8 50:50 Sharemilkers: Operational Financial Analysis
Operating profit per hectare for 50:50 sharemilkers (herd owning sharemilkers) recorded an increase (+8%) to $775 per hectare in 2018-19. Lower milk payouts received (-4 cents per kilogram milksolids) were partially offset by a 9 percent increase in kilogram milksolids produced per cow. Operating expenses per kilogram milksolids decreased 13 cents to $3.00. Production per cow and hectare increased from last season. The average cash available for living and growth increased to $134,715 per farm. With increased capital expenditure, drawings and debt, a cash deficit of $12,622 was recorded in 2018-19.
Tables 13.1, 13.2, 13.3 and 13.4 show net cash income, cash farm working expenses and the adjustments made to calculate operating profit for the average New Zealand 50:50 sharemilker on a per farm, per cow, per hectare and per kilogram milksolids sold basis.
The price received for milk decreased from $3.21 to $3.17 per kilogram milksolids in 2018-19, a decrease of 4 cents (-1.2%) from the previous season. This being the second time that the price surpassed the decadal average of $3.02 since 2013/14. Income from milk sales increased by 24 percent to $586,337, alongside net livestock sales of $75,931 and other dairy income of $2,332. These contribute to a total net dairy cash income for the average farm of $664,600 for the season, which is 26.5% above the result for 2017-18.
Net livestock sales have become a more prominent source of income for sharemilkers over the last five seasons. Annual average livestock sales were $73 per cow over 2010-11 to 2013-14, but rose to $168 in 2018-19. Nonetheless, livestock sales as a proportion of net dairy cash income fell from its historical high (per kilogram milksolids) reported in 2016-17, to a level closer to its long-term average. Figure 8.1 shows the trend for the past decade. Milk production per herd increased for sharemilkers (25.7%), reflecting an increase in herd number, herd size, effective hectares and milksolids per cow.
Farm working expenses (FWE) increased relative to last season. It averaged $451,327 per sharemilking business or $2.44 per kilogram milksolids. Farm expense items remained relatively similar to last seasons on a per kilogram milksolids basis. After adjustments for resources used but not paid for in the cash account (e.g. unpaid family labour), operating expenses per kilogram milksolids were $3.00 per kilogram milksolids, lower than last seasons of $3.13. The components of dairy operating expenditure are shown in Figure 8.2.
Dairy operating profit per kilogram milksolids in 2018-19 was $0.63 for the average 50:50 Sharemilker, compared to the 2017-18 season. Net dairy cash income per kilogram milksolids went up by 2 cents relative to last season. In comparison, operating profit per effective cow and per hectare increased by 3% and 6.5%, respectively.
Figure 8.3 shows the distribution of 2018-19 operating profit per hectare. It is approximately normally distributed around the mean of $775 per hectare. Eighty-eight percent of sharemilkers had positive operating profit, leaving 12% of sharemilkers below $0 per hectare. Twenty-eight percent of sharemilkers achieved operating profits of over $1,000 per hectare.