2 Nov 2016

Dairy price rise boosts farmer's morale

6:39 pm on 2 November 2016

The latest jump in global dairy prices is a morale booster for farmers left distressed by low pay-outs, they say.

Pak n Save employee stacking milk in Gisborne.

Pak n Save employee stacking milk in Gisborne. Photo: RNZ / Alexander Robertson

The key whole-milk powder price has risen above the average break-even point for the first time since March 2014.

Farmers generally needed about US$3000 a tonne for whole-milk powder to break even.

The price shot up by nearly 20 percent overnight to $US3317 in the latest global dairy trade auction overnight.

Lloyd Downing, who has been farming near Morrinsville for 52 years, said the lift was a morale booster.

"It's great for the country, it's great for farmers - long may it stay there."

He was confident prices would remain at that level.

He said the drop in Fonterra's payout from $8.40 to $3.90 over the past two years had been a "huge culture shock" for farmers.

"We've got quite a lot of debt but we have been farming for a long time so we can handle that debt a lot better. People who have had high input costs are really, really struggling."

Ashburton dairy farmer Willy Leferink said he was forced to sell land to make ends meet when prices fell.

But the future now looked much brighter, he said.

"I'm jubilant, it's fantastic, it's probably a little bit like Christmas has come early, it's certainly helpful to have a little bit more leeway," he said.

He was also confident prices would remain high as European farmers were also under pressure.

North Canterbury sharemilker Melissa Slattery said the lift would provide some comfort to those farmers in distress, especially after a very wet spring.

But she was more cautious about the outlook.

"Volatility has been posted in our brains pretty heavily. I suppose you've just got to take the good with the bad and carry on and just hope for the best," she said.

As of June, total dairy debt stood at more than $40 billion, accounting for two thirds of all agricultural debt and more than six times the amount people owed on their credit cards.

In September Fonterra raised its forecast payout to $5.25 per kilo of milk solids and ASB was picking it could increase to $6.

Wairarapa dairy farmer Mike Moran said that would relieve some of the pressure farmers are feeling from banks.

"It gives us some confidence that the payout will be backed up this year and possibly a bit more...it's been two years of losses and even if it comes good this year there's a fair way to go to pay back the overdraft before you get back to three or four years ago," he said.

Like most dairy farmers Mr Moran said he would be watching the next few global dairy trade auctions closely for signs that higher prices were really here to stay.

Federated Farmers dairy spokesperson Andrew Hoggard said global supply had been dropping off and farmers had been waiting for a hike.

Even if the payout was lifted following the price rises, it took a while for the money to get through to farmers, he said.

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