25 Jul 2014

Don't write off dairying, MyFarm says

2:02 pm on 25 July 2014

People should not be in any hurry to write off dairy farming just because prices have taken a dive, MyFarm executive director Andrew Watters says.

The average whole milk powder price in the Fonterra GlobalDairyTrade auctions has fallen by 38 percent since February.

Dairy farmers and economists say with the recent sharp drop in prices, it is inevitable Fonterra's $7 per kilogram of milksolids price forecast will come down - one predicted as low as $6.

But Mr Watters said predictions of the end of the good times in the dairy industry were premature.

He pointed out that Fonterra only sold only about a third of its product at the auction, and that volumes at recent auctions had been low.

The positive, longer-term outlook for dairy farming had not changed, he said.

"We think this year can still be quite a good, profitable dairy season. There is some downside risk, but overall the long term outlook is the same now as it was last year, albeit, there are going to be some fluctuations in prices and we do need to keep control of cost structures and debt levels."

Mr Watters said Fonterra was likely to lower its $ payout forecast for this season at its board meeting next week. He expected it would be in the low $6 range but that it would increase during the season.

"They've got increasing demand, struggling to keep the supply up to that demand and for the last five years, decreasing self-sufficiency in milk," he said.

"They'll probably turn that around at some point but the demand that's there isn't going to go away and once we get through two to four months of stocks, and we're probably part way through that, then you would expect prices to recover."

MyFarm has 47 dairy farms and six sheep and beef farms under management.