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

Editorial: Right call

OPINION: Public pressure has led to Canterbury Police rightly rolling back its proposed restructure that would have seen several rural police stations closed in favour of centralised hubs.

Owl Farm marks 10 years as NZ’s first demonstration dairy farm

In 2015, the signing of a joint venture between St Peter's School, Cambridge, and Lincoln University saw the start of an exciting new chapter for Owl Farm as the first demonstration dairy farm in the North Island. Ten years on, the joint venture is still going strong.

National

Machinery & Products

» Latest Print Issues Online

The Hound

Quid prod quo?

OPINION: Ageing lefty Chris Trotter reckons that the decision to delay recognition of Palestinian statehood is more than just a fit…

Deadwood

OPINION: A mate of yours truly recently met someone at a BBQ who works at a big consulting firm who spent…

» Connect with Rural News

» eNewsletter

Subscribe to our weekly newsletter