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Dairy Farm Expense Price Index up

New Zealand is up in arms about the consumer price index, with inflation the highest it has been since the GFC in 2008.  Everyone is curbing their spending to be able to afford the basics. 

For farmers it is the same story, only magnified. Farms are doing it tough despite the record milk pay out, the Dairy Farm Expenses Index is 10.6% up between March 2021 and March 2022. Now in July 2022 it is more like 12-13%. 

Higher input farms are hardest hit as diesel/petrol, fertiliser and feed costs are the leaders in price inflation. With this year still looking like a very high milk payout most farms are still trading in the black despite the steep cost increases, although the interest rate increases will hit those with a high loan to equity ratio. History has taught us that the expenses do not come down and certainly not as fast as the milk price does. So things will get tight when the milk price drops. All the more reason to plan and manage this season to make hay while the sun is still shining.

Cashflow budgeting and close monitoring are definitely needed this year. Monitor your budget on a monthly basis to see how the costs are tracking.