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Milk price prediction means prolonged doubt for farmers

Milk price prediction means farmers will tread water for another season

Farmers are resigned to another tight season after Fonterra confirmed its milk price at $4.25 for the coming season.

Dairy chairman Andrew Hoggard said: "Many were hopeful of a price in the vicinity of $4.50, so optimistic farmers will be feeling disappointed.

"The reality is we have seen the opening forecast price change quickly as the market has changed. Unfortunately it has changed for the worse in the previous two seasons. Hopefully with this conservative forecast, we won’t see any further drops. Especially as there are some more positive signs out there in the markets presently.

"It is welcome that Fonterra has brought forward the advance rate payments, however we are still dealing with a low milk price, that is undoubtedly still below the break even price for most dairy farmers.

"The DairyNZ economic survey showed that in the 14/15 season average farm working expenses were $4.07kg/MS, and the breakeven price was $5.77.

"Figures are still to be crunched for 15/16 but we can assume the breakeven price is now somewhere in the low to mid $5 range. This clearly shows that dairy farmers will again be financially pressed for the coming season.

"The causes for marginal prices remain the same in that there is reduced demand with the Russian ban, and the Chinese slow-down added to increased production from many parts of the world, most importantly Europe.

"For many to survive, maintenance and repairs will continue to be deferred and inputs will be at a minimum. The flow-on effect of less spending will mean the rest of the rural and provincial economies will also suffer," Mr Hoggard concluded.


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