After all, farmers around the globe are partly responsible – chasing high dairy prices, they have ramped up production, flooding the global market with milk. At the same time, demand has remained reasonable but not sufficient to soak up the extra supply at previously prevailing prices.
The price index on the latest Global Dairy Trade auction fell 3% to US$3678 a tonne - the 7th consecutive drop and a new 15-month low. Prices have declined for a cumulative 18% drop from its May peak.
Lower global dairy prices reflect a surge in milk supply from major exporting regions, including the US, NZ, and most recently the EU. No one is surprised; global milk production always looked like it would respond to previous price strength and dairy prices, like other commodities, work in cycles.
So, what does it mean for NZ farmers? Federated Farmers dairy section chair Karl Dean says farmers don’t need to worry yet.
They just need to keep focusing on the things they can control on farm: keeping on top of costs where they can, paying down some debt, and investing in the resilience of farms during the good times. A silver lining is the low New Zealand dollar is cushioning the downside in local currency terms.
Dean expects NZ farmers to keep producing as the local climate and grass growth allows.
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As he points out, NZ’s pasturebased production isn’t tied as closely to international prices as other countries who feed a lot of grain or other feed in their systems.
NZ farmers will be hoping that with dairy prices falling, those farmers will pull back production, helping arrest the decline in global dairy prices. Meantime, they will just carry on farming as efficiently as possible.
