Fonterra’s boss might have been ultra-cautious but out on the country’s dairy farms there was a subdued cheer at the news that the wholemilk powder price had leapt 14% at the latest GDT auction..
The GDT index rose 8.3%, the biggest rise since November 2016, and the fourth successive gain. Fonterra’s CEO Miles Hurrell says it’s “really surprising—no-one saw a number of this magnitude”.
It dispels some of the gloom generated by the Covid-19 pandemic. And it generates the hope that Fonterra pitched its forecast for the season too low, in the broad range from $5.40kg/MS to $US6.90.
Hurrell suggested suppliers should not get “too excited” by the WMP result. Fonterra had put out excess product for immediate shipment, which resulted in “a bit of a flurry in that first event” ..
“[This] suggests to me that some of our customers out there had caught themselves short – had seen Covid having an impact on their business – but things had bounced back faster than what they’d realised I think”.
But other commentators have noted that the market in China has come back to life. At the same time the dairy industry in the US has been hard hit by the dislocation caused by the pandemic, with dairy farmers in the big milk-producing regions having to dump milk through April and the beginning of May.
According to some analysts, the GDT auction result signalled a rebalancing after the hit taken earlier in the year because of Covid-19. Back in February, WMP was at $US3,233 a tonne; this week it was at $US3,208.
Clearly, greater volumes will be up for auction as the new season gets under way, and prices might ease back. Yet if dairy markets are seen to be moving back to normality, NZ might still have an advantage over other milk-producing nations.
That should be drawing relief not just in the country’s dairy sheds but also back in the Beehive.
According to the latest trade data from Statistics NZ the value of dairy exports reached about $7.4bn, compared with $6.5bn in 2019 and $6b in 2018, in the period between February 1 and June 17 in each of these years.
When NZ has lost what other major export-earners (tourism and international earners) have contributed, it is vital that the dairy industry should be encouraged to maximise production, and earnings.
But while the government splashed out $80m on sports bodies this week, its 17-page plan to lift primary exports by $44bn over the next 10 years appeared to focus largely on getting 10,000 more New Zealanders working in the sector overall in the next four years than on what the dairy industry could do in lifting export receipts.
All Agriculture Minister Damien O’Connor could offer is: the plan is a “direction based on a vision”.
He reckons the sector could not rely on volume growth to generate greater returns.
NZ, he says, needs to create new billion-dollar, category-leading products and services, while respecting the environment.
So where’s the government leadership on – for example – R&D, which might lead to “category-leading” products? Or for that matter on gene-editing, leading to more productive pastures, or higher-producing animals?