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Is Milk Futures the Future of Dairy Farming?

Is Milk Futures the Future of Dairy Farming?

Photo of Kylie Cronin

Article by:
Kylie Filbee-Cronin
MANAGER, BUSINESS ADVISORY SERVICES | STAPLES RODWAY TARANAKI
Kylie.Filbee-Conin@staplestaranaki.co.nz

We all fix our interest rates, insure our houses, lives, cars and health, and lock in prices for our monthly utilities. This is great for those on a regular salary or wage who like to budget and plan their cashflows. But for Dairy Farmers, not only is your income seasonal, you’re also at the mercy of the Farmgate Milk Price, so sticking to a budget can be difficult. We can’t do much about the timing of milk production (you’ll have to talk to a higher power about that), but Milk Futures allow you to lock in some or all of your milk price, which can give you certainty when it comes to protecting the income side of your cashflow and budget.

Think of it like fixing your mortgage interest rates, only you’re fixing your milk price. You can choose how many kgMS you fix, and you can choose the type of product you want to use based on your appetite for risk. Milk Futures are not about speculating or taking a punt. Used in conjunction with fixed interest rates and contract prices for feed and other farm supplies, they can help lock in some cashflow certainty in uncertain times.

With our unique staff mix of dairy farmers, dairy industry specialists, and top class tax consultants, Staples Rodway can be your go-to team for assisting you with the process of purchasing Milk Futures. There are costs involved, and we have created a tool to easily help you forecast how a Milk Futures scenario will affect your cash flow, so that you can make a well-informed decision as to the benefits of using Milk Futures to provide some certainty around the income side of your business.

Right now, we’re seeing 2018-2019 season prices at $6.05/kgMS (trending down), and 2019-2020 prices holding steady at $6.00/kgMS.

If you’d like to know more about Milk Futures and how to use them, please get in touch with your local Staples Rodway Rural Sector Specialist

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