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John Droppert, Dairy Australia.
Dairy Australia senior industry analyst John Droppert chaired a panel discussion on volatility in the dairy industry. Here are excerpts:
Volatility is a word we hear a lot in dairy these days.
But it’s more than a buzzword; it’s a phenomenon that anyone running a business in this industry can firmly attest is the swinging voter on big dollars and many sleepless nights.
Volatility is actually a tricky term to nail down. Everyone has an idea of what it is, but outside the mathematics and chemistry definitions you get a lot of variation.
Put simply, volatility is the liability to change rapidly and unpredictably, especially for the worse. It’s fluctuation, variation, risk. Movement of a given measure around the expected value is part of it – that’s variance (the up and down). The other aspect of volatility is the frequency. So how big are these fluctuations, and how fast are they happening?
In the dairy industry, we face volatility in the price of inputs – feed, water, even electricity (and the availability of some), volatility in the milk price, the weather, sentiment, business relationships (for example between farmer and processor), in corporate structure – who owns what – in market access, in milk production, and who wants it. Those risks are interrelated, some have causal relationships, where volatility breeds more volatility.
Some of that volatility is driven by market interactions (like growing milk production drives prices down) and some by shocks (a drought, or closure of a key market, for example). Some recent examples are millennium drought, 2010-11 floods, DCD, botulism, bluetongue.
Volatility is everywhere. And in many cases, it’s becoming a bigger deal. We’re told the climate is becoming more volatile. Dairy markets certainly are and that reflects commodity markets more broadly.
Very few of the driving forces are within our control, and economic history in particular is littered with examples of well-intentioned attempts to ‘smooth out’ markets ending in expensive failure (examples: wool scheme, Thai rice stockpile, European exchange rate mechanism).
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OPINION: News that the Labour Government is spending taxpayer money to advertise to New Zealanders living in Australia that life is better there now they can get citizenship is appalling.
Federated Farmers president Wayne Langford is claiming “some real success” on the 12 policy priorities it placed before the Coalition Government.
Federated Farmers is throwing its support behind the Fast-track Approvals Bill introduced by the Coalition Government to enable a fast-track decision-making process for infrastructure and development projects.
The latest report from ANZ isn’t good news for sheep farmers: lamb returns are forecast to remain low.
Divine table grapes that herald the start of a brand-new industry in Hawke’s Bay have been coming off vines in Maraekakaho.
In what appears to be a casualty of the downturn in the agricultural sector, a well-known machinery brand is now in the hands of liquidators and owing creditors $6.6 million.
One of New Zealand’s deepest breeder Jersey herds – known for its enduring connection through cattle with the UK’s longest reigning monarch, Queen Elizabeth II – will host its 75th anniversary celebration sale on-farm on April 22.
