Imagine this: It’s the end of another long day on the farm. You’re sitting at the kitchen table, coffee in hand, staring at milk price forecasts. And the question keeps circling in your mind—will we make it through another volatile season?
Sound familiar?
If you’re like many of the dairy farmers we work with at CMK, you’ve lived this moment more times than you’d care to admit.
But here’s the truth—you don’t have to rely on gut feeling or cross your fingers and hope for the best. There’s a financial tool that can guide you with clarity and confidence, and that’s your breakeven point.
What Exactly Is Breakeven?
Think of it as your farm’s survival threshold. It’s the minimum milk price you need to cover all your costs and keep the lights on.
Above that number? You’re making money.
Below it? You’re dipping into reserves—or adding more debt.
Right now, across New Zealand, the average dairy farm breakeven sits around $8.00 per kilogram of milk solids for the 2025-26 season. With Fonterra forecasting $10.00, that might sound comfortable.
But here’s where it gets interesting: every farm is different. And your breakeven could be much higher—or lower—than the national average.
Kevin and Nicole’s Story
Take Kevin and Nicole from our Milking It series. Like many ambitious contract milkers, they knew their production numbers inside out. But when it came to their true cost position, things were hazier than a Taranaki morning.
Working with our team, they discovered that knowing your breakeven isn’t just about crunching numbers—it’s about creating a financial compass. One that helps you make smarter, more confident decisions every single day.
The Three Types of Breakeven
Here’s something that often surprises farmers: there isn’t just one breakeven number. There are three.
Cash Breakeven is your immediate survival number. It covers your cash expenses, family drawings, and debt payments. It’s the figure most farmers use day to day, because it answers the question: can I pay the bills this month?
Economic Breakeven digs deeper. It includes the value of your own labour and management—the opportunity cost of your time. It answers: am I really better off farming, or would I be ahead working for someone else? And yes—it’s often $2-4 higher than your cash breakeven.
Full-Cost Breakeven is your long-term sustainability number. It includes everything—plus a margin for reinvestment and growth. Banks look at this number when you’re seeking finance. And it’s the number you should target if you want a genuinely healthy business.
The New Zealand Challenge
Let’s be honest: New Zealand’s dairy systems are unique, and that creates some real wrinkles when calculating breakeven.
Unlike many overseas farms that have steady, year-round costs, Kiwi dairy farmers face big seasonal swings. Costs spike. Production dips. Then the cycle resets.
The numbers tell a sobering story. Just five years ago, breakeven sat around $5-6. Now? $8.00. That’s a 45% increase.
And it’s not just inflation—though on-farm inflation has been running as high as 17%. We’re also facing environmental compliance costs that could reduce profits by 26% for owner-operators and up to 74% for sharemilkers.
Add in the complexities of our industry structure—owner-operators, sharemilkers, contract milkers—and it’s clear: no two breakevens are the same.
Better Tools, Better Decisions
Here’s the good news: the tools for tracking and managing breakeven have never been better.
Gone are the days of once-a-year spreadsheet marathons. Today, farm management software like Figured can give you real-time insights into your cost position.
That means no more guesswork. You can spot issues early, make tweaks along the way, and stay in control—even when the market feels out of control.
Common Mistakes to Avoid
What are the biggest mistakes we see farmers making?
Incomplete costs. Too many farmers underestimate the true cost of production.
Timing mismatches. Paying for feed in advance but not recording it properly, or missing component adjustments as butterfat and protein levels change.
These may look like small accounting oversights, but they can swing your breakeven by thousands of dollars.
The farmers who succeed aren’t the ones who calculate breakeven once a year. They’re the ones who track it continuously—and use it to guide real decisions.
Breakeven as a Decision-Making Tool
This is where breakeven becomes powerful. It’s not just a number—it’s a decision-making tool.
The farms that thrive are the ones using breakeven analysis to:
- Guide expansion decisions
- Evaluate technology investments
- Plan for droughts or market downturns
We’ve seen farms justify new milking systems, optimise herd sizes, and even shape their succession planning—all through breakeven modelling.
Kevin and Nicole are a perfect example. By getting clear on their numbers, they’ve been able to set savings targets and identify areas where efficiency gains boost their bottom line. And that clarity is moving them closer to farm ownership.
Are You Confident in Your Numbers?
Here’s the big question: are you confident in your breakeven position?
If the answer is “not really,” you’re not alone. Most farmers have a rough idea. But few have the precise, actionable numbers needed for truly confident decision-making.
And in today’s environment—with volatile milk prices, rising input costs, and increasing regulation—flying blind isn’t just risky. It’s a luxury no farmer can afford.
That’s where we come in. At CMK, we’ve specialised in dairy farming for nearly 70 years. And we’ve seen how transformative it can be when farmers truly understand their numbers.
Whether you’re a contract milker chasing ownership, a sharemilker optimising your system, or an owner-operator planning your next move, knowing your breakeven is the foundation everything else is built on.
This article is part of our Milking It series, following Kevin and Nicole’s journey toward farm ownership. To follow their progress—and for more practical financial guidance for dairy farmers—visit dwn.co.nz/milking-it