March 11, 2026 • 10 mins
In this DairyNZ Update, Michelle Watt talks to Head of Economics at DairyNZ Mark Storey, about the DairyNZ EconTracker.
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Episode Transcript
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Speaker 1 (00:00):
Hello, and welcome to another Dairy in z Dairy Update
with the Country. I'm Michelle Watt, your host, and today
we're talking to Mark's Story who is darien Z's head
of economics, and we are going to be talking about
the econtracker tool and some of the numbers behind it
and what is going on within the industry at the moment.
Speaker 2 (00:19):
High Mark, Hi, Michelle.
Speaker 1 (00:21):
Now we're going to get stuck in straight away. So
the econ Tracker, firstly, what is it?
Speaker 2 (00:26):
Darians econ Tracker is a tool we have or an
app we have on our on our on our web page.
It's designed as a one stop portal for all information
economic information related to the dairy sector. So you can
get a range of information which is quite farm specific
in terms of farm financial information and forecasts. There's a
(00:50):
range of information there tracking what's going on in the
sector and including data around employment, etc. And then there's
some national level data. The farm financial stuff is all
broken down for the projections, the historical data and the
forecasts are broken down by regions, so you can sort
of see it by by in New Zealand average figures,
(01:11):
you can see it for by regions. It's broken down
by a farm per hectare, per cow, per kg book solid,
and by different types of ownership structures, so there's a
lot of there's a lot of information on their contractor.
It's intended to be updated regularly, so it's not it's
a mixture of historical and forecast and it's there to
(01:33):
give information to both farmers and real sector professionals around
a snapshot of what's going on in the dairy sector
right now.
Speaker 1 (01:43):
It sounds like a really useful tool if you wanted
to know things like quarterly updates or any other resources
on any numbers maybe as well.
Speaker 2 (01:53):
Yes, we do. We do update it at least quarterly.
So obviously it's the mixture, as I said, historical data,
so you can sort of go back a number of
years and see what farm working expenses were five years
ago and see the trends. But the value that I
think it adds is coming in with the forecasts for
the current season and one season out in the season ahead,
(02:15):
so we do stick our neck our necks out and
project where we see both revenue and expenses going and
what the cash position and the operating positions of farmers
will be one year out. But because that's always slightly
risky business and it's a volatile industry. We do revise
(02:37):
it at least quarterly, and if, for example, Fonterra revised
their projected farm gate milk price, we will often revise
our projections accordingly, depending on how significant their changes are.
So it should be it's intended to be up to date,
(02:57):
relevant and a snapshot of what the financial position and
the financial situation for farmers is right now.
Speaker 1 (03:06):
So Mark, can you please clarify for our listeners out
there what the forecasts are determined by and how they
differ from Fonterra's say forecasts.
Speaker 2 (03:18):
Yeah, sure, Michelle. It's an important distinction in particular on
the revenue side, so we forecast both on the revenue
and the expensive side to get a picture on farmer's
financial position. Our forecast around revenue is called the average
payout received and that's effectively a calculation of our expected
(03:40):
revenue received by dairy farmers in that financial year. So
it's a mixture of their retroactive payments, it's a mixture
of the payments that come in from their process in
that year, and then there's also divid in payments which
are paid out which flow into that income stream, so effectively,
(04:00):
the average payout received is something of a composite and
an estimate of the revenue to be received in that
financial year. It's not exactly the same thing as the
farm gate milk price, but clearly it should be pretty
similar to it. So, for example, in the twenty five
to twenty sixth season, currently Fonterra's midpoint for the farm
(04:21):
gate milk price for that year is nine dollars fifty
Our estimate of average payout received for the twenty five
to twenty six season is nine dollars ninety two per
kg milk solid, So that's there is a difference there,
but there's obviously there's a relationship between the two.
Speaker 1 (04:40):
And the latest quarterly update. What does that tell us
so far?
