1 00:00:01,920 --> 00:00:03,840 Speaker 1: Now it has been the most expensive season for dairy 2 00:00:03,880 --> 00:00:06,400 Speaker 1: farmers in a decade and that has left operating profits 3 00:00:06,400 --> 00:00:08,360 Speaker 1: down twenty seven percent. This is from the Dairy New 4 00:00:08,440 --> 00:00:11,000 Speaker 1: Zealand survey that shares farmers are contending with they drop 5 00:00:11,000 --> 00:00:13,119 Speaker 1: and milk solids reduction and the stocking rates and a 6 00:00:13,200 --> 00:00:16,280 Speaker 1: list and farm expenses. Head of Data Science and Modeling 7 00:00:16,280 --> 00:00:18,200 Speaker 1: at Dairy New Zealand, Mark Neil's done all these numbers. 8 00:00:18,239 --> 00:00:19,000 Speaker 1: He's with us Mark. 9 00:00:18,880 --> 00:00:22,880 Speaker 2: Morning, Morain and Mike, good to talk with you and 10 00:00:23,000 --> 00:00:23,360 Speaker 2: Drew too. 11 00:00:23,400 --> 00:00:26,440 Speaker 1: Have you got a word for this? Is it arduous, difficult, troubled? 12 00:00:26,480 --> 00:00:28,200 Speaker 1: What's what's happening on the farm? And a word? 13 00:00:29,960 --> 00:00:32,840 Speaker 2: Well, I think farmers are a bit like the rest 14 00:00:32,840 --> 00:00:35,360 Speaker 2: of us in New Zealand at the moment, really battling 15 00:00:35,440 --> 00:00:40,720 Speaker 2: with inflation and that led to lower profit margins and 16 00:00:40,840 --> 00:00:43,600 Speaker 2: so farmers have to be really cost conscious in this 17 00:00:44,600 --> 00:00:45,440 Speaker 2: in this environment. 18 00:00:45,680 --> 00:00:48,760 Speaker 1: How rearview mirror is this given? I'm hoping that the 19 00:00:48,840 --> 00:00:52,360 Speaker 1: increase in prices is dropping. So the yes, they're increasing, 20 00:00:52,400 --> 00:00:53,880 Speaker 1: but not by as much as they have been. 21 00:00:54,960 --> 00:00:57,560 Speaker 2: Yeah. So the economic survey that we've just released was 22 00:00:57,560 --> 00:01:00,320 Speaker 2: for the twenty two to twenty three season so that 23 00:01:00,400 --> 00:01:04,679 Speaker 2: finished twelve months ago. We've got forecasts for the most 24 00:01:04,840 --> 00:01:10,120 Speaker 2: current season where we've seen a reduction in milk price 25 00:01:10,160 --> 00:01:14,800 Speaker 2: relative previous season, again which has put pressure on margins. 26 00:01:15,520 --> 00:01:18,560 Speaker 2: And what we've set, what we think we've seen is 27 00:01:18,600 --> 00:01:22,360 Speaker 2: that feed prices have ease back a little bit, fertilizer 28 00:01:22,440 --> 00:01:25,240 Speaker 2: prices of ease back a little bit, and farmers have 29 00:01:25,480 --> 00:01:28,320 Speaker 2: in their budgets pulled back a little on the repairs 30 00:01:28,319 --> 00:01:32,640 Speaker 2: and maintenance. So the net effect though is for the 31 00:01:32,840 --> 00:01:37,400 Speaker 2: season just gone a further ten percent lower operating profit 32 00:01:37,520 --> 00:01:39,399 Speaker 2: per kilo milk solids. 33 00:01:39,160 --> 00:01:41,200 Speaker 1: And when they are down, the whole town around them 34 00:01:41,240 --> 00:01:41,880 Speaker 1: is down right. 