Risky business
OPINION: In the same way that even a stopped clock is right twice a day, economists sometimes get it right.
He has found in recent year a strong correlation between better prices and complacency and he says farmers need to keep watch on their cost of production or be caught out financially.
Proudfoot says because of the fast recovery, some farmers who had been planning changes suddenly put these on hold.
And he says the dairy industry faces new challenges caused by the breakdown of the relationship between the US and Mexico and further uncertainty caused by Donald Trump’s election.
“Mexico was the largest buyer of American skim milk but they now appear to have reduced their buying which will mean the US will have to find different markets for some of that product and SE Asia is one of the potential markets.
“This means they would compete with New Zealand products destined for that market so we could see changes here in NZ quickly over the next couple of GDT auctions,” he says.
Proudfoot says NZ doesn’t have a special trading relationship with Mexico, but was relying on the TPP to deliver that which he doesn’t believe will happen. He says NZ now needs to urgently work on building special trading relationships with Mexico and Japan.
Meanwhile Proudfoot says overall American milk production is up and there are no signs of a reduction in Europe.
Meanwhile he’s not sure NZ milk production will be down as much as predicted a year ago. Though some farmers are suffering from drought and wet, many had a better November and December and this may reduce the drop in production.
