Saturday 30 May 2015

The truth of falling dairy prices and the lies of the government

This interview with Agricultural consultant Alison Dewes is required listening for anyone who wants to cut through the lies of the government (and the lies by omission of the country's media) about what the real state of the economy is.

New Zealand's "rock star economy" is based on a one-trick pony.  Dairy prices (along with other commodity prices from coal, iron ore and shipping) are tanking (being less than one-half of what they were a year ago.

The lie of the government is to say that this is just the result of the success of the industry (an oversupply). If you have a drop off in demand naturally what you are left with is an 'oversupply'.

The truth is, as the Telegraph's Ambrose Evans Pritchard correctly points out, we are headed for a recession with no lifeboats left.

Between the failure of infinite growth (which is alluded to in this interview) and the ravages of abrupt climate change the prospects for farmers in this country looks very dire indeed. 

Believe me, that is a gross understatement.

Warnings over dairy foreclosures

Fonterra has lowered its forecast milk payout for the current season prompting warnings of farm foreclosures. Agricultural consultant Alison Dewes estimates that about 50% of dairy farmers will be in trouble, and she warns that some will go bust, and will be bought up by foreign buyers unless the law is changed.

There has been very little coverage of this. Although it never once featured in its daily news broadcasts this article appeared online a couple of days ago

Tough times for dairy farmers - DairyNZ

The industry body, DairyNZ, is painting a grim picture for dairy farmers over the next year.

Dairy cow.Dairy cows    Photo: SUPPLIED

29 May, 2015

It predicts most dairy farmers will be running at a loss for much of the next 12 months, and going deeper into debt , following Fonterra's announcement of a further fall in this season's forecast milk price and a low opening milk price for the new season, starting next week.

Fonterra has dropped its already low payout for the current season by a further 10 cents to $4.40 a kilo of milk solids, and declared an opening forecast for the 2015-16 season of $5.25 a kilo.

DairyNZ's chief executive Tim Mackle said based on that, the average dairy farmer's income for the next season is going to fall well short of the break-even milk price - $5.70 - it has calculated.

"So, if the $5.25 that's been announced as a forecast - and it's early days yet - does come to fruition next year, then the reality is that the average net milk income that farmers receive will be lower than that. We think it will possibly be around the $4.75 mark," he said.

"That's because every year, income is shifted forward, if you like, from the previous year's milk price and that's called retrospective payments. Now these retro payments that are due in 2015-16 will be significantly less than what farmers have received in the current year.

"So, a combination of that and the fact that some of the income from next year will shift forward to the following year, means that we're picking around $4.75.

Mr Mackle said Fonterra's scheduled advance milk payments to December will be the lowest for that period since 2006-07.

"If the average break-even milk price is, we're picking, around $5.70, by the time you've had your farm working expenses, interest and rent, and tax, and of course drawings to live on, there's quite a big gap, and on average it's almost a dollar."

DairyNZ is calculating that the average farmer's milk income for the next season will drop by $150,000.

In response, it is ramping up its support to dairy farmers by boosting the Tactics for Tight Times campaign it has been running.

This is what goes for comment in the rest of the media - this is, I guess from the agricultural section of the Christchurch Press

Dairy farmers slashing costs will still be short

The average Canterbury dairy farmer will be $300,000 out of pocket in the year ahead, loading them with more debt and emotional stress, an industry body says.

Dairy giant Fonterra told farmers on Thursday its payout was expected to be $5.25 for a kilogram of milk solids for the 2015-16 season. Farmers need on average $5.40 to $6kg to break even.

To cover the cost of operating, dairy farms farmers will have to borrow.

Dairy New Zealand, a farm advisory body, estimates farmers' costs in Canterbury will be $1 a kg more than their revenue in the new 2015-16 season.

With the average dairy farm in Canterbury producing 316,000 of milk solds, that is additional costs of more than $300,000.

John Key prepetuates an egregious lie

Prime Minister John Key was in New Plymouth on Sunday to address National Party members at the weekend's Central North Island Regional conference.

John Key: Taranaki's economic woes temporary

Prime Minister John Key is confident Taranaki's economy will bounce back quickly from the twin effects of the low dairy payout forecast and the subdued price of oil. 

Finally a regional wrap of weather conditions in the country

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