Homepaddock reports that Fonterra has cut its forecast payout for the coming season to $5.10 – well down on the $7.90 paid last season.
This is a significant decline in returns, however even though prices could go lower it is unlikely they will this season. As a result this leaves us two other factors to look at when figuring out what will happen to disposable incomes among diary farmers: quantity and costs.
As we are coming out of drought, quantity will have moved back towards “normality” (for an individual farmer) – this should help to improve returns relative to last year – however, farmers would have already accounted for that when making decisions.
The more important factor for me is costs. Have fertiliser prices begun to tail off? Will the sharp pull back in fuel prices help out? These sorts of questions will be key for figuring out how heavily dairy farmers disposable income will suffer during this lull in dairy prices.