Behind all the Covid headlines lurked a positive story this week.
Prices at the Fonterra Global Dairy Auction leapt 4.6% to hit an eight-year-high, as tight milk supply stokes demand for NZ’s biggest export commodity.
Almost certainly Fonterra’s farmer-shareholders will receive a record payout this season, and, with a bit of luck, this could be high enough to end up ahead of rising costs.
And even though local consumers may find themselves paying more for their milk, butter and cheese, the country benefits from dairy products boosting export returns. Some economists are predicting Fonterra’s total payout to its producers will top $14bn this season.
At the auction,the average price for whole milk powder, which has the most impact on what farmers are paid, posted the biggest gain, up 5.6% cent to US$4082 (NZ$6041) a tonne, and is now 21% higher than at the same time last year.
Among other products:
- SMP up +5% to US$3,963 or NZ$5778
- Butter up +5% to US$6,158 or NZ$8,978
- Cheddar up +1.1% to US$5,546 or NZ$8,086 (all per metric tonne)
Since December 10, 2021, in New Zealand dollar terms all products have lifted in price by between 5% and 6%.
Global dairy prices have been supported this season by weaker milk production in NZ and overseas, hindered by poor weather and higher feed costs.
Last week, Fonterra lowered its forecast for the amount of milk it expects to collect this season by 1.6% to 1.5 billion kg/MS because of “challenging pasture growing conditions”.
Demand was strong from most regional buyers at the latest sale, with North Asian buyers the most active. China secured more than 50% of the product.
Buyers have “taken full stock of the tightness of milk supply globally and are now increasingly willing to pay the price to secure product,” said NZX dairy insights manager Stuart Davison.
Among the range of price predictions this season ASB Bank’s forecast, for example, of $9.10 was more than Fonterra’s forecast of between $8.40 and $9.00 per kgMS, which compared with 2013’s record payout of $8.40.
ASB chief economist Nick Tuffley said:
“We’re on track for, at least in nominal terms, a record payout for farmers.”
The Global Dairy Trade price index rose to 1397, its highest level since March 2014.
Some rural authorities are suggesting the dairy farmers should enjoy “their moment in the sun” because there won’t be much encouraging news coming their way from the government this year. For example the climate change warriors are expecting the government to spell out its policy on what measures it is intending to take to curb methane emissions.
Water policy and nitrate pollution are other contentious issues.
It remains to be seen whether the work that has already been done in the farming regions on these issues will be recognised by the bureaucrats in Wellington.
One thought on “Record payout for dairy farmers is in the offing – but climate change policy pressure sours the outlook”
three cheers for our Farmers, the salt of the earth!! the greenies hate them?? from Trevor.