Speaker 2 (04:43):
The latest carterly update tells us what we already knew,
which many of us knew that we're in for another
strong season. So the yeah, the latest quarterly update does
two things. It revises the forecast for the twenty five
to twenty six season. So we're now in March, we
have had updated information come into us, so we can
(05:04):
revise our forecasts of both expense and revenue with greater
confidence as we approach the end of the season, and
then we WI also release our preliminary forecast for the
twenty six twenty second season. What that's telling us for
now is that with an average payout received of nine
dollars ninety two per kg milk solid and a forecast
(05:28):
break even milk price of eight dollars thirty six, that
there is a surplus for your average farm of about
one dollar fifty six per kg milk solid. So that's
a pretty healthy situation for the sector to be in
that sort of margin. In addition to that, we know
that there is going to be the distribution of the
(05:50):
of the Fonterra, the Fontira capital payment, the one off
cash injection, and for many farmers that equates to a
pretty strong cash position this year, probably quite a unique
season in that respect.
Speaker 1 (06:04):
What issues are likely to impact the farmer's investment options
this season? You're saying that obviously that payout and the
money is quite good at the moment, things are very looking,
very positive, But what kind of things are going to
impact their investment options?
Speaker 2 (06:19):
I mean, every farm is going to be in a
different position. So actually, you know, we'll watch with a
lot of interest when that capital payment and that extra
dividend on the fonteri side is coming through into farmer's account.
How they spend that, we know there's a mixture of things,
and some of the information is quite anecdotal, but there's
payment of repayment of debt going on, there's new capital expenditure.
(06:42):
Some of that money will be going into off farm
financial investments and diversification of risk. So what farmers do
in the next twelve to eighteen months and the context
of the sear's cash position will be very important for
the position of the sector going forward. There's not really
an overall direction on on how that on how that
(07:05):
cash purpose will be spent, or how that cash injection
will be spent, but it will provide a very welcome
buffer for the sector going into going into coming years
in the sort of volatility that we're seeing right at
the moment.
Speaker 1 (07:19):
Yes, a lot of volatility happening around the world and
within sectors at the moment all over the place. Isn't
there market lots of positives in the dairy sector, isn't there?
Speaker 2 (07:29):
There are? There are positives. Obviously, the revenue side is positive.
When I talked about the break even milk price. That
that gives you basically the estimate of what you what
you need to be getting from your from your revenue
side to cover your farm's costs in a given season,
and it does exclude capital expenditure and repayment of principle onlins,
but it gives you an idea of how much money
(07:50):
you need to be to be in the black. That is, also, however,
quite historically high, so I guess, typical economist fashion, you
never get super happy about anything. Expenses are still high overall,
and we are forecasting they will come down next season
marginally to around eight dollars thirty one. But those levels
(08:13):
suggest that you're still going to manage your your operating expenses,
your farm working expenses, and your and your cash position
quite carefully. It doesn't take much for that picture to change.
And yeah, so there's just kind of a cautionary tail
there is. It's a good time to be in dairy,
but those expenses are staying stubbornly high, and while there's
(08:37):
a margin for most farms, yeah, you've got be strategic
about how you use it. I guess my other message
would be we've had a notable period in all term
sense now, farmers have had three consecutive seasons with milk
prices around above nine dollars fifty KGP and milk solid,
and we've had six consecutive years within flag adjusted milk
(09:00):
prices above eight dollars. At the same time, the break
even milk price has been above eight dollars per kg
moxsords for three years in a row. So what we're
seeing is strong international prices consecutive and consecutive years, but
those those expenses are also sort of being built into
the system, so well, we'll see. It remains to be
(09:22):
seen how the sector, you know, what's around the corner.
Farmer is often quite nervous that once you've had our
goods and then a good price one year in a row,
you don't often see it two or three years. We
have had at a number of years in a row
now and there's nothing indicating that's going to change, but
there's some some signs of volatility that might around the corner. Now.
Speaker 1 (09:42):
If people want to find out more about the e
con track, cause they can find it on your website right.
Speaker 2 (09:46):
Yes, it's there, it's live. The informations. There's both, there's
both the detailed breakdown of information. There's a summary which
we actually call our quarterly update, which is which is
a commentary and a summary of the BOS and if
you like, an outlook for with a bit more detail
for the sector for the season ahead, and there's a
(10:07):
diverse amount of material there to be looked at by
a numbers neds and by people who've got a passing
interest in the sector alike.
