Why Fonterra accepted defeat in the dairy aisle
OPINION: Fonterra's sale of its consumer dairy business to Lactalis is a clear sign of the co-operative’s failure to compete in the branded consumer market.
Figures released at DairyNZ’s annual meeting in Ashburton last week show the 2015-16 milk price of $3.90/kgMS was the lowest in ten years and it hit farmers who last season were on average operating at a break-even cost of $5.25/kgMS.
DairyNZ board chair Michael Spaans says despite an obvious shortfall in farm income, last season farmers worked to cut their costs of production.
“Our data shows farmers have become more efficient and fine-tuned their farm management – so much so, that in August we revised the average farm’s break-even cost down to $5.05/kgMS for 2016-17,” Spaans told the meeting.
“This is a rare positive from a period of low milk prices, and farmers should be immensely proud of it. Farmers’ ability to sharpen their pencils and remain focused is the key to maintaining our industry’s international competitiveness.”
The 2015-16 challenges were compounded by the low milk price in 2014-15. With no significant retrospective payments from the previous season, many farmers in 2015-16 increased debt to cover costs.
The previous 2014-15 season had been somewhat buffered by the $8.40/kgMS price of 2013-14.
Nationally, dairy farmers produced 1.862 billion kgMS, worth $8b in 2015-16.
The industry’s milk production benefited the NZ economy by $12.2b from dairy exports in 2015-16 and provided around 35,000 full-time jobs on-farm and a further 14,500 jobs in milk processing and wholesaling.
DairyNZ chief executive Tim Mackle says 2015-16 was another busy year for DairyNZ, which spends in the industry the $67m levy it gets from farmers, plus extra government and commercial cash.
“Spending farmers’ money in a wide range of programmes is designed to deliver direct benefits for farmers and the industry as a whole,” says Mackle.
“While each year we focus on supporting farmers through immediate issues such as managing the low milk price, we also maintain our long-term work in research, environmental management and our workforce.”
This coming year, $16m will be spent on farm profit, biosecurity and product integrity. Environmental work will receive $12m.
