Ag 07 may, 2015

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Thursday, May 7, 2015

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Dairy prices ‘a worry’ BY DAISY HUDSON

DAISY.H@THEGUARDIAN.CO.NZ

The Reserve Bank Governor says the prospect of future cuts to dairy prices is worrying for Mid Canterbury’s economy. Prices at Fonterra’s GlobalDairyTrade auction fell to a five-year low overnight on Tuesday, dropping by 3.2 per cent to an average of NZ$3328 a tonne. That drop, and the prospect of further decreases, could have

a significant impact on the district’s economy as dairy farmers begin to feel the pinch. Reserve Bank Governor Graeme Wheeler was in Ashburton yesterday for an economic overview at a luncheon hosted by Grow Mid Canterbury. In an interview with the Guardian after the event he spoke about the impact of falling dairy prices on Mid Canterbury’s economy.

Mr Wheeler said falling dairy prices represented a $6 billion hit to dairy farmer incomes, and the effects of that drop were starting to be felt in the district. “It will have an impact, and much will depend on to what extent farmers try to smooth their spending,” he said. He believed most farmers would “sharpen their pencils” and manage costs as best they could, but it did represent a “big hit”.

He was also concerned about the impact of further low payouts in the future. “The worry is that if that continues for a long period, say if we had another year of a payout of around $4.50, that would be really quite worrying,” he said. He believed prices needed to reach around $3200 to $3800 US dollars per metric tonne to break even, but they were currently at $2500. It would also be worrying if

the price of dairy farm land fell, he said. He said data showed both dairy prices and farm prices were holding, but if farmers experienced a big hit to their income and their farm prices fell, they could get into a “fairly distressed” situation.

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