Budget reviews help farms identify financial pressure early
Farm profitability and cashflow remain subject to several competing conditions. A strong forecast for milk prices, favourable growing conditions in many areas and the return of Fonterra capital have provided reasons for optimism this season. At the same time, higher input costs, inflationary pressure and changing weather conditions remain factors that could affect financial results.
Regular budget reviews are intended to show where financial strain is emerging before it becomes more difficult to manage. They also allow farms to consider how any surplus cash should be allocated while retaining flexibility if circumstances change. The guidance places budget monitoring alongside day-to-day attention to expenditure and available cash.
Late winter and early spring can be particularly demanding for farm cashflow. During August and September, milk revenue is still accumulating, while payments for feed, fertiliser, fuel and repairs continue to arrive. More frequent checks of the budget can identify pressure points during this period and give farmers more choices when responding to them, rather than requiring decisions to be made only after conditions have tightened.
Recent analysis from DairyBase found a substantial difference in production costs between the most profitable farms and the average farm. The top 20% of profitable farms produced milk at about 90 cents per kilogram of milk solids less than the average farm. The benchmarking results also showed a broad range of profitability and returns, including during seasons with strong payouts.
The analysis associates greater resilience with control of costs, efficient systems and disciplined decision-making rather than with the milk price alone. The highest-performing farms are not necessarily undertaking major changes to their production systems as costs rise. Instead, the data describes a continuing focus on careful spending, close cashflow monitoring and the ability to remain flexible. These farms have consistently maintained a wider margin between income and expenses across different seasons, according to DairyBase.
