Tuesday, 19 May 2015 09:27

Dairy risk

Written by 
Graeme Wheeler, Reserve Bank. Graeme Wheeler, Reserve Bank.

The Reserve Bank says the outlook for global milk prices is highly uncertain and the financial stress on the dairy industry could rise markedly if prices remain at current low levels in the 2015-16 season.

In its latest Financial Stability Report, bank governor Graeme Wheeler lists dairy as one of three systemic risks facing the New Zealand economy. The others are the Auckland housing crisis and the current global financial conditions.

Wheeler says the dairy sector is experiencing a sharp fall in incomes due to lower international prices. Many highly leveraged farms are facing negative cashflows and the risks will become more pronounced if low milk prices persist beyond the current season.

The bank says while the situation in the China market may improve, the recent removal of milk quotas in Europe and the increase in US dairy exports are likely to weigh on prices. 

Wheeler says that if the lower dairy payout were to be sustained, “there is a risk that farm values could fall sharply and further exacerbate the increase in financial stress associated with lower farm incomes”.

More like this

We're OK!

OPINION: Despite the volatility created by the shoot-from-the-hip trade tariff 'stratefy' being deployed by the new state tenants in the White House, farm commodity prices are holding their own.

Relief for farmers on floating interest rate

ANZ says the latest cut to its floating rates will be welcome news to many of its business and agri customers still feeling the effects of high inflation and interest rates.

Rabobank cuts loan rate

Rabobank New Zealand will reduce the variable base rate on its rural loans by 0.5%, effective from 16 October 2024.

Featured

Big return on a small investment

Managing director of Woolover Ltd, David Brown, has put a lot of effort into verifying what seems intuitive, that keeping newborn stock's core temperature stable pays dividends by helping them realise their full genetic potential.

Editorial: Sensible move

OPINION: The Government's decision to rule out changes to Fringe Benefit Tax (FBT) that would cost every farmer thousands of dollars annually, is sensible.

National

Machinery & Products

» Latest Print Issues Online

The Hound

Overbearing?

OPINION: Dust ups between rural media and PR types aren't unheard of but also aren't common, given part of the…

Foot-in-mouth

OPINION: The Hound hears from his canine pals in Southland that an individual's derogatory remarks on social media have left…

» Connect with Rural News

» eNewsletter

Subscribe to our weekly newsletter