Dairy prices tumbled in the overnight Global Dairy Trade (GDT) auction, but analysts aren’t surprised.
Dairy Chair Andrew Hoggard says, “Farmers have no control over the markets, along with a number of other things that impact us. That is the nature of farming so it is always hard to accurately predict the reasons for these drops, which ultimately affects our bottom lines.”
“To be honest I wasn’t expecting such a big drop with the previous lifts in GDT, but that just goes to show how unpredictable the market is.”
Hoggard says there is a lot of speculation of why the price has fallen, and currently all indicators point to a supply issue. However, until the experts have had time to analyse it, it is hard to know for sure.
“Regardless of where it has come from, this is not great for farmer confidence, and hopes of getting back to a $6 plus payout next season will be lower if we don’t see continuing lifts in the next few auctions.”
Confidence is something that will also need to be addressed with Fonterra’s organic milk announcement.
“Fonterra’s expansion of its organic milk business and increased payout to those certified will be welcome news for our organic dairy farmers. We just hope that Fonterra will give more certainty to those farmers than they have in the past,” says Hoggard.
“Only a few years ago Fonterra signalled the organic premium for some areas in the country would be dropped as it wasn’t viable for their business. These mixed signals don’t help organic farmers in their planning as certification can take a number of years.”
“In light of everything, it is important that farmers don’t jump to conclusions too early and just get on with what they can control, which is putting sustainable milk in the vat.” Hoggard concludes.