Global dairy prices fall again

Global dairy prices fall again

Predictions of a rise in prices at this morning's global dairy auction have proved incorrect.

Prices fell 2.9 percent overall at the GlobalDairyTrade auction. That followed a rise of 1.4 percent two weeks ago.

Futures trading had suggested prices would rise modestly this morning.

Whole milk powder prices slipped 0.8 percent to US$1971 per metric tonne.

Skim milk powder prices fell 2.5 percent to US1,971/MT.

The auction is the first to be held since Fonterra cut its forecast milk price for this season to $3.90 per kilogram of milk solids.

That is well below the estimated break-even point of $5.25 for the average farm.

DairyNZ Chief Executive Dr Tim Mackle says last week's reduction in the forecast pay-out equates to a collective income drop for farmers of $460 million, or $37,000 per farm.

Total dairy debt stands at around $38 billion.

Ten percent of the famers hold about 30 percent of the debt. Dairy New Zealand says that is around $10 million for each of those farmers.

"That doesn't mean all those farms are at risk," Dr Mackle says.

He says farmers' ability to survive depends on the size of their debt and their costs.

DairyNZ is particularly concerned about sharemilkers. Workshops are being run to help them look at their options.

The Reserve Bank is worried too.

This afternoon it will release the full results of stress tests it has been running on the major dairy lenders. ANZ Bank. ASB Bank, Bank of New Zealand, Rabobank New Zealand and Westpac New Zealand.

The Reserve Bank of New Zealand has previously said that under extreme scenarios there would be losses. But those losses are manageable and the banks could cope with a sustained downturn in prices.

What bank stress tests do not look at is the human cost of farmers losing their businesses.

Organisations like DairyNZ have been running education campaigns to help farmers manage their finances and to recognise and address stress and depression.