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Dairy farming ‘no bet’


11 November 2014

Dairy farming ‘no bet’

Federated Farmers says it’s not the government betting on the farm, but instead farmers making sound market decisions. This comes after Green Party co-leader, Dr Russel Norman, said the government has ‘bet on the farm’ with dairying being a ‘one trick pony,’ which is producing a lower tax take and jeopardising a budget surplus.

“Dr Norman is ill-advisedly attacking New Zealand’s most successful export industry,” says Andrew Hoggard, Federated Farmers Dairy chairperson.

“Primary exports are an increasingly large share of our merchandise export returns and dairy an increasingly large share of farm production.

“The signals from the market are that growing middle classes, especially in South Asia, are developing a sustained taste for dairy products, and New Zealand is a respected source of those dairy products.

“Our dairy farmers are rationally taking these market signals on board and not being diverted by the inevitable short term fluctuations, or in Dr Norman’s terms, ‘a bet’

“The reasons for the present market slippage are clear.

“We didn’t cause Ebola in West Africa and our dairy farmers didn’t invade Eastern Ukraine either, but these two disparate events have cost us hundreds of millions of dollars. That same risk would exist if we exported mobile phones or software.

“Yes, the world produced seven billion litres more milk last season in an exceptional run the world-over. While that put a lid on dairy price growth, sanctions following events in the Eastern Ukraine released some three billion more litres and now you’ve got Ebola too.

“No question this season is a poor one. It ranks down there with 2005/6 but that also means the many seasons around them weren’t too shabby. Seasons that have helped to make this country the third most prosperous on earth according to Legatum.

“Unlike the past, our guys have been saving the gains while investing into productivity and environmental improvements. The ASB reckons, according to NZ Farmer, that agricultural bank deposits over the year to the end of September totalled $7.2 billion.

“Within the past few weeks RadioLive’s Duncan Garner has been on-farm and said this after visiting one; “So a bit of a message to the Greens, this guy wanted to pass on a message to the Green Party that they spend hundreds of thousands of dollars on what they do with their waste, and I thought it was quite brilliant, actually”.

Andrew Hoggard however doesn’t take too much issue with Russel Norman that the dairy industry might to likened to a pony.

“If he insists that it is a pony he should acknowledge that it is a very strong pony, it’s a stayer and it can perform economic miracles for our nation that Dr Norman would do well to get acquainted with,” Mr Hoggard concluded.

SeasonAverage Dairy Company total payout ($/kg milksolids)Dairy Company payout (inflation adjusted)a
2003/04$ 4.25$ 5.34
2004/05$ 4.58$ 5.60
2005/06$ 4.10$ 4.83
2006/07$ 4.46$ 5.14
2007/08$ 7.67$ 8.51
2008/09$ 5.14$ 5.59
2009/10b$ 6.37$ 6.82
2010/11b$ 7.89$ 8.02
2011/12b$ 6.40$ 6.44
2012/13b$ 6.18$ 6.18

Fonterra’s milk price payout for the immediate past (2013/14) season is $8.40 kg/MS.
Source: DairyNZ Dairy Statistics for 2012/13
a Weighted to give real dollar values using the Consumers Price Index for the end of the June quarter. Sourced from Statistics New Zealand; Excludes dairy company retentions and deduction for DairyNZ Levy.
b Average dairy co-operative payout (Fonterra, Tatua, Westland)

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