Andrew's blog

Why reducing milk production isn't the answer

Although the current Milk Price forecast is below the total cost of production, most farmers should still produce as much milk as they can this season.

Brian Cloughley explains why.

High land values not just a NZ thing after all

It is my personal view is that NZ dairy farm land values are too high - and are supported by too much debt.  When the milk price falls like it is at present that leaves the whole industry including our Co-ops vulnerable.  Collectively buyers need to demand a higher return on our investment so wealth isnt continually bled in favour of those exiting.

Time for a positive view

I attended a rural professionals conference last week - put together by CCH the Agri-Industry summit.  It was well attended and the speakers and their talks were impressive (myself excepted).  A lot of discussion was about the dairy scene with a low milk price and how it is important that farm's accountants provided needed support to their clients.

What US forecasts mean for us

by Brian Cloughley


The six monthly USDA GAIN report on dairy was released last Sunday, and it contains some encouraging forecasts - if you read between the lines. USDA Dairy: World Markets and Trade

Bobby calves down in value - bull beef?

In a meeting with our Meat Company partner they confirmed a semi-dire situation with bobby calf values this spring.  There are three main components to the value of a bobby calf; the veal itself, the skins and the blood.  Unfortunately the outlook for two of these three components is poor.

The day after

Yesterday's GDT auction price saw a 13.1% fall in Whole Milk Powder prices.  We are starting to get to some scary levels with prices at or around US$1700 or $1800 per tonne of WMP.  We haven't seen these levels since the global financial crises in 2008/09 - a far cry from the notional global break even price of US$3500/tonne.  

Review of GDT

Here is a great review of the latest GDT from our Brian Cloughley:

The overnight GDT auction price saw a 13.1% fall in WMP prices. However, volumes are low (2.1% of the total to be sold on GDT this year) and the impact on Fonterra’s Milk Price forecast is only $0.02/kgms.

Year to date, only 7.1% of the WMP volume to be sold on GDT has been put up and sold. To reiterate, the Aug-Dec sales window is the key to the level of this season’s Milk Price.

Fresh Agenda and the year ahead for milk

Fresh Agenda have just produced their latest half year report about the outlook for dairy.  The report is dominated by the supply and demand outlook for dairy commodities over the next two years, considering on a country by country basis the drivers of production and use.  

Lower commodity prices suggest a lower long run milk price?

Todays gDT auction was a bit ho hum after the events of the past three months.  The index was down 1.3% with the important whole milk powder down by a modest 0.1%.  Experts agree that the market will recover; what no one knows is when that will happen and how fast that will happen - with the key influencers being NZ milk flow this coming spring and summer as well as Chinese demand.

The only certainty is change

Change of industry fortunes appears to be the norm over many years.  See the following extract from the book, 'Empire of the Dairy Farmers'.