The Country 24/03/25: Mark Storey talks to Jamie Mackay

DairyNZ's Head of Economics says the 25/26 season could be one for the history books with two back-to-back $10 payouts and the two decent payouts in a row for the first time in 25 years.

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Episode Transcript

Speaker 1 (00:00):
Last week day en Zed came out with a new
season forecast and they threw this one out there. Could
the twenty five to twenty six season, i e. Next
season be one for the history books? Could we get
to ten dollars payouts in a row? Let's crunch the
numbers with Dairy and Z's head of economics, Mark Story
and Mark. In twenty five years of Fonterra, we've never

(00:21):
had two really good payout years in a row. What
chance this year and next year?

Speaker 2 (00:27):
Hi? Jamie? Yeah, cautiously, courseously optimistic going into next season,
as he said, we don't if you look back at
the last twenty five years, and farmers will be well
aware of this. When we had a really good payout season,
it's often been followed by quite a sharp four. Actually
that's you know. Every time we've had a payout by

(00:49):
some real term has been above ten dollars, it's been
followed by four the year after this year, we're hoping
we'll break that curse.

Speaker 1 (00:55):
Yeah, I remember the big Remember the big payout of
was was it twenty thirteen?

Speaker 2 (00:59):
Four?

Speaker 1 (01:00):
Off the top of my head, eight dollars something, and
then it literally halved the next season. It was a
bit brutal. Okay, So a ten dollar payouts one thing,
that's good. You guys are predicting what ten dollars for
for this season and ten dollars thirteen for next season.
But the cost of production or the break even milk

(01:21):
price stands at just over eight dollars fifty for both
of those seasons. It's stubbornly high. Are we going to
see that drop off the back of falling interest rates?

Speaker 2 (01:33):
It is stubbornly high. It partly affects dead on farm inflation.
We've had that sort of coming in the last couple
of years. That inflation's sort of coming off, and the
cost of borrowing are definitely easing in twenty five to
twenty six. That also affects that break even milk price.
It's not just the price of your inputs. It's actually

(01:54):
the use of the inputs. So that also effects that
we check farmers to be have been putting more input
on to the farm in the last season the next
and that's partly in response to a positive mick price,
and it's partly partly responses to catching up with with
previous seasons when they're sort of backed off on fertilizer.
And the final thing is we're the conditions which have

(02:16):
been prevalent in in different parts of the country. So
it's not just expenses, reflects what farmers are putting on
in terms of both the price and quantity.

Speaker 1 (02:28):
Obviously a lot of North Island farmers are going big
on the supplements with a ten dollar payout. It's a
mathematical equation, as I like to say, you put it
in one end, you get it out the other, and
it works at ten dollars. Of course, the elephant in
the room, the orange elephant as I like to call
them our tongue in cheek, of course, is Donald Trump
and his tariffs. Nobody knows geopolitically what's going to happen

(02:49):
in the world in the next year to eighteen months,
in fact, for the next three and a half years.

Speaker 2 (02:56):
Yeah, that's why, you know, it's always bit fort coming
out with a fork us the next season a couple
of months ahead and in protective before before front here
have given us there their first forecast for the season
as well, So it's always a bit it's always a
bit fought with risk. You know, it can only call
it as you see it at the time, but definitely

(03:17):
no one knows really which how those tariff dispuites might
play out. There could be there could be shock effects
for us, there could be opportunities for us that come
out of it. And we don't quite know what will
mean for the value of the dollar either, so that
will be quite a fundamental to the picture Mark's story.

Speaker 1 (03:35):
Let's finish very quickly on econ Tracker. That's the tool
you've got at Dairy and Z. Farmers can go onto
this site and have a look and compare their farms
to like farms and therefore be able to crunch the
numbers on their performance.

Speaker 2 (03:50):
Yes, we have that, you know. We publish our e
contractors our major economic the tool for economic data on
our Dairy INTI website. Reason and we publish our forecast
now is to help farmers with your financial planning for
the season. They yet, You've got a detailed breakdown of
farm financial forecasts both nationally and by region and by

(04:12):
different ownership types on the econtractor, and it's designed to
basically look at both historical and a future forecast and
you can sort of compare your farm started to those
averages and we update it at least quarterly or more
more often depending on you know. Significant announcements in terms
of forecast, farmgate, milk price or other developments.

Speaker 1 (04:37):
Darienz, dot co, dot in Z board, slash econ Tracker, one,
word mark's story, Dairy and Zed Head of Economics. Thanks
for your time today on the Country.

Speaker 2 (04:47):
Thank you, Jamie. Cheers by