Rabobank flags rising global dairy prices, warns of downside risks ahead
While global dairy commodity prices continue to climb in most key exporting countries, the second half of the year is expected to bring increased downside risks.
Trade logistics are once again set to become challenging for the NZ agricultural sector because of tensions in the Middle East.
In recent weeks, Houthi rebels based in Yemen have attacked ships going through the Red Sea and then via the Suez Canal to the Northern Hemisphere. This has triggered military retaliation by the US and UK, with the backing of other countries.
Rabobank research manager, Stefan Vogel, says this may mean increased costs for imported goods, including agricultural inputs such as fertiliser and farm equipment.
He says this is because more shipping companies are diverting their vessels away from the Suez route and are instead taking a 9-15 day detour around Africa’s Cape of Good Hope. Such a detour will add to the cost of any imports that would normally come through the Suez Canal and Red Sea.
But he adds that the impact on the cost of fertiliser will be mixed because nitrogen and compound fertilisers are mainly sourced from Asia and the Middle East, so will not be affected the Red Sea crisis.
“But a lot of phosphate rock comes from Morocco and potash from Europe and North America and those shipments normally go through the Suez Canal,” he says.
Vogel says containerised shipments both to and from NZ will be affected. He points to the 2021 freight crisis which saw NZ struggle to get sufficient containers to ship its exports to overseas markets. He warns that a similar crisis could occur again if the Red Sea situation tightens global container freight capacity.
He says that every vessel that’s longer at sea is slower to load their next cargo and that’s limiting the available shipping capacity and driving freight costs up.
“The good news is container freight rates now are still three to four times below the massively Covid-inflated levels of 2021. Imported goods into New Zealand will have to bear the higher freight costs, but container freight is unlikely to get as expensive as in 2021,” he says.
Vogel says there is a potential upside from the Red Sea tensions because NZ is likely to be more competitive with its exports into the Asian market. He says several of NZ’s key agricultural export competitors usually ship products into Asia through the Red Sea, and if tensions in the area remain heightened, they may be forced to divert more of their product into Asia via the longer and more costly route around Africa.
Newly elected Federated Farmers meat and wool group chair Richard Dawkins says he will continue the great work done his predecessor Toby Williams.
Hosted by ginger dynamo Te Radar, the Fieldays Innovation Award Winners Event put the spotlight on the agricultural industry's most promising ideas.
According to DairyNZ's latest Econ Tracker update, there has been a rise in the forecast breakeven milk price for the 2025/26 season.
Despite the rain and a liberal coating of mud, engines roared, and the 50th Fieldays Tractor Pull Competition drew crowds of spectators across the four days of the annual event.
Nationwide rural wellbeing programme, Farmstrong recently celebrated its tenth birthday at Fieldays with an event attended by ambassador Sam Whitelock, Farmers Mutual Group (FMG), Farmstrong partners, and government Ministers.
Six industry organisations, including DairyNZ and the Dairy Companies Association (DCANZ) have signed an agreement with the Ministry for Primary Industries (MPI) to prepare the country for a potential foot and mouth outbreak.
OPINION: ACT MP Mark Cameron isn’t everyone’s cup of tea, but he certainly calls it how he sees it, holding…
OPINION: Did former PM Jacinda Ardern get fawning reviews for her book?