Looks like Bill will need to keep ACC high for a bit longer


The economy looks to take another hit as dairy prices crash overnight

International dairy prices fell by 8.8 per cent at this morning’s GlobalDairyTrade auction – the first sale to be held since last week’s 1080 infant formula contamination scare.

At this morning’s auction, whole milk powder – the most important product for New Zealand producers – fell by 9.6 per cent to an average price of US$2928 a tonne.

The second most important category, skim milk powder, fell by 5.5 per cent to US$2731 a tonne.

Price declines were across the board, with anhydrous milk fat prices falling by 8.4 per cent, butter by 9.4 per cent and butter milk powder by 11.6 per cent since the last sale a fortnight ago. Cheddar prices dropped by 7.4 per cent and rennet casein prices fell by 15.2 per cent.

Fonterra’s current milk price forecast is $4.70 per kg of milk solids, about 30c per kg below the estimated average cost of production for most farmers.

So on average dairy farmers aren’t even meeting their costs. ?That’s going to continue to have a knock-on effect as the belts get pulled another notch and the money stops flowing.

Ultimately, the government’s projected tax take will suffer, and with it, Bill and John’s dreams of a nominal surplus.