The lift in the farm gate milk price to $9.00 kg/ms, with a range of $8.25-$9.75 kg/ms has brought about some welcome confidence to the industry and our farmers.

Alongside this increased payout, many farms started in a positive position for 1 June 2024 with improved cow condition, good pasture covers, and feed on hand.  

$7.20 kg/ms is the advance rate that Fonterra farmers are receiving for milk solids supplied in October and paid in November. Compared to last year’s rate of $5.45 kg/ms, the $1.65 per kg/ms increase will provide a meaningful impact to farmers’ cash flow. For the average sized 100,000kg farm that equates to an extra $165,000 cash that will be received on 15 November 2024 when directly compared to the same time last season.

Tax on this at the company tax rate of 28% is $46,200 in forecast additional tax. This is before factoring in any interest rate reductions or production increases, meaning taxable profits are forecast to be up significantly which is fantastic news for our farmers.

With the increased cash flow, some farmers are considering or have recently repaid a lump sum debt payment to their bank. A lump sum payment may seem like a great idea today, but it is important to consider what does the bank account balance look like heading into winter 2025? Will there be enough cash to pay the additional 28 June 2025 provisional tax?

To answer these questions and provide some clarity on cashflow, we recommend a 12-month cash flow forecast.  A forecast cashflow provides an opportunity to;

• Forecast the closing bank balance on 31 May 2025
• Forecast cash movement position and compare to last year
• Forecast the 28 June 2025 provisional tax payment to account for any extra tax
• Plan for debt repayment
• Identify break-even milk price, farm working cost per kg/ms and benchmark against industry averages

Another welcome change in the payout is the advance rate which is at $7.60 and not forecast to change until July 2025. What this means is a Farmer will not have any catch-up payments or larger milk cheques running through these months, which is very different to the past seasons and another good reason to complete a cash flow forecast to understand how this impacts your farm and your cash flow.

A forecast cashflow is a key decision-making tool and in this season, more important than ever.

The forecast seeks to use information we know today to plan.
With farming we know it is never going to be exact because of the external influences on the business. However, it is a proactive way to provide some certainty on cashflow and tax position to avoid any end of season surprises!