Farmers are feeling the pain of low milk prices with the latest calculations looking like 3 per cent of farming owner operators are unlikely to make it through the season. Many more farmers will not break even and face larger overdrafts.
Guy was monitoring farmer spirits and spending at the Central Districts Field Days at Feilding on Thursday.
He said farmers were experiencing volatile markets with the world basically awash with milk and it would take a supply and demand correction to rectify this.
«No its my belief we are not at a crisis level. What we are experiencing is a period of volatility. If you have a look just in the last seven months I have been tracking it the price Fonterra has been indicating we have gone through a hump and a hollow and we are back to where we started.»
Milk prices have gone into extreme volatility with Fonterra’s forecasted payout following suit, rocketing from an initial $5.25 a kilogram of milksolids to $3.85/kg to $4.60/kg and then to $4.15/kg and back down this month to $3.90/kg.
Guy said demand was still growing, but there was a lot of milk coming in from the European Union and although it was difficult to calculate Chinese inventories there was likely to be some stockpiling and the United States was producing more milk.
«So it is quite tough on the farm right now. We are all interested to see what Fonterra does next week when they open up their books and there may well be a support package which farmers will receive with open arms because right now on-farm it is very tough, but the medium to long term outlook for dairy is incredibly bright.»
He said farmers were entering a period of low milk prices which it had lasted longer than thought.
«My belief is that 2016 we will see this see-saw it’s way a bit and GDT [global dairy trade auction] will come up and down and the good thing is Fonterra is not putting so much reliance on the GDT now and they are looking for long term supply contracts elsewhere.
Guy said the Government was doing what it could to help farmers through with the extra $500,000 investment in mental health wellness initiatives and training clinicians and rural professionals to detect the early signs of depression and bolstering rural support trusts.
Guy said he had managed the family’s dairy farm in the early 2000s in Levin and the records showed farmers then were getting $4.20/kg on average for about five years and the opportunity today was for farmers to look back inside the farm gate.
DairyNZ initiatives were aimed at growing more grass more efficiently and if this could be achieved with cost cutting farming could continue to be viable into the future
Guy said banks did not want to see farmers booted off their land and were supporting rural lenders as well as realising the did not want to damage their reputations with them.
However, a minority of farmers on the margins would find it tough, he said.
He said it had to be remembered that other areas of the primary industry were going well with beef exports up $3.2 billion up in the last year, horticulture going «gangbusters» in apple, kiwifruit and wine sales, and forestry and wool was on the up and the seafood sector going well, albeit that lamb was a bit more «squishy» than would be liked. Rural regions were being supported by high tourism activity.
New Zealand still needed to invest in long term water storage projects which would boost the rural economy and the environment, he said.
Source: Stuff
