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Dairy farmers face squeeze

Dairy farmers are getting a lower payout for milk but their costs are rising for goods and services like feed, fuel, and freight, Stats NZ said today.

The prices received by dairy farmers fell (4.8 percent) in the September 2018 quarter, due to a lower farm-gate milk price. In contrast, their costs rose (1.5 percent), mainly influenced by higher prices for animal feed, fuel, and freight.

“Dairy manufacturers paid less to buy raw milk in the latest quarter. They also received higher prices from our export markets and local customers,” business prices manager Sarah Johnson said.

It’s important to note there’s often a lag time between changes in costs and what businesses charge customers.

Prices paid by dairy product manufacturers were down 3.7 percent due to the lower farm-gate milk price. In contrast, they received higher prices (up 6.5 percent), mainly due to higher whole milk powder prices. Prices for other dairy products – butter, cheese, milk, and cream – also rose.

Dairy in New Zealand’s economy

The dairy industry plays a key role in both the agricultural and manufacturing sectors of New Zealand’s economy.

Dairy farmers produce raw milk, and dairy product manufacturers use that to make dairy products such as milk powder, butter, cheese, and processed milk. About 90 percent of these dairy products are exported, with the rest being sold to local businesses and consumers.

The average price consumers paid for dairy products rose 1.2 percent in the September 2018 quarter, as the consumers price index for the quarter showed.

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Increased prices for dairy product manufacturing are the key contributor to the increase in overall output prices that producers received in the latest quarter.

In the September 2018 quarter, dairy farmers costs rose 1.5 percent while they received 4.8 percent less for their raw milk. Dairy product manufacturers costs fell 3.7 percent and they received 6.5 percent more for their products.

Dairy product manufacturers export to the rest of the world, and also sell their products to local businesses, such as cafes, and to households.

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