Mark Storey: DairyNZ Head of Economics on the dairy payouts rising, farmers urged to pay down debts

Dairy farmers are being urged to pay down debt while they're in a good position to do so. 

Fonterra's already forecasting a midpoint of $10 this season. 

Industry organisation Dairy NZ expects the situation to continue, forecasting a payout above $10 next season. 

DairyNZ Head of Economics Mark Storey told Mike Hosking it's a good chance to clear debt while payouts are rising, and interest rates are falling. 

He says farmers have been making repayments in the last few seasons, and they should continue to do so. 

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Episode Transcript

Speaker 1 (00:00):
So the dairy story continues. What looks like a golden run.
We've got new forecast this morning from darien Z telling
us the twenty five twenty six season could be one
for the history box. Basically, for the last quarter century,
you get a good year yet a not so good yet.
That's how the trend is gone. Darien Z had of
economics Mark's stories with us Mark morning, Good morning, Mike.
So what's happening into the new year. We got supply
demand balancing out nicely and it's all golden rainbows.

Speaker 2 (00:24):
It's looking positive. It's always a bit it's always a
bit risky doing a forecast and looking ahead into the
next season because things so change. But we've had a
good season to one we're currently in in terms of
the payout price, it's looking like the Spine de Marn's
in good balance and were We released our forecast yesterday

(00:45):
and we're looking at another payout average payout of in
access of ten dollars, which is always a good place
to be in.

Speaker 1 (00:52):
That's the truth. Average average break even points eight point
fifty ish. Is there too much debt in deiry? Generally?
I mean tens are number you need and if you
need to eight fifty every time you're asking for trouble,
aren't you.

Speaker 2 (01:06):
Yeah, it is. So that's reflecting quite high high farm
working expenses and other debt repayment, interest costs, et cetera,
which really sort of spiked over the last few years.
So while it's a good return, it's a good income,
it's undeniable that the prices are still the expense is
still pretty high. The good news in that is we're

(01:26):
sort of seeing some of that farm price inflation sort
of start to ease off, and our interest interest costs
are coming down. So farmers have been making repayments on
their debt in the last season or two, and we
certainly encourage them to continue to do so. So there's
a good pay. There's a good story in terms of
getting their debt levels down as well, which is which

(01:47):
has been a key issue in the last couple of seasons.

Speaker 1 (01:49):
You've got your hit around tariffs and what happens now.

Speaker 2 (01:54):
That's kind of the sort of the warning signs with
any with any making any sort of predictions about the
future is we just we just don't know. So it's
volatile on the number fronts. Fairy like all our trade
sector is kind of hugely exposed to what happens offshore
and things outside of the farmer's control. So yeah, the

(02:15):
tariff discussion is of concern because so many things could
go could go, could go pear shaped, or there could
be opportunities in there in terms of other people's strife
as well. So it's really hard to say at the stage.

Speaker 1 (02:28):
China isn't it. And I'm looking yet again at the
Chinese wanting to, you know, just seemingly print money and
give it to everybody within China. And I'm assuming some
of that flows through to us because I'm assuming the
desire for dairy from the middle class is still strong.

Speaker 2 (02:42):
Yeah, I mean, trying is a big part of the market,
and if they're in there buying, it's that's what's getting
the good market divisions for us. So we'll watch that
and you know, the trade, the trade issues between the
US and China and Mexico and Canada with interests.

Speaker 1 (02:58):
Okay, I good to talk to you. Make appreciate the
insight story. Deary in New Zealand, Hit of Economics with us.
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