Off the wire
• Gina Rinehart loses control of family's multi-billion dollar fortune  • News Analysis: Philippine economy slows down to 5.2 percent in Q1  • Commentary: U.S. meddling in South China Sea unjustified, unprofitable  • S. Korea's income inequality deepens between regular, irregular workers  • New Zealand to work with UN on dealing with foreign terrorist fighters  • Sydney siege gunman believed people could read his mind, inquest told  • Roundup: Internet era brings both challenges, opportunites for publishing industry  • 1st LD: Chinese shares plunged over 6 pct Thursday  • Roundup: Growing consensus in U.S. Congress against embargo on Cuba: U.S. senator  • Hanergy chairman refutes claims of defaults, probes  
You are here: 　 Home

Low dairy prices forecast to hit New Zealand economy for second year

Xinhua, May 28, 2015 Adjust font size:

New Zealand's dairy farmers were told Thursday to anticipate a second straight lean season next year as uncertainty continued in global dairy prices.

Dairy giant Fonterra Co-operative Group Ltd. cut its forecast milk price to farmers this season from 4.50 to 4.40 NZ dollars (3. 26 to 3.19 U.S. dollars) per kilogram of milk solids -- almost half of the 8.40 NZ dollars (6.09 U.S. dollars) per kg paid in the 2013-2014 season.

Chairman John Wilson said the revised forecast reflected the reality that global commodity prices for New Zealand's biggest export earner had not increased as expected.

"World markets are over-supplied with dairy commodities after farmers globally increased production in response to the very good prices paid 12 to 18 months ago," Wilson said in a statement.

"This is a tough season and we will continue to keep our farmers informed as the season draws to a close given the current volatility."

The co-operative also announced an opening forecast for next season (2015-2016) of 5.25 NZ dollars (3.81 U.S. dollars) per kg.

"We can expect prices to recover going forward, and to see a rebalancing of supply and demand over the season. However it is more difficult this early in the season to determine exactly when this recovery will lead to a sustained price improvement," said Wilson.

Dairy chairman of the Federated Farmers industry group Andrew Hoggard said in a statement the season would be tough, but he believed Chinese buyers -- New Zealand's biggest dairy export market -- would soon need to restock their inventories.

"But there are few signs the Russian trade standoff with the United States and Europe over Ukraine is going to end anytime soon, " he said, referring to the trade embargo that has led to a glut in the global market.

"At some stage the Russian government will be looking at alternative dairy supplies, which may not come from Europe or America because the Russians won't put up with going without dairy products for ever. That will help international prices for all producing countries."

Industry body Dairy New Zealand chief executive Tim Mackle said farmers were expecting "very tough and grim season."

The breakeven price for the average farmer was 5.70 NZ dollars (4.13 U.S. dollars) per kg, meaning farmers would be cutting costs and raising debt, Mackle said in a statement.

The main opposition Labour Party said Fonterra's cut to its forecast payout this season and next would lead to a "black hole" in the nation's economy of 13 billion NZ dollars (9.42 billion U.S. dollars) over two years.

That would lead to the government running its eighth consecutive operating deficit next year, Labour finance spokesperson Grant Robertson said in a statement.

"Not only will the economic black hole be a significant blow to the overall economy, it will really hurt regions and communities dependent on dairy," said Robertson. Endi