10 50:50 Sharemilkers: Regional Financial Analysis
10.1 Regional Profitability
DairyBase® classifies farms into eight regions, five in the North Island and three in the South Island (refer to Section 2.6). Table 10.1 and 10.2 shows key 2022-23 average performance indicators per kilo milksolids for 50:50 sharemilker farms in these eight regions. The low number of farms in the regions presented here may also reduce the representativeness of the sample. Both Table 10.1 and 10.2 report median values to reduce numerical bias created by the average of sums methodology in regional samples. Thus, totals and sub-totals in these tables will better represent average values of the data sample but will not add up. See section 2.11 for an explanation of this methodology.
Bay of Plenty had the smallest average herd size of 302 cows, followed by Taranaki (324). The average herd sizes in the South Island were considerably larger than in the North Island. Canterbury had the largest average herd size in the South Island with 785 cows, 197 cows above the South Island simple average (588), while the average herd size in Otago-Southland was 565 cows.
The regional range of stocking rates varies between 2.0 and 3.7 cows per hectare. West Coast - Top of the South (2 cows/ha) and Northland (2.3 cows/ha) had the lowest stocking rates. Canterbury had the highest stocking rate at 3.7 cows per hectare, while the remaining regions had average stocking rates between 2.7 and 3.
The regional averages for milksolids production per cow varied between 342 and 475 in 2022-23. West Coast - Top of the South recorded the lowest average milksolids production per cow of all the regions (342 kg MS). The North Island regions recorded milksolids per cow between 363 and 413 kg MS. Otago - Southland recorded the highest milksolids sold per cow (475 kg MS), while Canterbury recorded the highest milksolids sold per hectare of 1,561 (Table 10.1).
The average payout received in each region was at or above $4.10 per kilogram of milksolids. Regional average farm working expenses (FWE) per kilogram of milksolids were lowest in Taranaki ($2.88). The highest FWE per kilogram of milksolids was reported in West Coast - Top of the South ($3.48). The bottom of Table 10.1 shows the regional gross farm revenue, operating expenses and operating profit levels on a per hectare basis in 2022-23. Otago - Southland recorded the highest operating profit on a per hectare basis ($1,363), while West Coast - Top of the South recorded the lowest operating profit per hectare at $359/ha, however they were not the only region with average dairy operating profit less than $1,000/ha.
West Coast - Top of the South and Northland recorded the lowest gross farm revenue per hectare ($3,296 and $4,251, respectively) and the lowest operating expenses per hectare ($3,183 and $3,746, respectively). Canterbury recorded the highest gross farm revenue ($7,408) and operating expenses ($6,159) per hectare. 50:50 sharemilkers in Otago - Southland and Bay of Plenty experienced higher levels of profitability in 2022-23 relative to other regions.
