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GLOSSARYTERMS AS A CREDIT DESK USES THEM

Advance rate schedule (dairy)

What is a dairy advance rate schedule, and why does it shape the farm's overdraft?

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BY MICHAEL SHANG · SIXTEEN YEARS IN COMMERCIAL BANKING · UPDATED

// THE SHORT ANSWER

An advance rate schedule sets how much of the forecast milk price a New Zealand dairy processor pays farmers each month for the previous month's milk, with the share rising through the season and the rest paid once the final price is confirmed. Because early payments are a smaller share of the forecast while costs run through calving and spring, the seasonal facility usually peaks before the advances catch up. A lender builds the cash flow on the schedule rather than the headline price, since a cut in the forecast falls on the payments still to come. Australian processors instead publish an opening price that can be stepped up.

BASIS  Practitioner judgment from sixteen years in commercial banking, set out in How Bankers Think (Highbank Press, 2026). Every borrower on this site is a composite constructed for teaching, not a client. The market is mid-market commercial lending as practised in New Zealand and Australia; where a convention differs elsewhere, the page says so.

// WHAT IT IS NOT

In receivables and asset-based lending, the advance rate is the share of eligible collateral a financier will fund; a dairy advance rate is the share of the forecast milk price a processor pays each month.

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