Talk Money: February 17

Tony Field (Paul Henry)
Tony Field (Paul Henry)

Two major commodities – dairy and oil – are both falling in price this morning.

The average price fell 2.8 percent at the overnight global dairy trade auction.

That has prompted analysts at AgriHQ to cut their forecast payout for farmers this season to $4.05 per kilogram of milk solids. That is ten cents lower than Fonterra's forecast. Some economists predict the weaker prices will extend through next season as well.

That would mean three seasons in a row in which most dairy farmers are operating below break-even point.

There is also growing concern about the level of debt that some farmers are carrying, with some Australian banks increasing their provisions for impaired loans.

Oil prices have also been sharply down, with US light crude falling below US$29 a barrel.

That was after four of the world's major producers said they were prepared to cap production at January levels. But other producers disagreed with the proposal, saying production cuts are needed if there is to be any sustainable rise in oil prices.