NEW ZEALAND – This year is shaping up as a bumpy one for the international dairy industry, with the worst…
NEW ZEALAND – This year is shaping up as a bumpy one for the international dairy industry, with the worst U.S. drought since Ronald Reagan was president and thousands of European dairy farmers taking to the streets in protest.â€œWe seem to be staring down the barrel of a global dairy crisis, which could benefit New Zealandâ€™s dairy farmers,â€ says Willy Leferink, Federated Farmers dairy chairperson.
â€œAn act of nature in the United States and subsidies elsewhere are putting dairy farmers under the most unimaginable pressure. WeatherWatchâ€™s Philip Duncan says half of the continental United States is now in drought.
â€œThe worldâ€™s largest corn crop is withering and thatâ€™s a key marker because US dairy and beef production is grain dependent. US grain prices have climbed a quarter in the past three weeks and corn is following suit.
â€œThe US is also the worldâ€™s third largest dairy exporter right behind ourselves and the European Union.
â€œBefore drought struck, US dairy production growth was slowing but the brakes will be fully on now. Iâ€™ve heard estimates the United States Department of Agricultureâ€™s modest 0.2 per cent growth forecast may turn into a two per cent fall.
â€œThis is important because Fonterra Cooperative Groupâ€™s opening season milk price forecast of $3.85 per kilogram of milksolids (kg/MS), is down on last seasonâ€™s opening of $4.40 kg/MS.
â€œWhile the season just ended may return Fonterraâ€™s farmers $6.05 kg/MS for their milk, it comes from a season right out of the box. Westland Milk Products has also lowered its milksolids payout range for the season just ended, to between $6.00 and $6.20 kg/MS.
â€œIt is fair to say the 2012-13 season is looking tough everywhere plus we have a monkey on our back called the high Kiwi dollar.
â€œIn the United Kingdom, thousands of dairy farmers have marched in London to protest milk payouts lower than the cost of production. Thatâ€™s due to a vicious supermarket price war.
â€œHundreds of dairy farmers from Italy, Germany, Ireland and France have gone further, spraying milk outside the European Parliament. While it tells me they have no RMA-type legislation, it shows a sense of frustration in a world that needs this food.
â€œHere, New Zealand milk is unsubsidised and most of it is sold through cooperatives for export; we are not at the mercy of supermarkets or domestic processors.
â€œLocal retail dairy prices are directly tied to the international market place and while they rode the commodities wave up, that same wave means retail prices have come down.
â€œIn the space of 12-months, fresh milk has fallen 8 per cent while cheddar is down 16 per cent and butter has dropped 24 per cent. We just hope whatâ€™s good for consumers in the short term wonâ€™t turn sour for â€˜NZ Incâ€™ longer term,â€ Mr Leferink concluded.
TheCattleSite News Desk