10 50:50 Sharemilkers: Regional Financial Analysis

10.1 Regional Profitability

DairyBase® classifies farms into eight regions, five in the North Island and three in the South Island (refer to Section 2.6). Table 10.1 and 10.2 shows key 2019-20 average performance indicators per kilo milksolids for 50:50 sharemilker farms in these eight regions. The low number of farms in the regions presented here may also reduce the representativeness of the sample. Both Table 10.1 and 10.2 report median values to reduce numerical bias created by the average of sums methodology in regional samples. Thus, totals and sub-totals in these tables will not add up but will better represent average values of the data sample. See section 2.11 for an explanation of this methodology.

Key Points from Table 10.1 include:

  • Malborough-Canterbury had the largest farms by hectares, cows and milksolids, followed by Otago-Southland and then Lower North Island

  • The cash operating surplus per kg MS was highest in Waikato ($1.70), and lowest in Malborough-Canterbury ($1.25)

  • All regions had an average profit per hectare between $708 and $1,270 per hectare.

Table 10.1: Regional Sharemilker Profitability 2019-20
Northland Waikato Bay of Plenty Taranaki Lower North Island West Coast-Tasman Marlborough-Canterbury Otago-Southland
PHYSICAL CHARACTERISTICS:
Number of herds 16 33 10 17 13 5 8 22
Effective hectares 150.5 108.0 115.0 101.0 136.0 128.0 227.5 213.5
Peak cows milked 375 303 302 277 410 400 780 582
Stocking rate (cows/ha) 2.5 3.0 2.8 2.9 2.8 3.0 3.5 2.8
Kg milksolids sold 112,931 115,248 110,095 111,291 160,705 174,893 349,130 261,508
Milksolids sold per hectare 920 1,157 1,052 1,190 1,024 1,366 1,502 1,258
Milksolids sold per cow 322 380 373 409 367 443 447 444
PAYOUT RECEIVED: $/kg MS sold 3.49 3.50 3.39 3.51 3.48 3.55 3.49 3.52
DAIRY CASH INCOME $: MS BASIS
Milk sales (net of dairy levies) 3.49 3.50 3.39 3.51 3.48 3.55 3.49 3.52
Net livestock sales (sales - purchases) 0.52 0.38 0.48 0.42 0.43 0.64 0.37 0.37
Other dairy cash income 0.00 0.01 0.00 0.00 0.00 0.03 0.00 0.00
Net dairy cash income 4.08 3.90 3.82 3.94 3.94 4.23 3.90 3.90
CASH FARM WORKING EXPENSES: MS BASIS
Wages 0.30 0.28 0.33 0.30 0.48 0.37 0.52 0.47
Animal health 0.23 0.21 0.29 0.22 0.26 0.25 0.27 0.20
Breeding & herd improvement 0.16 0.15 0.17 0.15 0.23 0.16 0.15 0.17
Farm dairy 0.04 0.05 0.03 0.08 0.06 0.06 0.05 0.04
Electricity 0.10 0.10 0.15 0.11 0.14 0.09 0.10 0.08
Net feed made, purchased, cropped 0.56 0.62 0.39 0.55 0.68 0.50 0.37 0.46
Stock grazing 0.15 0.20 0.07 0.20 0.26 0.25 0.68 0.47
Support block lease 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Fertiliser (incl Nitrogen) 0.21 0.11 0.13 0.12 0.14 0.19 0.17 0.16
Irrigation 0.00 0.00 0.00 0.00 0.00 0.04 0.11 0.00
Regrassing 0.01 0.00 0.02 0.00 0.01 0.02 0.01 0.01
Weed & pest 0.02 0.01 0.01 0.01 0.01 0.04 0.01 0.00
Vehicles & fuel 0.24 0.19 0.18 0.15 0.15 0.21 0.11 0.14
Repairs & maintenance 0.08 0.05 0.08 0.05 0.07 0.12 0.05 0.07
Freight & general 0.05 0.05 0.04 0.05 0.05 0.10 0.04 0.04
Administration 0.12 0.08 0.07 0.09 0.09 0.07 0.05 0.07
Insurance 0.04 0.03 0.03 0.05 0.04 0.04 0.02 0.03
ACC 0.02 0.02 0.03 0.01 0.01 0.01 0.01 0.01
Rates 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Farm working expenses 2.56 2.21 2.08 2.24 2.55 2.70 2.62 2.68
Cash operating surplus 1.62 1.70 1.59 1.65 1.48 1.39 1.25 1.31
ADJUSTMENTS: MS BASIS
Value of change in dairy livestock 0.32 0.10 −0.01 0.01 0.17 0.05 0.05 0.10
Less labour adjustment 0.66 0.57 0.74 0.79 0.58 0.65 0.31 0.35
Plus feed inventory adjustment −0.02 0.00 0.00 −0.01 0.00 0.00 0.00 0.00
Less owned support block adjustment 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Less depreciation 0.23 0.17 0.12 0.16 0.15 0.18 0.11 0.12
Net adjustments −0.69 −0.68 −0.77 −0.97 −0.60 −0.58 −0.36 −0.36
OPERATING CASH & NON-CASH: MS BASIS
Dairy gross farm revenue 4.37 3.98 3.95 3.98 4.19 4.23 3.90 3.98
Dairy operating expenses 3.70 3.14 2.95 3.09 3.32 3.42 3.08 3.16
Dairy operating profit 0.85 0.83 0.89 0.80 0.80 0.81 0.87 0.80
OPERATING CASH & NON-CASH: HA BASIS
Dairy gross farm revenue 3,943 4,507 3,855 4,575 4,332 4,434 6,157 5,034
Dairy operating expenses 3,039 3,439 3,023 3,545 3,621 4,043 4,831 3,738
Dairy operating profit 708 850 993 1,030 923 1,123 1,270 948
Operating profit margin 18.90% 20.50% 23.37% 22.52% 19.19% 17.46% 21.55% 19.64%

Operating return on dairy assets ranged from 13.4 percent to 17.6 percent across the regions reported in Table 10.2. Term liabilities per kg MS were higher in Northland and West Coast-Tasman. The relatively high debt to asset ratio in West Coast-Tasman reflects the higher term liabilities per kg MS, and may be influenced by the sample selection.

Table 10.2: Regional 50:50 Sharemilker Financial Position 2019-20
Northland Waikato Bay of Plenty Taranaki Lower North Island West Coast-Tasman Marlborough-Canterbury Otago-Southland
RETURNS:
Operating return on dairy assets % 13.4% 15.8% 17.4% 13.7% 15.6% 15.6% 17.6% 15.4%
Total return on assets % 9.4% 9.7% 13.2% 7.5% 9.9% 11.4% 11.6% 11.0%
Total return on equity % 17.0% 16.0% 22.2% 19.0% 24.5% 35.5% 23.0% 16.1%
Growth in equity % 17.8% 20.7% 21.8% 20.8% 36.2% 45.9% 19.0% 14.6%
DEBT:
Closing term liabilities per kg MS 3.35 2.52 2.39 2.37 3.01 3.31 3.14 2.17
Closing debt to asset % 54.0% 45.9% 42.1% 49.1% 54.3% 72.2% 54.8% 45.2%