Speaker 1 (10:14):
That was Mark's story, head of Economics at Daryan zed
with a dairy in z update. If you would like
to know more about the econ tracker, here to the
Daryan ZID website Darienz dot co dot z forward slash econtracker. Also,
if you're a levy payer, don't forget to have your
say in the Milk Solids levy vote before five pm
this Friday, the thirteenth of March
Hello, and welcome to another Dairy in z Dairy Update
with the Country. I'm Michelle Watt, your host, and today
we're talking to Mark's Story who is darien Z's head
of economics, and we are going to be talking about
the econtracker tool and some of the numbers behind it
and what is going on within the industry at the moment.
Speaker 2 (00:19):
High Mark, Hi, Michelle.
Speaker 1 (00:21):
Now we're going to get stuck in straight away. So
the econ Tracker, firstly, what is it?
Speaker 2 (00:26):
Darians econ Tracker is a tool we have or an
app we have on our on our on our web page.
It's designed as a one stop portal for all information
economic information related to the dairy sector. So you can
get a range of information which is quite farm specific
in terms of farm financial information and forecasts. There's a
(00:50):
range of information there tracking what's going on in the
sector and including data around employment, etc. And then there's
some national level data. The farm financial stuff is all
broken down for the projections, the historical data and the
forecasts are broken down by regions, so you can sort
of see it by by in New Zealand average figures,
(01:11):
you can see it for by regions. It's broken down
by a farm per hectare, per cow, per kg book solid,
and by different types of ownership structures, so there's a
lot of there's a lot of information on their contractor.
It's intended to be updated regularly, so it's not it's
a mixture of historical and forecast and it's there to
(01:33):
give information to both farmers and real sector professionals around
a snapshot of what's going on in the dairy sector
right now.
Speaker 1 (01:43):
It sounds like a really useful tool if you wanted
to know things like quarterly updates or any other resources
on any numbers maybe as well.
Speaker 2 (01:53):
Yes, we do. We do update it at least quarterly.
So obviously it's the mixture, as I said, historical data,
so you can sort of go back a number of
years and see what farm working expenses were five years
ago and see the trends. But the value that I
think it adds is coming in with the forecasts for
the current season and one season out in the season ahead,
(02:15):
so we do stick our neck our necks out and
project where we see both revenue and expenses going and
what the cash position and the operating positions of farmers
will be one year out. But because that's always slightly
risky business and it's a volatile industry. We do revise
(02:37):
it at least quarterly, and if, for example, Fonterra revised
their projected farm gate milk price, we will often revise
our projections accordingly, depending on how significant their changes are.
So it should be it's intended to be up to date,
(02:57):
relevant and a snapshot of what the financial position and
the financial situation for farmers is right now.
Speaker 1 (03:06):
So Mark, can you please clarify for our listeners out
there what the forecasts are determined by and how they
differ from Fonterra's say forecasts.
Speaker 2 (03:18):
Yeah, sure, Michelle. It's an important distinction in particular on
the revenue side, so we forecast both on the revenue
and the expensive side to get a picture on farmer's
financial position. Our forecast around revenue is called the average
payout received and that's effectively a calculation of our expected
(03:40):
revenue received by dairy farmers in that financial year. So
it's a mixture of their retroactive payments, it's a mixture
of the payments that come in from their process in
that year, and then there's also divid in payments which
are paid out which flow into that income stream, so effectively,
(04:00):
the average payout received is something of a composite and
an estimate of the revenue to be received in that
financial year. It's not exactly the same thing as the
farm gate milk price, but clearly it should be pretty
similar to it. So, for example, in the twenty five
to twenty sixth season, currently Fonterra's midpoint for the farm
(04:21):
gate milk price for that year is nine dollars fifty
Our estimate of average payout received for the twenty five
to twenty six season is nine dollars ninety two per
kg milk solid, So that's there is a difference there,
but there's obviously there's a relationship between the two.
Speaker 1 (04:40):
And the latest quarterly update. What does that tell us
so far?
Speaker 2 (04:43):
The latest carterly update tells us what we already knew,
which many of us knew that we're in for another
strong season. So the yeah, the latest quarterly update does
two things. It revises the forecast for the twenty five
to twenty six season. So we're now in March, we
have had updated information come into us, so we can
(05:04):
revise our forecasts of both expense and revenue with greater
confidence as we approach the end of the season, and
then we WI also release our preliminary forecast for the
twenty six twenty second season. What that's telling us for
now is that with an average payout received of nine
dollars ninety two per kg milk solid and a forecast
(05:28):
break even milk price of eight dollars thirty six, that
there is a surplus for your average farm of about
one dollar fifty six per kg milk solid. So that's
a pretty healthy situation for the sector to be in
that sort of margin. In addition to that, we know
that there is going to be the distribution of the
(05:50):
of the Fonterra, the Fontira capital payment, the one off
cash injection, and for many farmers that equates to a
pretty strong cash position this year, probably quite a unique
season in that respect.
