Trade Minister Tim Groser says holding out for a better dairy deal in the Trans-Pacific Partnership Agreement (TPPA) will help farmers survive times of falling dairy prices.
Whole milk powder prices at the GlobalDairyTrade auction slumped 10.3 percent overnight, and skim milk powder fell even further. Fonterra is expected to cut its forecast payout to well below the break-even point for most farmers.
It's the 10th consecutive auction at which milk prices have dropped.
"We're deeply concerned for our farmers," Mr Groser said on the Paul Henry programme this morning, back from the recent unsuccessful TPPA negotiations in Hawaii.
"While it's all very well to say we've seen this before, milk production has gone up around the world. We don't know where the bottom of this market is.
"But look, we shouldn't lose confidence in our country's future. We are doing very well by international standards, and these trade deals are a part of that. We'll see our way through this commodity price fluctuation just as we've seen our way through in the last 100 years."
He says while New Zealand is a large exporter, we are a "very small producer".
"The reason why dairy prices fluctuate so wildly is because international trade is such a small proportion of total global production… We produce less than 3 percent of the world's milk. So if we can open up more markets, the fluctuations will be less severe than they would have otherwise been."
But the lack of a favourable dairy deal in the TPPA is why New Zealand refused to sign up in Hawaii.
"Everything else on all of our other exports – except dairy – does indeed look very good," says Mr Groser.
While he says there is no chance New Zealand will sign a "bad deal", he admits the necessary secrecy surrounding the talks isn't winning him many friends at home.
"We can't win this political argument at the moment in New Zealand, because I can't reveal what I know for negotiating purposes," he says.
"Nobody can push New Zealand out of this negotiation, but of course, yes, we could take ourselves out of this negotiation. I'm just not going to put New Zealand into that ridiculous choice – so we negotiate. I have to retain a certain degree of ambiguity."
New Zealand's tough stance on dairy is also frustrating other countries in the negotiations keen to ink a deal.
"Apparently I'm public enemy number one in Japan, and I'm going off after this to do an interview with their news media. They'll ask me the same questions, and I'll hope you'll understand for negotiating reasons I'm not going to put numbers on it," Mr Groser told Paul Henry.
"It'll just make any compromise between us and Japan, and us and the Canadians, and finally us and the Americans more difficult. We need a deal that makes sense to New Zealand – we don't have that deal on dairy. Everything else looks good."
One aspect of the negotiations that took Mr Groser and his team by surprise was the difficulty on getting agreement on trade in automobiles – a much bigger sticking point than dairy, apparently.
"We're not involved in that side of the discussion obviously, but we were gobsmacked. The extraordinary thing was that the Mexicans and the Canadians were also gobsmacked, and they are fully integrated into the North American supply chain, so that was a surprise."
With the Canadian election campaign officially underway and the US presidential campaign heating up, Mr Groser says it's hard to know when it will be too late to get the TPPA finalised.
"We have to maintain momentum, because if we lose that, we're dead."
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