What is the Dairy Forecaster and how does it work? 

How to use the Dairy Forecaster

The Dairy Forecaster helps you budget and track your seasonal milk income, including actual production, projected payments and Fonterra retro payments.

What is the Dairy Forecaster?

Your dairy budget has three main areas:

• Cashflow grid: Shows the dollar movements in your business.

• Livestock grid: Records stock events and animal quantities.

• Dairy Forecaster: Manages your actual and projected income from this season's milk production, including Fonterra retro payments.

If you have multiple milk supply numbers under one GST number and want to track production separately, you can create an additional Dairy Forecasters.

Set up your Dairy Forecaster

When you open the Dairy Forecaster for the first time the Settings will open, or you can click the settings cog in the top right-hand corner.

In the Dairy Forecaster tab:

1. 1. Select the bank account your milk income is paid into.

   2. Select your dairy company.

   3. Select your ownership type: 

      • Owner/Operator

      • Sharemilker (and enter your share percentage)

      • Contract Milker (and you will manually enter your contracted rate when budgeting milk income)
        NOTE: If you are an owner with a Contract Milker, select Owner/Operator. Enter your expected monthly payment to the Contract Milker in the cashflow grid under Wages > Contract Wages.

   4. Tick the checkbox to include base advance increase payments (NZ)/step-up payment calculations (Australia) automatically, if required. 
      
      

   5. Add a Management Tag, if required.

You can update these settings if your circumstances change.

If you are a Fonterra supplier in NZ, you will also have a Retro payments tab in Settings. From there select the code your retro (last season's deferred) payments are coded to.

There is also a Set up retro payments button in the top right-hand corner where you can access the settings to select the code you use for your retro payments.

NOTE: Fonterra NZ suppliers are the only dairy company where Farm Focus automatically calculates the retro (last season's deferred) payments.

Enter your budgeted This Season's milk income

In the Dairy Forecaster, enter the expected production for each month, in either kilograms of milk solids or litres. Ensure you consistently use the same unit of measurement throughout the season.

Enter the base advance rate you expect to receive each month. If you supply to Fonterra, Westland or Synlait in New Zealand, you can load the latest available forecast prices by clicking Update Prices in the top right-hand corner, or manually enter your predicted prices if no forecast pricing is available. 

If you are a Contract Milker, enter your contracted rate.

If you are a Sharemilker enter the full production and $/kg (or $/l) and your % share will be displayed in the cashflow.

You can adjust your expected milk price to reflect a more optimistic or conservative forecast, or the rate suggested by your bank. 

If you have selected to include the base advance increase payments (NZ)/step-up payment calculations (Australia) then the Increase payments will automatically calculate and be included in your cashflow.

TIP: Use a Draft plan to explore different milk price and production scenarios.

Fonterra NZ retro payments

Fonterra NZ retro payments are paid in the year after production once the final season price is announced and are sometimes referred to as Last Seasons Deferred and the Dairy Forecaster calculates these payments automatically.

When you are set up as a Fonterra NZ supplier you will have a Retro payments section at the bottom of your Dairy Forecaster.

The Dairy Forecaster calculates each payment using your total season milk solids, including actual and planned production, and multiplying that by the increase advance for each month that retro payments are paid in the following year (July, August and September and a final in October).

Your Final $/kg and Total Season Payment is displayed at the very bottom and includes both your This Season's payment total and your retro payment total.

NOTE: The Co-operative Difference Payment is not included in the retro payment calculation.

If there is no forecast price available for the season, the Dairy Forecaster displays No prices available and the payment amounts show as zero, but a predicted price can be manually entered. Farm Focus updates these rates as they become available.

NOTE: The retro payments will be displayed in the cashflow against whichever code you have selected in the Dairy Forecaster settings as explained above.

Using the automatic retro payments for the first time

If you already have planned retro payment items manually entered in your cashflow then, when you first set up the automatic calculations, Farm Focus will ask whether you want to keep those items or clear them and use the calculated figures.

Choose the option that suits your existing plan. This choice appears only once, when automatic retro payments are first set up and existing planned retro items are present.

Recording actual milk production

As each month passes, your actual milk income pulls through from your matched invoices or coded transactions, and the revision line moves forward.

Follow these tips when coding your milk income:

• Invoice date: It is common practice to use the last day of the month the milk was produced as the invoice date, and the date the payment was made as the payment date. This aligns the income with the production month.
  NOTE: Inland Revenue has granted Fonterra NZ an exemption, so Fonterra's invoice date (issue date) is the 7th of the month that payment is made. Some Fonterra suppliers prefer to enter the invoice date as the last day of the month the milk was produced to line up with production for reporting. Consult your accountant about the best approach for your business and apply it consistently.

• Quantity: Enter the actual quantity produced each month in the quantity field. In New Zealand generally use kgMS. In Australia, use either kgMS or litres, ensuring consistency throughout the year.

In a revised Working Plan, you cannot edit the actuals section because the information comes from your coded transactions. Click the three vertical dots to view the actual transaction and its coding details.

If you have not received or coded the milk income for a month, or you did not supply milk in the previous month, an alert appears to let you know that data is missing for that month.

Other milk income and payments

Some payments and deductions are not included in the Dairy Forecaster's milk payment calculations and need to be budgeted separately in the cashflow grid.

These include:

• Fixed Milk Price contracts: The impact of any price risk management contracts are realised with the retro payments and need to be manually accounted for. The Retro payments in the Dairy Forecaster can be manually updated to include the increase or decrease as a result of any contract, or a seperate code can be created under Income > Milk production to account for this separately. 

• Milk company dividends and other payments or deductions: Enter these manually using the appropriate extended code. Examples include Winter milk payments and industry levies.

Troubleshooting the Dairy Forecaster

If your milk income is not calculating correctly, check your code set-up.

1. Go to Settings > Codes > Farm codes > This Seasons.

2. Check that the extended code for this season has its Type set to Milk Solids.