3 Sep 2014

Farmers prepared for lower payout

4:27 pm on 3 September 2014

Dairy farmers watching the continuing fall in international dairy prices say they will be budgeting for a lower payout than the current six dollars a kilo of milk solids forecast by Fonterra.

Dairy farmers are expecting a a lower payout.

Dairy farmers are expecting a a lower payout. Photo: Photo NZ

Dairy prices have nearly halved since February after another six percent fall in the global dairy trade auction overnight.

The price index dropped to $US2,787 a tonne the lowest point since July 2012.

Whole milk powder prices fell by 4.3 percent and skim milk powder prices by a further 9.5 percent.

Vice-Chairperson of Federated Farmers Dairy Section Chris Lewis said farmers are being very cautious over budgeting and this is having a flow-on effect.

"A lot of retailers in town have already noticed the drop in spending from farmers and some are saying it is very, very noticeable and it is not just a few percent drop either."

The drop is hitting rural communities that support farming, Mr Lewis said.

"We can only hope that the dollar drops by 20-percent to match the fall in commodities because with the fall in commodities at the moment you would say that the dollar is very, very overpriced," he said.

Chris Lewis says for budgeting, farmers would be looking at a payout figure of about $5.50.

"And being optimistic that it might go higher than $6 but in life you have to budget for the worse-case scenario," he said.

"I guess at five-dollars 50 to six dollars is break even for most farmers, some could face a substantial loss depending on how you run your farm and your service commitments to the banks."

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