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.
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.