As we near the midpoint of the dairy season, it is timely to look at how the current Fonterra Farmgate Milk Price range for the 2022/23 season is shaping up against prior years. The forecast range was recently revised and narrowed to $8.50 – $10.00 per kgMS with the midpoint decreasing to $9.00 per kgMS.
From a tax and cashflow point of view, the payout profile is as follows:
*These are derived from the base advance rate plus the capacity adjustment and will vary slightly across farms. The capacity adjustment no longer applies from the 2021/22 year.
** This excludes the Co-Operative Difference Payment which farmers received up to $0.10 if the eligibility criteria was met
The above payout profit shows a slight decrease of $0.17 per kgMS when taking into account the dividend or $0.27 per kgMS excluding the dividend. Despite the payout remaining strong for the current season, this is being offset in some part by rising costs. As such, we are for the most part seeing profit forecasts coming back for the 2022/23 year compared with the 2021/22 year.
There still remains a strong increase in payout between the 2020/21 year and the current 2022/23 years. For clients where we have yet to prepare your 2022 tax year accounts or we have delayed the filing of these tax returns, your provisional tax will remain due based on the 2020/21 year which may still be too light even with the rising costs.
In most cases, any top up in provisional tax will need to be paid by 28th June 2023. We will be in touch with clients that we foresee needing to make additional voluntary payments closer to the June installment but please feel welcome to touch base with your client manager should you wish for us to review your requirements sooner.