globalDairyTrade result encouraging

Federated Farmers has welcomed the uplift in dairy commodities from the latest globalDairyTrade event, but warns the high New Zealand dollar means that farmers and the economy will not realise its full benefit.

“This is very good news for the dairy sector but only so far as the gains in prices have managed to outpace the Kiwi dollar’s rise. Today, we’ve just seen the dollar spike upwards off the back of this news. Farmers seem caught in a fiscal policy vice of the Government’s own making,” says Lachlan McKenzie, Federated Farmers Dairy chairperson.

“The dollar is a sea-anchor on the export economy as ANZ's commodity price index graphically underscores. I just feel for my colleagues in meat and fibre who are seeing increased demand but getting reduced returns.

“The Government really has to face up to the size of central government spending, which, in real terms, is around $30 billion bigger today than back in 1999.

“Internationally, dairy farmers in the United States are putting pressure on their Government to maintain a cornucopia of subsidies.

“At US Senate Hearings late last week, Associated Milk Producers Incorporated said the price US dairy farmers are receiving for milk is ‘still below the cost of production’. US producers want both the Milk Income Loss Contract and the Dairy Product Price Support Programme continued.

“Ironically that has an upside as the US taxpayer is creating a price floor for all milk powders by subsidising US skim milk powder (SMP) production. Kiwi farmers are left wondering just how unbalanced the US dairy industry has become.

“It’s the European Union who is now making some very positive moves towards market normalisation. Last week, it abolished refunds on SMP and reduced butter and whole milk powder (WMP) refunds by 50 percent.

“The EU is seeing the same positive signs as we are in milk powders, casein, bulk cheeses and butter.

“With demand for WMP high, New Zealand is hitting normal summer peak production while production from the EU and US drops back, as they head into the northern winter.

“Current weather conditions are seeing bumper grass growth and that’s extremely positive for early summer.

“I also think the new commodity class of Anhydrous Milk Fat (AMF) is very positive for Fonterra and its members going forward. AMF is high quality pure butterfat used in foods, confectionary and ice-cream.

“While we are seeing numbers similar to 2007, if it holds up, none of this will flow into the hands of farmers until late 2010. If, I need to remind people, is a small word with a very big meaning,” Mr McKenzie cautioned.