A record milk payout is bittersweet for Northland dairy farmers whose immediate focus is on meeting compliance costs and repaying debt rather than putting money aside for discretionary spending.

Fonterra has announced the highest payout of $9.50 per kilogram of milksolid for the 2021/22 season that will earn Northland dairy farmers $855 million based on about 90 million kg/MS they supply each year.

With a total dividend of 20 cents per share to fully shared-up farmers – comprising of an interim dividend of 5 cents per share and a final dividend of 15 cents per share – the final cash payout for farmers is $9.50.

The highest previous payout they received was $8.50 per kg/MS for the 2013/14 season, which was worth $765m.

Steve Nightingale, owner of Arnold Franks in central Whangārei that sells pipes, pumps and fittings to farmers, said cost increases would potentially offset any gain farmers would make from the record payout.

“A lot of that payout will go towards paying off debts and not on capital projects. Farmers, when they get a good payout, they know how to spend. When there’s no money, they know how to sit on their chequebook,” he said.

Nightingale said businesses that sold products like fertiliser and seed would likely benefit more from farmers’ patronage.

Rural Direct branch manager Kane Storey said increased compliance costs were likely to impact on the huge payout.

“An increase in interest rates also means farmers are not making a profit,” he said.

Ngunguru dairy farmer Matt Long said farm maintenance, environment work and debt repayment would take up a big chunk of the payout.
Long is the Federated Farmers Northland former acting dairy chairman.

A record payout still made it worthwhile to continue dairy farming, he said.

“Things are looking in a reasonably good shape for the next couple of years but can change quickly,” he said, referring to international milk prices.

Fonterra has announced a forecast 2022/23 farmgate milk price range of between $8.50 and $10 per kgMS, with a midpoint of $9.25 per kg/MS.

Chief executive Miles Hurrell said despite tight supply, there was robust demand from global customers for dairy products, which has helped Fonterra deliver a strong milk price and financial performance.