News Financial
As a dairy farmer, expect a large tax bill
Dairy farmers must prepare for another major tax assessment for the year 2023. Countus expects this on the basis of an overview of the average half-year results of dairy farms affiliated with the accounting firm. The financial performance in dairy farming over the first six months of this year is particularly good. Dairy farmers did, however, take up much less financing than usual during this period.
The costs for feed, crops or processing, among other things, rose less rapidly in the first half of this year than the revenues, reports countus. Although the milk price has been under considerable pressure in recent months, it is still about €0,20 per 100 kilos higher than in 2021. The gross surplus, the amount available for fixed costs such as rent, interest, repayments, investments and private money, is more than €0,09 per kilo of milk higher than last year and €0,16 higher than in 2021.
Interest rates rose sharply
Due to the higher fixed costs, a higher gross surplus is also necessary to be able to generate cash flow, Countus emphasizes. Although the spread per company is large, the fixed costs in dairy farming increase by an average of 35%. According to Countus, the increase in fixed costs is mainly due to two items: interest paid and private withdrawals.
The interest paid rises by an average of 36% per 100 kilograms of milk, while the financing decreases slightly. The variable interest rate and the interest on the current account have also risen sharply, according to Countus. The organization points to the decision of the European Central Bank (ECB) to raise the deposit rate by another 0,25 percentage point this month. Countus is counting on the ECB not allowing interest rates to rise further in the second half of this year, but emphasizes that the interest rate rise for companies by banks often lasts a little longer as an after-effect.
Financing is declining, while private expenditure is on the rise
The Countus accountants have noticed that dairy farms have taken up considerably less financing in recent months than in recent years. Less use was probably made of lease constructions, the organization suspects, because there was sufficient liquidity. Major investments are often postponed due to all the uncertainties.
Normal private expenditure has also risen sharply: by almost €0,01 per kilo of milk. "This is also a result of the price increases that everyone has to deal with when shopping. With an increase of 30%, it is expected that people will also enjoy more," Countus reports. Expenditure on taxes paid is considerably higher than in recent years. This should come as no surprise to dairy farmers, given the results, Countus says. In recent years, the tax could be reduced to €7.000 to €8.000 per company. "But this suddenly rises to €28.000 per farm. That is about €0,03 per kg of milk," says Countus.
Milk price in a falling line
The organization points to the sharply decreased milk price in the course of this year. "The current milk price is almost €0,13 lower than the average over the first half of the year. In addition, the second quarter is generally the most expensive quarter in terms of costs." According to Countus, the end result of many dairy farms for this year is on average quite close to the result for 2022. "In other words: prepare yourself for another year with a large tax assessment."
Eric the Thrush
© DCA Market Intelligence. This market information is subject to copyright. It is not permitted to reproduce, distribute, disseminate or make the content available to third parties for compensation, in any form, without the express written permission of DCA Market Intelligence.
