Fonterra’s recent decision to reduce its opening Farmgate Milk Price forecast from $9.75/kgMS to $9.25/kgMS has understandably caught the attention of dairy farmers. While a 50-cent reduction isn’t welcome news, it’s important to remember one thing:
This is a forecast—not the final payout.
The dairy industry has always been cyclical and forecasts can move several times throughout a season as global demand, supply, exchange rates and weather conditions change.
The key is not to panic—it’s to plan.
Don’t Make Knee-Jerk Decisions
When payout forecasts change, it’s tempting to immediately slash spending or postpone every planned investment.
In reality, the best decisions are usually made after reviewing the numbers rather than reacting to the headlines.
Ask yourself:
- How much does this change affect my expected income?
- What does it mean for cash flow over the next 12 months?
- Are there discretionary expenses that can be delayed?
- Do I still have enough working capital for the season ahead?
A measured response is almost always better than a rushed one.
Update Your Cash Flow Forecast
One of the most valuable things you can do after a payout revision is update your cash flow budget.
A revised forecast allows you to:
- Estimate monthly cash availability.
- Identify periods where cash may become tight.
- Plan for tax payments and debt servicing.
- Discuss funding requirements with your bank before they become urgent.
- Make informed decisions about capital expenditure.
A cash flow forecast isn’t just a budgeting exercise—it’s a decision-making tool.
Keep an Eye on Costs—But Don’t Cut the Wrong Ones
Every farm has expenses that can be reviewed.
However, reducing spending simply for the sake of reducing spending can sometimes cost more in the long run.
Maintenance, animal health, pasture management and staff development are all investments that support future productivity.
Focus on improving efficiency rather than making across-the-board cuts.
Talk to Your Accountant Early
Changes in payout forecasts often create opportunities to revisit budgets, financing arrangements and tax planning.
Having these conversations early gives you more options than waiting until cash becomes tight.
Your accountant can help you understand:
- How the revised payout affects profitability.
- Whether your provisional tax estimates remain appropriate.
- The impact on debt servicing and cash reserves.
- Whether your current budget still reflects reality.
Remember the Bigger Picture
While a lower forecast is disappointing, it’s also worth keeping some perspective.
The revised forecast remains well above long-term historical averages, and it’s still early in the season. Forecasts can move in either direction as global markets respond to changing supply and demand.
Successful farming businesses aren’t built on one payout announcement—they’re built on good planning, disciplined financial management and informed decision-making throughout the year.
The Bottom Line
Markets change. Forecasts change.
The businesses that perform best over the long term aren’t necessarily those with the highest payout—they’re the ones that adapt quickly and make decisions based on reliable financial information.
If you haven’t updated your cash flow forecast since the latest milk price announcement, now is the time.
06 765 6178 | 
cmk@cmk.co.nz