White gold loses lustre

Dairy prices last season were at record highs, well above the long term average so a drop isn’ t unexpected.

However, it is concerning that international prices for butter, chedder, skim and whole milk are heading back to 2006 levels.

Cicero  found these charts from agridata.co.nz which show the drops in international dairy prices:

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The fall in the value of the dollar will compensate for some of the fall in prices, but that’s a two edge sword because a lower dollar increases the prices of two of the biggest budget items – fuel and fertiliser.

The other concern for farmers is that while income will drop the costs of production never go down as far or as fast as product prices.

There is also a wider concern for the New Zealand economy. Dairy produce accounts for around quarter of our exports so a significant drop in returns for butter, milk and cheese has a significant impact on the national income and balance of payments.

3 Responses to White gold loses lustre

  1. Ed Snack says:

    Hmm, asset price bubble anyone. It is not proper to go on about at anyone’s misfortunes (except Winston Peters’), but an awful lot of investment has gone into dairy that was/is not justified on the fundamentals. I see a minor shake out with a few punters (and a few banks) taking a small but rather cold bath. Not good short term but better for the long term health of the industry if, for once, the participants learn something, to wit, prices that go up, can also come down.

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  2. Rod says:

    Great! Sheep farming might become viable again with more realistic land prices once the dairy bubble has burst.
    Why are Kiwis such gamblers in agriculture? Goats? Ostriches?… the list goes on.
    The record of pain this fad following has caused has been dreadful.

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  3. Mr Dennis says:

    Although it is good to capitalise on price bubbles it is a gamble and you better be ready for the crash. It is frustrating how the dairy boom has driven up the price of land, even land that is completely unsuitable for dairy farming. Hopefully the slump will allow the next generation such as myself to get into land ownership more easily.

    However in this slump we certainly cannot afford an emissions trading scheme, we need parties in parliament that are committed to dumping it and protecting agriculture (only Act and the Family Party).

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