Grim forecast for New Zealand farmers as dairy prices continue to fall

0 Comment(s)Print E-mail Xinhua, April 30, 2015
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New Zealand's farming dependent regions are bracing for an economic blow -- after years of benefiting from rising global dairy prices.

The warnings came as dairy cooperative Fonterra on Thursday announced another cut in its forecast payout to its farmers, from 4.70 to 4.50 NZ dollars (3.57 to 3.42 U.S. dollars) per kilogram of milk solids.

Chairman John Wilson said the reduction reflected the continuing and significant volatility in international dairy commodity prices caused by over-supply in the market.

Prices on Fonterra's fortnightly GlobalDairyTrade auction had fallen 23 percent since February.

"This reduction will impact cash flows for our farmers, who will need to continue exercising caution with on-farm budgets," Wilson said in a statement.

Chief executive Theo Spierings said geopolitical unrest in places such as Russia, the Middle East and North Africa was impacting global dairy demand.

"Remote as they are, events such as the flow of refugees from Libya to Europe come together with factors like lower oil prices to soften dairy demand," Spierings said in the statement.

It was further bad news for farmers -- many of whom say they need a payout of at least 6 NZ dollars (4.56 U.S. dollars) per kg to remain viable -- who are already struggling with a high exchange rate.

Opposition lawmakers criticized the government for failing to act on the country's housing crisis, which led the Reserve Bank of New Zealand to keep interest rates high, resulting in an overvalued dollar.

The cut to the payout confirmed that "an economic black hole" of 7 billion NZ dollars (5.33 billion U.S. dollars) was opening up, finance spokesperson for the main opposition Labour Party, Grant Robertson, said.

"The cut confirms the long-term trend of a fall in global milk prices due to an upcoming international supply glut set to last five years. With global milk prices slashed in half since the February 2014 peak, there is little doubt the forecast cash payout will fall too," Robertson said in a statement.

The opposition New Zealand First party would table an amendment to the Receiverships Act that would introduce Agricultural Debt Mediation, said leader Winston Peters.

"The need for this bill may become all too obvious over coming months," Peters said in a statement.

"Sadly the government turns a blind eye to the one immediate reform that would help all farmers now -- Reserve Bank Act reform and a lower dollar," said Peters. Endi

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