35 00:01:43,000 --> 00:01:46,039 Speaker 2: Yeah, I think that's safe to say that deerries is 36 00:01:46,080 --> 00:01:49,120 Speaker 2: a very important sector for New Zealand twenty five to 37 00:01:49,160 --> 00:01:52,560 Speaker 2: thirty billion dollars of export revenue at one in four 38 00:01:52,600 --> 00:01:56,360 Speaker 2: of our export dollars. So it's important for New Zealand's 39 00:01:56,360 --> 00:02:00,320 Speaker 2: success and the success of rural communities. Well. 40 00:02:00,440 --> 00:02:02,080 Speaker 1: As we sit here at the moment, the auctions of 41 00:02:02,200 --> 00:02:04,520 Speaker 1: late have been reasonable. The sin Lay story not a 42 00:02:04,560 --> 00:02:08,000 Speaker 1: particularly good one. Is are you optimistic for dairy as 43 00:02:08,000 --> 00:02:09,160 Speaker 1: an industry generally? 44 00:02:11,680 --> 00:02:16,280 Speaker 2: I think so. We've got a program of work at 45 00:02:16,360 --> 00:02:20,640 Speaker 2: darien Z. That is really looking towards our international competitiveness 46 00:02:20,760 --> 00:02:24,799 Speaker 2: going forward. We need the research and development into productivity 47 00:02:24,800 --> 00:02:29,200 Speaker 2: and sustainability that helps us retain that competitiveness. So it's 48 00:02:29,240 --> 00:02:32,720 Speaker 2: a key part of our role. I think farmer sentiment 49 00:02:32,880 --> 00:02:35,440 Speaker 2: has improved a little over the last six months. They're 50 00:02:35,480 --> 00:02:38,920 Speaker 2: feeling a bit more in control of their businesses, even 51 00:02:38,919 --> 00:02:43,200 Speaker 2: though they're cautious with respect to the wider economy. Yeah, 52 00:02:43,240 --> 00:02:46,040 Speaker 2: I think we can have a positive view of the 53 00:02:46,040 --> 00:02:49,040 Speaker 2: future while understanding it's quite tight at the moment. 54 00:02:49,200 --> 00:02:51,240 Speaker 1: Yeah, you say down twenty seven percent that comes from 55 00:02:51,280 --> 00:02:54,560 Speaker 1: the operating profit per hector, which is threeenty seventeen dollars. 56 00:02:54,560 --> 00:02:57,639 Speaker 1: How much should you make per hector to be able 57 00:02:57,680 --> 00:02:59,480 Speaker 1: to go tell you what, things are pretty good? 58 00:03:02,560 --> 00:03:06,840 Speaker 2: So out of that operating profit, you have to pay 59 00:03:07,040 --> 00:03:11,040 Speaker 2: first operating profit before interest in tax, and so what 60 00:03:11,080 --> 00:03:15,680 Speaker 2: we've seen in twenty one twenty two, farmers had to 61 00:03:15,680 --> 00:03:19,560 Speaker 2: put twenty five percent of that operating profit into interest, 62 00:03:20,120 --> 00:03:24,760 Speaker 2: and then with increasing interest expense and a declining margin 63 00:03:25,800 --> 00:03:28,640 Speaker 2: in the year that's just finished, that's probably been closer 64 00:03:28,639 --> 00:03:32,280 Speaker 2: to two thirds of their operating profit has gone into 65 00:03:32,320 --> 00:03:37,200 Speaker 2: the interest expense. So that's probably a lot more than 66 00:03:37,240 --> 00:03:41,120 Speaker 2: farmers would like to be putting into interest, leaving a 67 00:03:41,160 --> 00:03:42,480 Speaker 2: lot less for themselves. 68 00:03:42,640 --> 00:03:44,720 Speaker 1: It's the old story, isn't it. Good insight, make appreciate 69 00:03:44,720 --> 00:03:46,400 Speaker 1: it very much. You have a good long weekend. Appreciate 70 00:03:46,440 --> 00:03:48,480 Speaker 1: your time, Mark Neil, head of Data and Science modeling 71 00:03:48,480 --> 00:03:51,000 Speaker 1: it during New Zealand. Just for more from the mic 72 00:03:51,040 --> 00:03:54,160 Speaker 1: Asking Breakfast, listen live to news talks. It'd be from 73 00:03:54,240 --> 00:03:57,680 Speaker 1: six am weekdays, or follow the podcast on iHeartRadio.