NZ dairy farmers paid least in world

  • 01/09/2015
Farming (iStock)
Farming (iStock)

By Fiona Rotherham

New Zealand dairy farmers bracing for the lowest payout in a decade probably won't welcome the latest analysis of global trends in the industry - their counterparts in every other dairy-producing country are being paid more.

AgriHQ analysed milk prices from around the world converted to $NZ/kilogram of milk solids to allow valid comparisons, although some dairy farmers' incomes in other countries are boosted by subsidies and support schemes.

Fonterra's forecast farmgate milk price, which is the price setter in the New Zealand dairy industry, is $3.85/kgMS for this season, the lowest in a decade.

That compares to China at the other end of the scale at $11/kgMS, the United States at $8.15/kgMS, Argentina at $7.57/kgMS, and the UK at $6.95/kgMS.

Of the countries analysed, Ireland's payout of $6.10/kgMS was the closest to New Zealand's.

Across the ditch, Fonterra buys milk from Australian suppliers as part of its strategy of having diversified milk pools but is being forced to pay a lot more than it will to their New Zealand counterparts because of greater farmgate competition.

The price setter in Australia is its biggest farming cooperative, Murray Goulburn, which takes 38 per cent of the milk produced.

After releasing its 2015 profit result on Monday, Murray Goulburn warned it may be forced to cut the milk price it pays farmers below the $A6/kgMS ($NZ6.72/kgMS) it originally forecast for this season to between $A5.60 and $A5.90/kgMS.

Fonterra is due to update its Australian milk price next week and last month said while it was holding to its farmgate milk price of $A5.60/kgMS at that stage, suppliers needed to be prepared for the possibility of a step down in milk price this season.

Fonterra chief executive Theo Spierings has previously said here that in Australia, Chile, and Brazil, the prices paid for milk are influenced by in-market dynamics rather than global prices, so its businesses in these markets have faced higher input costs.

AgriHQ dairy analyst Susan Kilsby said New Zealand has greater exposure to the global market because more than 95 per cent of the milk it produces is exported.

In other countries such as Australia, domestic consumption accounts for about 50 to 80 per cent and prices in domestic markets tend to be a lot more stable than in international ones.

She said when the dairy market is depressed, New Zealand farmers are worse off than anyone else in the world.

But when milk prices were up a couple of years ago the New Zealand payout rose to a record $8.40/kgMS, while farmers in Australia, the US, and Europe saw a lot less of that upside.

"The big difference here is a lack of subsidies so they have no one to go crying to anymore," she said.