21 Jul 2016

Labour is panicking farmers, says KPMG

8:48 pm on 21 July 2016

Labour is panicking farmers by pointing to OECD figures that show they won't break even for another three years, a farm enterprise specialist says.

Dairy heifers on Malcolm's farm

Photo: RNZ / Cosmo Kentish-Barnes

Labour finance spokesperson Grant Robertson said the government was budgeting on the whole milk powder price returning to US$3400 a tonne in 2018, but new figures from the OECD showed that wouldn't happen until after 2025.

Market commentators say dairy farmers need a whole milk powder price of over US$2500 a tonne to break even, and revised forecasts from the OECD showed this wouldn't be reached until 2019 at the earliest.

However, KPMG farm enterprise specialist Julia Jones said Labour's latest comments were irresponsible, especially when farmers were heading into calving for the new season.

"It looks a bit like political [hurly-]burly and could be quite alarming for farmers who are currently in a stressful part of the farming season."

The OECD figures did hold some weight, Ms Jones said.

"The numbers are based off information they hold in data, they're relatively sound, however nobody can actually predict the future.

"We still need to base our business practice within the farm off what is happening today with some consideration for the future, but we can't get hung up on things we cannot change - and we have no control over these numbers."

Based on the current behaviours in the market, it didn't look like the government's prediction of whole milk powder reaching US$3400 a tonne in 2018 would happen, she said.

Mr Robertson said the milk price forecasts in the 2016 Budget were too optimistic, but Labour's comments were not irresponsible.

29062016 Photo RNZ / Rebekah Parsons-King. Grant Robertson

Labour MP Grant Robertson Photo: RNZ / Rebekah Parsons-King

"We've got a responsibility to be honest about the situation the dairy sector faces, the break-even point is slipping further away.

"We now have a forecast that is significantly less rosy than the one that the government put forward in the 2016 Budget, we need to face up to [the] fact that we are looking at significantly lower dairy prices over a long period of time."

Mr Robertson said the government had to use the 2015 OECD figures for its budget because they were the most current at that time.

However, he said looking at the market at the time the budget was done, the numbers were unrealistic, and the new and revised OECD report had confirmed that.