $344,252 (2021-22) to $250,934, and the higher-than-average interest expenses ($29,384) and drawings ($90,535). Tax expenses in 2022-23 ($66,548) were 81 percent above the 10-year average ($36,578), net debt ($48,487) was 280 percent above the 10-year average ($12,682) and drawings were 25 percent above the 10-year average of $72,400.
50:50 Sharemilkers Summary Table
Variable
2021-22
2022-23
PHYSICAL CHARACTERISTICS
Effective hectares
140
147
Peak cows milked
422
437
Stocking rate (cows/ha)
3.0
3.0
Kg milksolids sold
171,282
181,551
Milksolids sold per hectare
1,227
1,239
Milksolids sold per cow
406
416
PRICES:
PAYOUT RECEIVED ($/kg MS sold)
4.54
4.14
CASHFLOW:
Cash operating surplus
344,252
250,934
Discretionary cash
258,608
168,587
Cash available for living and growth
249,488
181,016
Cash surplus/deficit
38,556
5,853
PROFITABILITY PER HA:
Dairy gross farm revenue per ha
6,198
5,763
Dairy operating expenses per ha
4,434
4,659
Dairy operating profit per ha
1,764
1,104
Business profit before tax per all effective hectares