Income falls after low dairy prices
Low global dairy prices have left an Invercargill City Council department out of pocket.
The council, which owns land in Awarua, receives 50 per cent of the milk income from the property and because of low dairy prices, and other investments, the Investment Property Department is over budget.
Council financial services manager Dale Booth said it was about $100,000 down on income for the financial year to May.
‘‘The farmers who run our farm are really tightening their belts, so we are almost breaking even.’’
However, dairy prices were recovering because of the long autumn, Booth said.
It was predicted global dairy prices would improve, so the future would not be a concern, he said.
The council has been involved in the operation for almost 10 years.
On July 19, global dairy prices were unchanged at the Global Dairy Trade auction, but whole milk powder rose 1.9 per cent.
‘‘Anyone who has been in the dairy industry would be somewhat concerned about the prices over the last two years.
‘‘But the signs are they hopeful for it to improve.’’
Booth said the shortfall would be funded by a council reserve fund, called the Special Purpose Reserves fund.
To his knowledge it was the first time the council had known of falling dairy prices affecting finances, he said.
‘‘This has been one of are the harder years in terms of prices, but we’ve offset that with the reserves.’’
The financial report tabled at the council’s finance and policy committee meeting last week says the investment property department was $156,803 over budget for the eleven months to May 30.
This was ‘‘primarily’’ due to milk solid income from the Awarua Farm being lower than budget, on the back of low dairy prices, the report says.
The city council also bought properties on Ness and Grace St in April which contributed to the $156,803 over budget figure for the department, he said.
Booth said the timing of the report was such that the amount over budget would become even.
‘‘So in May it looks like we are over budget, but we’re not really, because we’re waiting for money to come in from reserves so we can cover it.’’
The council also had five rental properties at Awarua, of which they received a return of about $40,000 per year for three cottages.