July top-up offers boost but long-term planning still key

Good news for dairy farmers in the Top of the South — Fonterra’s latest schedule includes a 25-cent retro payment in July, easing what’s traditionally been a tough month for cashflow.

With regular rain and solid growing conditions, the usual weather worries have taken a back seat, but financial planning remains as important as ever.

Ben Wouts of Reynolds Rural Accounting, who has over 30 years of experience supporting dairy clients, says while the July top-up is welcome, it doesn’t change the fundamentals.

“Even with a payout, winter remains a low-income period with ongoing costs for wintering and calving prep,” he explains.  “Good planning and strong communication with your accountant, farm manager, and bank manager ensures you’re in a strong position, no matter what the season brings.”

Wouts highlights that every farm is different, and running a successful dairy farm has always come down to planning ahead, staying flexible, and working closely with your team on and off the farm.

“Every farm has its own break-even point, with costs like irrigation, debt, feed, and wages varying,” says Wouts.

“By sitting down with your accountant to plan and explore options, you can ease the pressure of a lower payout in July.”

Wouts also says there are a few key things farmers can do to stay financially prepared.

“Have a fertiliser programme and stick to it, even in the tough years,” he advises. “That way, you’re not suddenly having to spend extra capital to catch up. If you don’t keep up with it, it can take a few years to recover from.”

Another key point he stresses is the importance of being aware of your estimated tax and ACC costs. “With the increased dairy payout, your income goes up, so your tax bill goes up too,” Wouts explains.

“Talking to your accountant early to estimate what you owe helps you plan ahead and avoid any surprises.”

Reynolds Rural is currently seeing many clients put the recent higher milk price payout into practical improvements and reducing debt.

“We’re seeing farmers invest in long-term assets, like putting a new roof on the calf or milking shed,” he explains.  “And many are using the extra cash to pay down debt, which is a good move. If you don’t pay debt off in the good times, you won’t be able to draw down again when the bad times hit.”

Wouts believes good accountants should help clients look beyond the current season.

“It’s not just about the numbers right now,” he says, “Ii’s about where you want to be in five or 10 years and making adjustments along the way to help you get there.”

He adds that one of the most rewarding parts of his job is watching people grow and succeed in the dairy industry.

“I really enjoy seeing young people working hard to become 50/50 sharemilkers, moving up the ladder,” he says. “And it’s just as satisfying to see those ready to take a step back, do so with confidence, knowing they’ve planned for it.”

From aspiring 50/50 sharemilkers to seasoned farmers planning to scale back, Wouts emphasises the key to long-term success is always the same: a solid year-round farm plan, open communication, and a trusted team behind you.