Dairy farmers in New Zealand are urged to prepare for tighter margins and possible feed shortages after DairyNZ modelling showed a strong El Niño could push farm working expenses to $6.78 per kilogram of milksolids and the national breakeven milk price to $9.07/kg MS. The weather risk comes on top of existing pressure from fuel, fertiliser and feed costs, said DairyNZ head of economics Mark Storey.

The EconTracker quarterly update models two scenarios against a non-El Niño baseline. The breakeven milk price rises from $8.62/kg MS to $8.90 under a strong El Niño and $9.07 under a very strong one; farm working expenses rise from $6.18 to $6.57 and $6.78 respectively. Pasture takes the first hit, with national feed expenses — home-grown maize as well as imported palm kernel — modelled to rise from $1.56 to $2.02/kg MS in the severe case.

Modelled pasture deficits reach 2–3 tonnes of dry matter a hectare across Northland, Waikato, Bay of Plenty and the East Coast, widening to 3–4.2 t under a very strong event as effects run into autumn. Irrigation partly shields Canterbury, though water restrictions and stronger winds may still limit growth; on the West Coast and in Southland wetter soils and less sunshine give smaller deficits of 0.1–0.8 t but may cut pasture quality. Milk production is expected to fall 2.1% in the strong scenario and about 3.3% in the very strong one.

The sector is in a relatively strong financial position and used to managing volatility, Mr Storey said, but expenses have risen sharply in recent seasons before any El Niño effect and are not expected to fall much in 2027-28, so profit margins are forecast to remain very tight. The figures are a scenario, not a milk-price prediction, and revenue fundamentals still look positive.

For most farmers the biggest risk is seasonal feed availability, said farm systems team manager Steve Veix: keep feed budgets current, monitor pasture growth and cover, and set clear trigger points for action if conditions worsen.

Source: Farmers Weekly NZ