NZ arable farmers face global profitability pressures
Profitability issues facing arable farmers are the same across the world, says New Zealand's special agricultural trade envoy Hamish Marr.
While wholesale milk prices may be on their way up, we need to be aware of “retailers’ revenge” says a food marketing specialist.
Lincoln University agribusiness and food marketing programme director Nic Lees says two things need to happen for the market prices to recover to anywhere near previous levels.
“Retail prices need to fall to stimulate consumer demand and global supply needs to be reduced. Both of these take some time to occur.
“We are starting to see the milk tap being turned off with farmers’ globally selling cull cows and reducing supplement, and plans for future expansion and conversion are being put on hold.”
Lees says low prices are hurting farmers everywhere; recently German dairy farmers drove tractors up to the Bavarian State Chancellery to protest low milk prices.
However, he says, over the last six months retailers in New Zealand and internationally have been recovering from the squeezed margins that occurred in 2013 when wholesale milk powder prices were high at over NZ$ 8000/tonne. Many manufacturers with retail brands, and the retailers, were losing money over this period.
“They are now trying to recoup their losses (with lower, but rising wholesale prices) by holding the retail price, and their margin, for as long as possible, slowing a rise in demand. This is why consumers haven’t seen a major fall in the price of dairy products in the supermarket yet.
“When commodity (wholesale) prices are high producers of consumer branded products tend to suffer. When prices fall they exact their revenge by holding retail prices for as long as possible to recoup the losses.”
Consumer prices are only just starting to fall so it will take some time for consumers to start drinking more milk, and consuming more cheese, yoghurt and other products, Lees says.
New Zealand is vulnerable to commodity price swings.
He says the country needs a portfolio of dairy exports that include more value-added products such as nutritional powders and consumer ready dairy product exports, like ice cream and UHT milk, as these tend to follow different cycles.
“At the moment we are still heavily weighted to commodities. Fifty per cent of our dairy exports [are] whole milk powder. We need to encourage the development of truly branded businesses.”
Lees says New Zealand lacks experience in developing global food brands, an area in which we need to develop capability. Companies like Nestlē have had over 100 years of experience developing brands in some of the toughest markets in the world.
In the same way as the Government has supported and promoted the New Zealand tourism industry, it also needs to help our food industry to market and promote New Zealand products to international consumers, he adds.
New Zealand milk production is off to a strong start, with the first month of the 2025/26 dairy season recording a whopping 17.8% jump in milk production, compared to the previous season.
With adverse weather set to rain down on the Top of the South, the Bay of Plenty and parts of Northland, Agriculture Minister Todd McClay says farmers, foresters, and growers need to prepare for possible challenges.
Keep up with innovation and e-commerce in China or risk losing market share. That was the message delivered at the China Business Summit in Auckland this month.
Meat Industry Association (MIA) independent chair Nathan Guy says getting meat processors involved has been a shot in the arm for the sector's key marketing initiative into China, Taste Pure Nature.
Listed carpet manufacturer, Bremworth is undertaking a $6 million expansion at its Napier plant more than two years after the site was heavily damaged by Cyclone Gabrielle.
Federated Farmers is vowing to keep the big banks accountable for their actions and to continue pushing for meaningful change in the rural lending sector.
OPINION: Will synthetic milk derail NZ's economy?
OPINION: According to media reports, the eye-watering price of butter has prompted Finance Minister Nicola Willis to ask for a…