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Tough times forecast for NZ dairy farmers

Author
Hannah Bartlett ,
Publish Date
Sat, 6 Feb 2016, 6:23am
Photo / Getty Images
Photo / Getty Images

Tough times forecast for NZ dairy farmers

Author
Hannah Bartlett ,
Publish Date
Sat, 6 Feb 2016, 6:23am

Economists are forecasting even lower milk prices after this week's Global Dairy Trade auction saw whole milk prices drop to their lowest since last August.

ANZ chief economist Cameron Bagrie says they've revised their earlier milk solids price forecast for the 2016 - 2017 year, to an even lower $5 per kg, down from 5.75.

"And that's not going to make life not just tough, I think it's going to make life incredibly tough.

"One year of negative cash flow things are manageable, it's when you start to roll into that second year that problems start to arise."

Bagrie said Kiwi farmers are responding well - changing their cost structure, improving efficiency, and showing how adaptable the New Zealand dairy sector can be.

But he said there's still a fundamental problem of global oversupply - particularly from Europe where low oil prices and grain costs are driving production.

"If prices are low, we stopped milking cows. Unfortunately the rest of the world in regards to the production of milk is not quite so rational.

"I guess the big area that we're focusing on at the moment, where we're seeing a big lift of supplies, is what's coming out of Europe."

Cameron Bagrie said Europe shows no signs of slowing, and they predict their production will be up 5% on last year.

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