Tuesday, 11 August 2015 05:09

Debt-laden producers exposed to thin trade

Written by 
John Luxton, DairyNZ. John Luxton, DairyNZ.

The latest drop in the Global Dairy Trade price index will impact many farmers carrying a lot of debt, says DairyNZ chairman John Luxton.

Now banks must give young farmers leeway as they work their way through the crisis.

“Hopefully in 12 months there will be a much stronger industry going forward,” he told Dairy News.

The price index fell 9.3% in the latest GDT – the 10th consecutive fall, bringing it to levels not seen since 2002.

Whole milk powder, a crucial product for New Zealand, fell by 10.3% on average to US$1590/tonne.

Skim milk powder prices slumped by 14.4% to US$1419/t on average.

Anhydrous milk fat prices fell by 11.7%, butter by 6.1% and butter milk powder by 5.1%.

 Luxton says NZ is very exposed to a thinly traded market.

“One outcome of the low GDT is likely to be a rapid lowering of our cost systems and probably some reduction in milk production out of NZ. 

“When you look at the world market there isn’t a big overhang of surpluses despite what people are saying. The supply and demand is reasonably well balanced.”

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