Westpac says $4.70/kgms next year

Westpac is basing dairy farm budgets on a $4.70/kgMS payout from Fonterra next season, the bank's Westland-based agribusiness manager Dean Rainham says in the Rural News. Speaking to a monitor farm field day in the region earlier this month, Rainham advised farmers to analyse their financial position, if they hadn't already done so, and budget for next season."˜Then have a reality check. Take your figures to your accountant, banker or consultant. But it's important you have a go at doing them first.' Profitable businesses can still go bust so updating the cashflow forecast is also essential."˜Three years ago equity was the really important factor. Now, cashflow is the key. If you are trading at a loss, look at how you can at least get that back to a break even position.'Strong dairy businesses will have over 50% equity, farm working expenses of under $3.60/kgMS, debt no greater than three times annual income, and interest charges of less than 25% of annual income. "˜Equity in the business is like having grass. If you've got grass you've got options: if you've got equity, you've got options.'Financing facilities should be assessed and managed to minimise interest with current long-term fixed rates looking attractive. Term rate offers can be locked in for future start dates. "˜If you can get rates with a five in the front you are doing pretty well.' For those with over $1m of borrowings swaps are a good option. "˜It enables you to manage your interest rate risk. They're really flexible.'