The latest Global Dairy Trade auction results do not make for happy reading for farmers and the dairy sector, nor for the wider economy.
Auction prices fell for the fifth consecutive time and are more than 50 percent below their peak two years ago. The fall in global prices and the lower payout to farmers is set to wipe $7 billion from the New Zealand economy this year.
The overall auction price fell 2.2 percent to US$2,472 (NZ$3,352) per tonne. The whole milk powder price dropped 0.5 percent, while skim milk powder declined 3.6 percent.
Prices are now at their lowest since October 2009. But there is some glimmer of hope within the figures.
AgriHQ Dairy analyst Susan Kilsby has pointed out that "despite GDT prices easing for five consecutive auctions, there are some positive signs starting to trickle into the market. European milk supply is now at its seasonal peak and the growth in supply appears to be moderate rather than excessive which will reduce fears of a global oversupply of milk."
She said there are also some signs of optimism in the markets ahead of the auction. Prices firmed for whole milk powder futures contracts dated between August and September this year.
"The markets now appear to be slowly starting to turn but this optimism is yet to be reflected in the GDT prices."
The payout
A rise in prices cannot come soon enough for Fonterra. It has lowered this season's forecast farmgate milk price to $4.50. That means a forecast cash payout of between $4.70 and $ 4.80 (the milk price plus a cash dividend of between 20 to 30 cents).
That compares to a farmgate milk price last season of $8.65 and a total cash payout of $8.75 (the milk price and a 10 cent dividend).
Next week Fonterra is due to have its first attempt at forecasting next season's payout. Some commentators think it could be between $5.00 and $5.20.
Dairy NZ has estimated that on average farmers need a payout of $5.40 this season to break even after paying their on-farm costs and debt servicing.
This season's forecast payout is below $5.40, but farmers will also receive retrospective payments from the 2013/14 season, which should lift many farmers to the break-even point.
The dollar
The New Zealand dollar has lost ground following the auction result.
It was trading at 73.40 US cents at 8am, compared to 74.28 US cents yesterday evening.
It is 92.74 Australian cents, compared to 92.95 last night.
The Kiwi is treading at 47.34 against the pound, compared to 47.47 last night.
It is almost unchanged against the euro at 65.81.
The 'Mother of All Budgets'
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Today it was the 1990s - and Finance Minister Ruth Richardson's 'Mother of All Budgets', which cut welfare payments and introduced user-pays for tertiary institutions and some medical services.
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The financial force is with him
George Lucas sold his studio and the rights to Star Wars to Disney in 2012 in a deal valued at more than US$4 billion. But the Financial Times reports that he has since made an additional paper profit from the deal of more than US$2 billion.
He was paid US$2.2 billion in cash and 37.1 million shares in Disney. The shares were worth US$1.9 billion, giving the deal a value of US$4.1 billion dollars.
The Financial Times reports those shares have gained almost 70 percent over the past two years, meaning the LucasFilm deal is now worth about US$6.3 billion.
It reports that another winner from the rising Disney share prices is Issac "Ike" Perlmutter, who was the largest shareholder in Marvel Entertainment when it was acquired by Disney in 2009 in a deal worth US$4.2 billion.
He received US$867 million in cash and shares worth US$694 million. His Disney shares are now worth US$2.4 billion, meaning a paper profit of US$1.7 billion.
But it is Steve Jobs' widow Laurene Powell Jobs who is the biggest winner from the rising Disney share price.
3 News
source: newshub archive
