The average dairy farm made a cash loss of $58,500 in 2008/09, with a smaller loss predicted for the current year despite expected cuts to expenses.
In its latest dairy farm monitoring survey, released today, the Ministry of Agriculture said farms in most areas of New Zealand went into the 2009 winter with less than desirable pasture cover and cow condition.
While supplementary feed was readily available, the cash to buy it was not, MAF said.
Despite that, dairy farmers were budgeting for a 3 percent rise in production above 2008/09 levels, while the result net cash income would fall 5 percent to $714,900 in 2009/10.
The fall was expected even though farm working expenses were budgeted to drop 11 percent to $3.34 per kg milksolids, with major falls expected for feed, fertiliser and repairs and maintenance.
The average dairy farm, as depicted by MAF's model, would still make a cash loss of $15,500 in 2009/10. In the absence of off-farm income, new borrowing and introduced funds, that loss would be almost $40,000.
"As a result of the financial losses in 2008/09, the lower than expected payout of $4.55 per kg of milksolids in 2009/10, and some uncertainty around the final payout price, farmer morale is subdued," MAF said.
The 2008/09 year had been relatively forgettable for dairying, coming on the back of variable weather, a significant decline in the payout throughout the season, and the forecast $4.55 payout going into 2009/10.
Nationally, production rose 9.8 percent in 2008/09 compared with 2007/08, with most of that being a post-drought recovery.
Despite the increased production, net cash income dropped 27 percent compared with 2007/08 to $750,000. That was very much as a result of the drop in payout, from an original forecast of $7 per kg milksolids down to $5.20, MAF said.
Farm working expenses rose in 2008/09 to an average of $3.86 per kg milksolids, driven by higher feed expenses due to variable weather, and increased prices pushing up fertiliser expenses.
The $58,500 cash loss that the average dairy farm finished the 2008/09 year with was a fall of 141 percent from the previous year. In the absence of off-farm income, new borrowing, and introduced funds, the loss would have been $130,600.