Speaker 1 (06:04):
What issues are likely to impact the farmer's investment options
this season? You're saying that obviously that payout and the
money is quite good at the moment, things are very looking,
very positive, But what kind of things are going to
impact their investment options?
Speaker 2 (06:19):
I mean, every farm is going to be in a
different position. So actually, you know, we'll watch with a
lot of interest when that capital payment and that extra
dividend on the fonteri side is coming through into farmer's account.
How they spend that, we know there's a mixture of things,
and some of the information is quite anecdotal, but there's
payment of repayment of debt going on, there's new capital expenditure.
(06:42):
Some of that money will be going into off farm
financial investments and diversification of risk. So what farmers do
in the next twelve to eighteen months and the context
of the sear's cash position will be very important for
the position of the sector going forward. There's not really
an overall direction on on how that on how that
(07:05):
cash purpose will be spent, or how that cash injection
will be spent, but it will provide a very welcome
buffer for the sector going into going into coming years
in the sort of volatility that we're seeing right at
the moment.
Speaker 1 (07:19):
Yes, a lot of volatility happening around the world and
within sectors at the moment all over the place. Isn't
there market lots of positives in the dairy sector, isn't there?
Speaker 2 (07:29):
There are? There are positives. Obviously, the revenue side is positive.
When I talked about the break even milk price. That
that gives you basically the estimate of what you what
you need to be getting from your from your revenue
side to cover your farm's costs in a given season,
and it does exclude capital expenditure and repayment of principle onlins,
but it gives you an idea of how much money
(07:50):
you need to be to be in the black. That is, also, however,
quite historically high, so I guess, typical economist fashion, you
never get super happy about anything. Expenses are still high overall,
and we are forecasting they will come down next season
marginally to around eight dollars thirty one. But those levels
(08:13):
suggest that you're still going to manage your your operating expenses,
your farm working expenses, and your and your cash position
quite carefully. It doesn't take much for that picture to change.
And yeah, so there's just kind of a cautionary tail
there is. It's a good time to be in dairy,
but those expenses are staying stubbornly high, and while there's
(08:37):
a margin for most farms, yeah, you've got be strategic
about how you use it. I guess my other message
would be we've had a notable period in all term
sense now, farmers have had three consecutive seasons with milk
prices around above nine dollars fifty KGP and milk solid,
and we've had six consecutive years within flag adjusted milk
(09:00):
prices above eight dollars. At the same time, the break
even milk price has been above eight dollars per kg
moxsords for three years in a row. So what we're
seeing is strong international prices consecutive and consecutive years, but
those those expenses are also sort of being built into
the system, so well, we'll see. It remains to be
(09:22):
seen how the sector, you know, what's around the corner.
Farmer is often quite nervous that once you've had our
goods and then a good price one year in a row,
you don't often see it two or three years. We
have had at a number of years in a row
now and there's nothing indicating that's going to change, but
there's some some signs of volatility that might around the corner. Now.
Speaker 1 (09:42):
If people want to find out more about the e
con track, cause they can find it on your website right.
Speaker 2 (09:46):
Yes, it's there, it's live. The informations. There's both, there's
both the detailed breakdown of information. There's a summary which
we actually call our quarterly update, which is which is
a commentary and a summary of the BOS and if
you like, an outlook for with a bit more detail
for the sector for the season ahead, and there's a
(10:07):
diverse amount of material there to be looked at by
a numbers neds and by people who've got a passing
interest in the sector alike.
Speaker 1 (10:14):
That was Mark's story, head of Economics at Daryan zed
with a dairy in z update. If you would like
to know more about the econ tracker, here to the
Daryan ZID website Darienz dot co dot z forward slash econtracker. Also,
if you're a levy payer, don't forget to have your
say in the Milk Solids levy vote before five pm
this Friday, the thirteenth of March
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