New Zealand dairy industry dismayed as prices hit five-year low

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New Zealand farmers are preparing for austerity in the year ahead after prices for the country’s pillar dairy exports plunged to the lowest level in more than five years on Thursday.

The average price on the Fonterra-run GlobalDairyTrade auction fell to 2,599 U.S. dollars per tonne, the lowest price since August 2009, and almost half of the peak price in February this year.

The fall means Fonterra could further slash payouts to farmers, after the cooperative indicated payouts would drop by 70 NZ cents (55 U.S. cents) to 5.30 NZ dollars (4.14 U.S. dollars) per kilogram of milk solids — depending on a recovery of prices early next year.

The Federated Farmers industry group said New Zealand farmers were paying the price for Russia’s ban on dairy imports from the European Union following events in the eastern Ukraine.

«There’s no way to dress this up as anything but a kick in the guts,» Federated Farmers dairy chairperson Andrew Hoggard said in a statement.

«This is the auction result that brings the chickens roosting in the eastern Ukraine home to us on-farm. Dislocated European milk has definitely put a sinking lid on global dairy prices,» said Hoggard.

«Unlike most of our competitors who are subsidized, there’s not one Kiwi farmer looking for a handout. We may not like what prices are doing, but we know this is market forces at work and while it often runs in our favor, this season it isn’t.»

The main opposition Labour Party said the price drop put New Zealand’s economy in a vulnerable position and exposed a weakness in its reliance on raw commodities.

«The figures speak for themselves. Other industries such as export manufacturing are in relative decline. Commentators report that the dairy industry faces a prolonged downturn with other countries now producing their own milk powder leading towards a global surplus,» acting Labour leader David Parker said in a statement.

On Wednesday a report from Rabobank warned the dairy industry faced a prolonged period of low prices as the global market struggled to soak up surplus, and prices would only begin to recover in the 2015-2016 season.

Last month, dairy giants Fonterra and Synlait announced they were looking to slash payouts to farmers on the back of weakening global demand, prompting concerns over New Zealand’s economic growth.

Statistics New Zealand announced last month that milk powder, butter and cheese exports to China fell 35 percent year on year in August, although China remained the top destination for dairy products, taking 14 percent of the total.

Goldman Sachs reportedly forecast earlier this year that annual global dairy output would exceed demand by 2 billion liters through to 2018 — a five-year glut that would depress prices.

Source: Global Post

Mirá También

Así lo expresó Domingo Possetto, secretario de la seccional Rafaela, quien además, afirmó que a los productores «habitualmente los ignoran los gobiernos». Además, reconoció la labor de los empresarios de las firmas locales y aseguró que están «esperanzados» con la negociación entre SanCor y Adecoagro.

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