| Variable | Northland | Waikato | Bay of Plenty | Taranaki | Lower North Island | West Coast - Top of the South | Canterbury | Otago - Southland |
|---|---|---|---|---|---|---|---|---|
| PHYSICAL CHARACTERISTICS | ||||||||
| Number of herds | 11 | 30 | 10 | 16 | 10 | 7 | 11 | 14 |
| Effective hectares | 179 | 112 | 104 | 108 | 134 | 216 | 219 | 200 |
| Peak cows milked | 410 | 332 | 302 | 324 | 379 | 413 | 785 | 565 |
| Stocking rate (cows/ha) | 2.3 | 3.0 | 2.9 | 2.9 | 2.7 | 2.0 | 3.7 | 2.8 |
| Kg milksolids sold | 155,675 | 131,494 | 121,764 | 130,108 | 165,862 | 131,181 | 338,000 | 269,034 |
| Milksolids sold per hectare | 905 | 1,191 | 1,191 | 1,189 | 1,079 | 658 | 1,561 | 1,337 |
| Milksolids sold per cow | 363 | 389 | 403 | 413 | 408 | 342 | 455 | 475 |
| PAYOUT RECEIVED ($/kg MS sold) | 4.27 | 4.20 | 4.19 | 4.25 | 4.16 | 4.38 | 4.10 | 4.28 |
| DAIRY CASH INCOME ($/kg MS): | ||||||||
| Milk sales (net of dairy levies) | 4.27 | 4.20 | 4.19 | 4.25 | 4.16 | 4.38 | 4.10 | 4.28 |
| Net livestock sales (sales - purchases) | 0.94 | 0.35 | 0.29 | 0.38 | 0.39 | 0.53 | 0.43 | 0.31 |
| Other dairy cash income | 0.01 | 0.01 | 0.01 | 0.01 | 0.00 | 0.02 | 0.00 | 0.00 |
| Net dairy cash income | 5.17 | 4.54 | 4.51 | 4.73 | 4.58 | 4.98 | 4.50 | 4.74 |
| CASH FARM WORKING EXPENSES ($/kg MS): | ||||||||
| Wages | 0.62 | 0.43 | 0.37 | 0.43 | 0.63 | 0.48 | 0.56 | 0.57 |
| Animal health | 0.23 | 0.29 | 0.31 | 0.26 | 0.30 | 0.25 | 0.30 | 0.26 |
| Breeding & herd improvement | 0.18 | 0.19 | 0.19 | 0.16 | 0.21 | 0.21 | 0.15 | 0.17 |
| Farm dairy | 0.06 | 0.05 | 0.04 | 0.07 | 0.05 | 0.04 | 0.05 | 0.05 |
| Electricity | 0.12 | 0.12 | 0.12 | 0.14 | 0.13 | 0.12 | 0.09 | 0.09 |
| Net feed made, purchased, cropped | 1.02 | 0.79 | 0.76 | 0.68 | 0.77 | 0.51 | 0.73 | 0.73 |
| Stock grazing | 0.11 | 0.21 | 0.20 | 0.20 | 0.02 | 0.34 | 0.73 | 0.52 |
| Support block lease | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 |
| Fertiliser (including Nitrogen) | 0.31 | 0.18 | 0.19 | 0.18 | 0.22 | 0.31 | 0.21 | 0.15 |
| Irrigation | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.09 | 0.00 |
| Regrassing | 0.02 | 0.01 | 0.03 | 0.01 | 0.03 | 0.02 | 0.01 | 0.00 |
| Weed & pest | 0.01 | 0.01 | 0.00 | 0.00 | 0.01 | 0.00 | 0.00 | 0.01 |
| Vehicles & fuel | 0.30 | 0.19 | 0.22 | 0.18 | 0.21 | 0.36 | 0.13 | 0.18 |
| Repairs & maintenance | 0.08 | 0.09 | 0.06 | 0.08 | 0.07 | 0.08 | 0.07 | 0.09 |
| Freight & general | 0.07 | 0.07 | 0.07 | 0.07 | 0.05 | 0.17 | 0.05 | 0.07 |
| Administration | 0.10 | 0.11 | 0.09 | 0.08 | 0.10 | 0.15 | 0.09 | 0.08 |
| Insurance | 0.04 | 0.04 | 0.04 | 0.05 | 0.04 | 0.08 | 0.03 | 0.04 |
| ACC | 0.04 | 0.03 | 0.03 | 0.03 | 0.02 | 0.04 | 0.03 | 0.03 |
| Rates | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 |
| Farm working expenses | 3.45 | 2.93 | 2.89 | 2.88 | 3.22 | 3.48 | 3.40 | 3.20 |
| Cash operating surplus | 1.88 | 1.42 | 1.45 | 1.77 | 1.33 | 1.71 | 1.07 | 1.53 |
| ADJUSTMENTS ($/kg MS): | ||||||||
| Value of change in dairy livestock | -0.13 | 0.18 | 0.13 | 0.01 | 0.09 | 0.07 | 0.06 | 0.16 |
| Less labour adjustment | 0.77 | 0.68 | 0.66 | 0.79 | 0.69 | 0.82 | 0.36 | 0.45 |
