Tuesday, 29 January 2013 11:06

Bank confident in New Zealand dairy’s outlook

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Rabobank says it has a strong outlook for the New Zealand dairy sector, with its December survey showing confidence moving back into positive territory.

The bank says comments about the New Zealand dairy industry were incorrectly attributed to Rabobank in an article ‘Agriculture’s mythbuster in top flight’ published in Rural News on December 4, 2012. It disputes claims the bank has undertaken research showing a lack of viability for New Zealand dairy farms, as had been quoted in the article, a bank spokesman says.

Rabobank’s quarterly Rural Confidence Survey, released on December 14, 2012, showed dairy farmer expectations have nudged back into positive territory with those expecting the agricultural economy to worsen reducing from 41% to 21%. More than half (52%) now expect it to stay the same, while 25% expect an improvement (versus 20% at the last survey).

In the latest survey, only 1% of dairy farmers surveyed considered that they were ‘unviable’, with 74% citing they were ‘viable or easily viable’, and a further 25% were ‘just viable’.  

In addition, this survey was undertaken before Fonterra lifted the milk price in December for this current season by 25 cents/kg MS.

Rabobank senior dairy analyst Hayley Moynihan says that while the Rural Confidence Survey was conducted before Fonterra lifted its expected milk price to $5.50/kg milk solid, the price still remain 10% below last season.

“Dairy farmers had generally enjoyed milk production flows higher than last year over the first half of the season which had also assisted income,” Moynihan says.

The latest survey also shows New Zealand dairy farmers’ investment intentions have improved with 31% expecting to increase their farm investment over the coming 12 months versus 22% in the last survey.  Those expecting to decrease their investment fell from 15% to 12%.

Looking ahead, Rabobank expects international dairy prices to recover in 2013, with weaker demand growth unlikely to dent further price recovery on top of the firming prices evident in late 2012. 

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