IT IS one of the most common phrases in the dairy industry - "break even" - yet its definition is debatable.
On-Farm Consulting dairy consultant John Mulvany said the phrase meant different things to different people.
He said it was as confusing as the term "cost of production".
"You can have two farms next door to each other with vastly different costs of production," Mr Mulvany said.
"Therefore one farm would demand a higher price for their milk.
"Yet their milk is no different to their neighbours."
Mr Mulvany said that in his terminology, to break even meant to finish the year "cash neutral".
He used a farm operating account opening the financial year at minus $100,000 and finishing at minus $100,000 as an example of what a "cash neutral" position was.
However, Mr Mulvany said the cash position of a farm was different to its business performance.
It was important not to confuse these, along with another financial concern: tax.
He said many of his clients would end the year in a cash-neutral position due to only paying interest on loans for the first six months of the year, and had only recently moved to pay some principal as well as interest.
Mr Mulvany said an estimate of the cost of production for farm working expenses was about $3/kg of milk solids.
He added another $1/kg/MS to enable the farmer to pay themselves or someone else to provide the labour.
Mr Mulvany said another $1/kg/MS was needed to provide a return on the investment.
"A milk price at $4kg/MS is totally unacceptable," he said.
"Once it gets to $5kg/MS it is starting to get into the zone where farmers are feeling as though they are getting at least something for their asset or investment."
One Western District farmer told The Weekly Times he was sick of surviving and "just wanted to live".
While he said that he would "break even" by covering running costs, the low milk price would only go so far.
"We will probably break even," he said.
"But last year we had money to put away by now to pay for fertiliser in the autumn.
"This year we might have to borrow the money for fertiliser."
Another Western District farmer said 35c/litre would be the "minimum" he would need to cover living and farm costs with minimal maintenance.
He said farmers would need to be paid 50c/litre to be able to keep up with expenses such maintenance, repaying debt and make dairying an attractive industry for young people to be involved in.
The break-even point at another family-operated farm near the South Australian border was 30c/litre.
The farmer said this included running costs, living expenses, interest and repaying some principal.
However, the farmer said at 35-40c/litre - if costs remained unchanged - he could make "good" money.
