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Family corporate farmer Trevor Hamilton.
The $8.40/kgMS payout was probably the worst thing that happened to the dairy industry, says family corporate farmer Trevor Hamilton.
He says in the present era of market volatility and low payouts, farmers need to go and check the balance sheet and really delve into their cost structure.
Hamilton, who has farms in the North and South Islands, says farmers need to get costs down to about $3.50/kgMS.
"My personal view is that if you average the Fonterra milk price over the last ten years it's about $6.00. So medium term if you have a sound business at about $6.00 you are probably ok. But if you haven't, you could well do with an assessment of your business."
Hamilton says dairy companies such as Tatua and Westland Milk Products, with a higher percentage of value add products, are more shielded from the volatility of the commodity market. He says while Fonterra does have some value add products, it's a very small percentage of their business. But he says it's hard to blame Fonterra for this given that they have to take all the milk produced in NZ.
OPINION: There is zero chance that someone who joined Fonterra as a lobbyist, then served as a general manager of Fonterra's nutrient management programme, and sat on the board of Export NZ, a division of lobbyist group Business New Zealand, doesn't understand that local butter (and milk and cheese) prices are set by the international commodity price.
Kiwis love their butter, and that's great because New Zealand produces some of the best butter in the world. But when the price of butter goes up, it's tough for some, particularly when many other grocery staples have also gone up and the heat goes on co-operative Fonterra, the country's main butter maker. Here the co-op explains why butter prices are so high right now.
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