Dairy prices tumbled in the overnight Global Dairy Trade (GDT) auction, but analysts aren’t surprised.
That's the prediction from the Minister for Primary Industries, Nathan Guy who told Dairy News for the last six to eight months the GDT has been bouncing around and that looks likely to continue for some time.
The reason for the market volatility is not new and the extra 3% more milk coming out of Europe is adding to a world that has more milk than consumers want to buy.
"It's a case of waiting to see what Fonterra forecasts in the next month or two," he says.
"Open Country have come down 30 cents and this just confirmed in my mind that there is quite a lot of volatility still around. But I am always hopeful it is going to stabilise and improve. The medium to long term outlook for dairying is good and we know that the historical price over 15 years is $5.25."
Guy says Fonterra is helping out farmers with the 50c/kgMS interest free loan and banks are also being supportive. Farmers have culled cows and cut costs in an effort to cope.
"My view is that they will get through this season and I am always hopeful that the outlook for next season will be more optimistic," he says.
Guy says focus is now on what's happening with the Chinese economy which is going through structural turmoil. But it's important to remember that NZ is not the only country affected.
"I think about 124 countries call China their number one market so it's very competitive and every industry has to continue to add value to their products," he says.
"There are numerous examples of where the dairy industry is adding value especially companies with relatively low profiles."