Opening milk prices – now is the time to review plans

Dairy farmers are encouraged to review budgets and timing for any capital expenditure plans off the back of opening dairy price forecasts. NAB’s Neil Findlay says these plus this financial year’s stronger finish should support the confidence that’s been returning to southern producers.

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NAB Agribusiness has encouraged dairy farmers to review budgets and timing for any capital expenditure plans off the back of opening dairy price forecasts.

“Major dairy companies have this week released some pretty aggressive opening milk prices, but the forecast end-of season prices are somewhat more conservative than expected,” said Neil Findlay, NAB’s Head of Agribusiness for Victoria and Tasmania.

“We’re looking at closing prices around 50c/kg lower than those of this year, which means producers may have a different cash flow structure in the financial year ahead. They shouldn’t necessarily allow their plans to rely on the kinds of step-ups we’ve seen this year. Now that farmers know where they likely stand on prices, it’s worth reviewing and adjusting plans for the coming 12 months.”

Mr Findlay said the number of step-ups over the past 12 months has seen many dairy customers in southern systems put the past few years behind them and tackle a wish list of improvements. “Paying down debt is a key consideration for some, along with priority capital expenditure that’s been put off for several years. Some farmers are also rebuilding herd numbers.”

Mr Findlay says the stronger finish to the current financial year and opening prices – which in some cases are setting records – should provide support to the confidence that’s been returning to southern producers.

“There are also a number of new pricing structures being offered by some dairy companies, including long term pricing and incentive payments, which should be discussed with advisors before farmers take on anything new,” said Mr Findlay. “We always recommend putting together a best and a worst-case scenario when you’re looking at cash flow and outlays for the year ahead.”

“Your agribusiness banker and accountant should be partners in your business and the earlier you get them involved in your planning, the more options are available.”

Important Note:

Any advice in this editorial has been prepared without taking into account your objectives, financial situation and needs. Before acting on this advice, you should consider its appropriateness to you.