22 Apr 2015

Short-term pain, long-term gain - expert

9:23 am on 22 April 2015

Financially-pressed farmers may take a bit of convincing - but one agribusiness expert says low milk prices could actually be a blessing for the New Zealand dairy industry.

Dairy farmer in a milking shed

A dairy farmer moves through a milking shed (file) Photo: AFP

Lincoln University Agribusiness and Food Marketing Programme Director Nic Lees said low international prices at the moment could be positive in the longer term because they will curb European plans to expand production.

The expectation of expanded production with the removal of EU milk quotas has been one of the factors driving down the prices.

"What we've seen is significant increase in production from Europe, actually in anticipation of those quotas coming off," Mr Lees said.

"And as you can imagine, that was driven also at the time of very high world prices and Europe is a huge dairy producer.

"So, I guess the upside of the falling prices is that a lot of those European farmers are going to be hurting. They're going to be reviewing their decisions around investment both in dairy production and also in processing facilities."

Mr Lees said the low milk prices were also pushing New Zealand farmers to cut their costs and return to a focus on grass-based production, giving them a competitive advantage against their northern hemisphere counterparts.

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