| Plus feed inventory adjustment | 0.00 | 0.05 | 0.04 | 0.00 | 0.01 | 0.01 | 0.00 | 0.00 |
| Less owned support block adjustment | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 |
| Less depreciation | 0.21 | 0.18 | 0.15 | 0.15 | 0.17 | 0.26 | 0.14 | 0.17 |
| Net Adjustments | -1.19 | -0.78 | -0.55 | -0.93 | -0.68 | -1.17 | -0.42 | -0.45 |
| OPERATING CASH & NON-CASH ($/kg MS): | ||||||||
| Dairy gross farm revenue | 4.91 | 4.61 | 4.61 | 4.69 | 4.78 | 4.88 | 4.55 | 4.86 |
| Dairy operating expenses | 4.24 | 3.69 | 3.56 | 3.65 | 4.12 | 4.52 | 3.92 | 3.71 |
| Dairy operating profit | 0.59 | 0.73 | 1.04 | 0.93 | 0.67 | 0.33 | 0.74 | 1.14 |
| OPERATING CASH & NON-CASH ($/ha): | ||||||||
| Dairy gross farm revenue | 4,251 | 5,538 | 5,393 | 5,530 | 5,031 | 3,296 | 7,408 | 6,313 |
| Dairy operating expenses | 3,746 | 4,581 | 4,199 | 4,487 | 4,246 | 3,183 | 6,159 | 5,041 |
| Dairy operating profit | 402 | 922 | 1,235 | 1,173 | 669 | 359 | 1,225 | 1,363 |
| Operating profit margin (%) | 12.1 | 15.8 | 22.6 | 20.0 | 15.5 | 6.9 | 15.7 | 23.4 |
Table 10.2 shows the eight regions’ key 2022-23 financial indicators. The values reported in this table are medians (see section 2.11 for more information). Regional average operating returns on dairy assets ranged between 6.0 and 19.8 percent. Otago - Southland (19.8 percent), Taranaki (17.8 percent) and Bay of Plenty (17.7 percent) had the highest operating returns on dairy assets in 2022-23. West Coast - Top of the South had the lowest operating returns on dairy assets (6.0 percent). West Coast - Top of the South (-2.0 percent) and Northland (-0.8 percent) were the only regions to report negative total return on assets, conversely Otago - Southland had the highest total return on assets (13.1 percent) followed by Bay of Plenty (9.2 percent).
Total return on equity is the return on the owner’s funds, including capital changes after interest is paid. Similar to total return on assets, the West Coast - Top of the South (-8.9 percent) and Northland (-1.9 percent) reported negative returns on equity, while the rest of the regions reported positive returns varying from 4 percent to 17.1 percent (Table 10.2). Otago - Southland reported the highest return on equity at 17.1%, followed by Bay of Plenty with 14 percent. The average term debt per kilogram of milksolids varied between $1.3 (Canterbury) and $3.61 (West Coast - Top of the South) in 2022-23 (Table 10.2).
| Variable | Northland | Waikato | Bay of Plenty | Taranaki | Lower North Island | West Coast - Top of the South | Canterbury | Otago - Southland |
|---|---|---|---|---|---|---|---|---|
| RETURNS: | ||||||||
| Operating return on dairy assets % | 6.6 | 14.9 | 17.7 | 17.8 | 12.0 | 6.0 | 14.6 | 19.8 |
| Total return on assets % | -0.8 | 4.7 | 9.2 | 6.4 | 4.8 | -2.0 | 5.9 | 13.1 |
| Total return on equity % | -1.9 | 4.0 | 14.0 | 8.9 | 4.4 | -8.9 | 9.3 | 17.1 |
| Growth in equity % | 2.2 | 4.9 | 7.6 | 8.1 | 0.6 | -3.5 | 5.8 | 11.0 |
| DEBT: | ||||||||
| Closing term liabilities ($/kg MS sold) | 1.42 | 2.10 | 1.58 | 2.67 | 2.23 | 3.61 | 1.28 | 1.47 |
| Closing debt to asset % | 22.3 | 36.3 | 30.7 | 32.0 | 39.4 | 44.6 | 26.0 | 30.2 |