The milk pay­outs roller­coaster ride

Matamata Chronicle - - Rural Delivery - By PETER HEX­TER

For the farmer it is dif­fi­cult to pre­dict the cur­rent sea­son’s pro­duc­tion and cur­rent sea­son’s pay­out.

Fi­nal pay­outs have been an­nounced as per the ta­ble.

Tatua proved to be the lead­ing dairy com­pany last sea­son.

It’s in­ter­est­ing to note the vari­ances in re­ten­tions.

Tatua hold­ing back $1.17 ver­sus Fon­terra that held back only $0.14.

Dairy Com­pany Pay­outs:

In­ter­est­ingly, West­land Dairy held back $0.30 which would have given them a to­tal pay­out higher than Fon­terra’s for the milk price com­po­nent.

In the 2013/14 sea­son Fon­terra is lead­ing the pack with an early in­di­ca­tion for a milk price of $8.30.

This is be­ing driven by the de­mand for milk pow­der and has been high­lighted by the reg­u­lar auc­tions be­ing sig­nif­i­cantly higher.

When we have a com­mod­ity-driven mar­ket as it is at the mo­ment, this is when Fon­terra ex­cels.

The value-added mar­ket is not as prof­itable in com­par­i­son, which may have an im­pact on Tatua and the div­i­dend de­clared to Fon­terra share­hold­ers, which is ex­pected to re­main con­sis­tent with 2012/2013 div­i­dend.

What does all this mean for the farmer?

The first point is that whether you are a Fon­terra or other dairy com­pany sup­plier it is still go­ing to be a very good sea­son in terms of pay­out.

The cur­rent ad­vance for Fon­terra sup­pli­ers has been sig­nif­i­cant at $5.50 per milk solid.

On top of this, the pro­duc­tion has been up and feed costs down due to the mild win­ter and spring.

From an ac­count­ing and man­age­ment per­spec­tive it has cre­ated the need to fo­cus on the prof­itabil­ity and tax­a­tion re­quire­ments for our clients.

Firstly, for those that have a sig­nif­i­cant in­crease in prof­itabil­ity we need to look at keep­ing on top of the po­ten­tial tax bur­den.

En­sure that com­mu­ni­ca­tion is kept go­ing with your ru­ral spe­cial­ist ac­coun­tant.

Pay­out is not the only item that will im­pact you this year, es­pe­cially if your live­stock are on the Na­tional Stan­dard Cost scheme.

The IRD pro­pose to in­crease val­ues for the rear­ing and grow­ing costs, which has been high­lighted in pre­vi­ous ar­ti­cles or can be found on our web­site.

This will add ad­di­tional in­come over the next three years.

From a man­age­ment per­spec­tive, I be­lieve the farmer should be mak­ing the most of this in­crease in pre­dicted pay­out.

It will mean sum­mer­proof­ing them­selves so they can make the most of this sea­son and set them­selves up well for next sea­son. Ex­am­ples are: Feed – It is a time to be look­ing at build­ing up the feed on hand, which was largely con­sumed in the drought last sea­son.

Re­pairs and main­te­nance – There will no doubt need to be re­pairs com­pleted that may have been left due to the last sea­son’s drought and short­age of funds.

En­vi­ron­men­tal reg­u­la­tions – Keep­ing up with the en­vi­ron­men­tal reg­u­la­tions may mean eval­u­at­ing your ef­flu­ent sys­tem and your wa­ter re­quire­ments.

Fi­nan­cial po­si­tion – Debt re­duc­tion is still im­por­tant es­pe­cially if there is go­ing to be a rise in in­ter­est rates as in­di­cated by the Re­serve Bank.

Other ar­eas of in­ter­est may be in re­view­ing op­por­tu­ni­ties to grow by in­vest­ing in wealth­pro­duc­ing as­sets, plus don’t for­get suc­ces­sion plan­ning ei­ther. Ev­ery­one in busi­ness needs to look at this and prof­itable years can cre­ate op­por­tu­ni­ties for this to start.

There are al­ways chal­lenges with farm­ing and if it isn’t the sea­son, en­vi­ron­men­tal is­sues or health scares it may be an­i­mal health.

We are see­ing a large in­crease in re­ported cases of thei­le­ria, which will have an im­pact on pro­duc­tion, re­pro­duc­tion and gen­eral an­i­mal wel­fare.

Keep an eye out for this and be proac­tive.

Note, for the 2014/2015 sea­son we ex­pect in­come lev­els to be con­sis­tent with 2013/2014 as the de­ferred pay­ments will com­pen­sate for any pro­jected de­crease in 2013/2014 ad­vance rates.

At Coop­erAitken we en­cour­age our clients to work with us to achieve the most ef­fec­tive so­lu­tion for them­selves given the above vari­ables men­tioned.

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