Blog – Know Your Numbers

As part of our Milking It series with Kevin and Nicole, we’re diving deep into one of the most crucial financial tools every dairy farmer should have in their toolkit—understanding your breakeven position. 

Picture this: You’re sitting at the kitchen table after a long day, coffee in hand, looking at milk price forecasts and wondering if your
operation can weather another volatile season.

Sound familiar? If you’re like most dairy farmers we work with at CMK, you’ve probably had this exact moment more times than you’d care to count. 

Here’s the thing—you don’t need to rely on gut feelings or crossed fingers when it comes to your farm’s financial health. Understanding your breakeven position isn’t just accounting jargon; it’s your financial compass that can guide every major decision you make on farm. 

What Exactly Is Your Breakeven Point? 

Your breakeven point is simply the minimum milk price you need to cover all your costs and keep the lights on. Think of it as your farm’s survival threshold. When milk prices sit above this number, you’re making money. When they drop below, you’re eating into reserves or adding debt. 

Right now, across New Zealand, the average dairy farm breakeven sits around $8.68 per kilogram of milk solids for the 2025/26 season. With Fonterra forecasting $10.00/kgMs, that might sound comfortable—but here’s where it gets interesting. Every farm is different, and your personal breakeven might be significantly higher or lower than this average. 

Kevin and Nicole from our Milking It series discovered this firsthand when they started working with our team. Like many ambitious contract milkers, they knew their production numbers inside out, but their true cost position? That was hazier than a Taranaki morning. 

The Three Ways to Look at Breakeven 

Not all breakeven calculations are created equal, and this is where many farmers get tripped up. There are actually three different ways to calculate your breakeven, each serving a different purpose: 

Cash Breakeven is your immediate survival number. This covers all your cash expenses, family drawings, and debt payments. It’s what you need to pay the bills and sleep soundly at night. Most farmers find this is their go-to number for day-to-day decision making. 

Economic Breakeven digs deeper by including the opportunity cost of your own labour and management. This is the number that tells you whether you’re actually better off farming than working for someone else. It’s often $2-4 per KgMs higher than your cash breakeven, and it’s the reality check many farmers need but don’t want to hear. 

Full-Cost Breakeven is your long-term sustainability number. It includes everything plus a profit margin for reinvestment and growth. This is what banks look at when you’re seeking finance, and what you should be targeting for genuine business health. 

Why New Zealand Farms Face Unique Challenges
 

Our seasonal, pasture-based systems create some specific wrinkles in breakeven calculations. Unlike our overseas counterparts who might have more consistent year-round costs, Kiwi dairy farmers deal with massive seasonal swings in expenses and production. 

The numbers tell a sobering story. Breakeven costs have jumped from around $5-6/KgMs just five years ago to today’s $8.68/KgMs. That’s a 45% increase, driven by everything from on-farm inflation hitting 17% to looming environmental compliance costs that could impact operating profit by 26% for owner-operators and a whopping 74% for sharemilkers. 

Add to this the complexity of our industry structure—owner-operators managing 56% of herds face different cost pressures than the various sharemilking arrangements, while contract milkers like Kevin and Nicole need entirely different frameworks. 

Technology Is Changing the Game 

The good news? The tools available to track and manage your breakeven have never been better. Gone are the days of annual spreadsheet marathons. Modern farm management software can give you real-time insights into your cost position. 

Figured is the leader of the pack here, tracking the majority of New Zealand dairy farmers. 

Reviewing your accurate numbers from your farming system is critical so tweaks can be made along the way. 

The Mistakes That Cost You Money 

In our experience at CMK, we see the same breakeven mistakes repeated across farms. The biggest? Incomplete costs some framers way underestimate the overall cost of production. 

Then there are the timing mismatches—paying for feed in advance but not accounting for it properly, or missing the boat on component adjustments as butterfat and protein levels change. These might seem like small accounting details, but they can swing your breakeven calculation by thousands of dollars. 

The most successful farmers we work with don’t just calculate their breakeven once a year—they’re tracking it continuously, using it for everything from feed purchasing decisions to investment planning. 

Making Breakeven Work for Your Business 

Understanding your breakeven isn’t just about knowing a number—it’s about using that knowledge strategically. The farms that thrive use breakeven analysis to guide expansion decisions, evaluate new technology investments, and plan for drought or market downturns. 

We’ve seen farms use breakeven modelling to justify new milking systems, determine optimal herd sizes, and even make succession planning decisions. When you know your true cost structure, every business decision becomes clearer. 

Kevin and Nicole’s journey in our Milking It series perfectly illustrates this. By getting clear on their breakeven position, they’ve been able to make informed decisions about their path to farm ownership, setting savings targets and identifying areas where efficiency improvements could boost their bottom line. 

Your Next Steps 

If you’re reading this and realising you’re not 100% confident in your breakeven position, you’re not alone. Most dairy farmers have a rough idea of their costs, but few have the precise, actionable numbers they need for confident decision-making. 

The reality is that in today’s environment—with volatile milk prices, rising input costs, and increasing regulatory pressures—flying blind on your breakeven is a luxury no dairy farmer can afford. 

At CMK, we’ve specialised in dairy farming for nearly 70 years, and we’ve seen how transformative it can be when farmers get clear on their numbers. We’re not talking about complex financial gymnastics—we’re talking about practical, actionable insights that help you make better decisions every day. 

Whether you’re a contract milker working toward ownership like Kevin and Nicole, a sharemilker looking to optimise your operation, or an owner-operator planning your next move, understanding your breakeven position is the foundation everything else is built on. 

Ready to get clear on your numbers? Our team at CMK specialises in helping dairy farmers understand and optimize their breakeven position. We’ll work with you to create a clear, accurate picture of your costs and help you use that information strategically. 

Call us on 06 765 6178 or email cmk@cmk.co.nz to book a consultation. Your future self will thank you for taking this step. 

This article is part of our Milking It series, following Kevin and Nicole’s journey toward farm ownership. To follow their progress and access more practical financial guidance for dairy farmers, visit dwn.co.nz/milking-it/